In this interview, we talk with Charlie Steel, CFO of International Workplace Group (IWG), the world’s largest flexible workspace provider. Charlie provides a brief overview of the group, its strategy and the market that it operates in, before discussing the outlook for growth in earnings and cash flow. Business demand for IWG’s offering is driven by the need for flexible, well-located office space, while landlords are attracted by the opportunity to fill buildings and increase income on their assets. These complementary trends are driving rapid growth in IWG’s increasingly capital-light network, and we discuss the cash flow and shareholder returns that this is generating. The company recently reiterated its guidance for $585–625m of EBITDA in 2026, up from $531m in 2025, and returned $144m in share buybacks and dividends. Over the medium term, it targets EBITDA of around $1bn and 50% free cash flow conversion. We end the conversation by considering the potential for successful delivery on strategy and growth to deliver not just strong shareholder cash returns but a re-rating of the company’s shares.
What is IWG, for those unfamiliar with the company?
Charlie Steel: IWG is the world’s largest flexible office group, and we operate in 120 countries. We have around 5,000 locations. What we do is provide office space to people, from individual meeting rooms that can be booked by the hour up to two years’ worth. We also have that global network, which means that if you are a member of one, you can be a member of all. Fundamentally, we assist start-ups, enterprises and individuals by giving them office space and good places to work around the world.
Which IWG brands would people recognise in the UK?
Charlie Steel: We’ve got a number of brands. Our largest brand by quite a long way is Regus, and that’s the one that it got started as nearly 40 years ago. Then we’ve got a number of other brands that go with that. The primary brands in the UK alongside Regus are Spaces, Signature and HQ. We use those brands as different price points and different product offerings for our users.
What are the key drivers of IWG’s business and the flexible workspace market it operates in?
Charlie Steel: On the demand side, it’s really about that flexibility – having space for your business that you need at exactly the right size. You’re not overpaying for space, but equally you’ve got the flexibility to expand and contract as your business might expand and contract. We also provide all the ancillary services that you might want, such as coffee, printing, other stationery services, virtual office services and the like. That’s the reason why people use this on the demand side: it’s really a one-stop shop for all of your needs.
On the supply side – in terms of the actual space itself – we provide landlords with lots of different solutions. In some cases, we take leases, and that’s historically been what we’ve done as a business. We’ve taken individual leases on different buildings. We’re doing less of that now.
Now what we do is go and manage buildings or locations on behalf of landlords and take a fee for doing that. So we provide landlords with a lot more flexible cash flow – more cash flow than they would get through a lease. And we partner with them as well, so they take advantage of our scale economies and also our network in order to fill these centres quickly.
What impact will AI have on IWG and demand for office space?
Charlie Steel: First of all, it’s still pretty uncertain, but what we say is that AI overall in the market has a lot of very positive drivers for us. To start with, if you go and ask a CEO or CFO how much office space they need in five years’ time, very few will be able to tell you. Therefore, what you don’t want to be doing is taking out a 10-year lease at this point in time until you’ve got a bit more certainty around that. That’s where we can provide some really good solutions.
The second big tailwind that we have from AI is that we’ve got many more start-up businesses coming, because AI is lowering the barriers to entry for starting businesses. For example, you can already have accountancy services and other admin services done by AI agents, which lowers the barriers to entry for business start-ups. You don’t need as much funding. Again, that’s where we can be very useful for businesses because you can come to us and use us as a way to flex your space needs at the same time.
So overall, we see AI as a big tailwind for the business. We do hear a few people asking whether AI is going to put all workers out of jobs, so that no one’s going to need office space any longer. But the drivers that we’re seeing in the market definitely don’t support that thesis. If anything, people want more flexibility at this point in time, which is a tailwind for our business.
What growth is IWG seeing and what are its expectations?
Charlie Steel: At the moment we’re seeing phenomenal growth in the business, and that is coming from the capital-light side of the business in particular, where we go along to landlords and partner with them directly. To give you some context, we’re opening about 1,000 new centres every single year. Our largest competitor has around 500 locations at the moment. So we’re opening twice as many locations as our largest competitor has in its entire network. You can see that level of growth is absolutely phenomenal, and we’re dealing with it very well. We’re opening these high-quality centres, we’re filling them very quickly and our landlords are very happy with the progress that we’re making.
The reason why this is working so well is that we’re expanding both our scale and our network. Our landlord partners are benefiting from our scale economies. We believe we’re the second-largest furniture buyer in the world, after the US government. That means we buy furniture, as an example, significantly cheaper than anybody else can, and we pass those savings on to our landlord partners.
So there’s huge growth all around the world at the moment; it’s not concentrated in any one particular location. What I would say, though, is that the US economy, where we have about 40% of our revenues at the moment, is doing really well. The US economy is just one of those economies that continues to outperform every single year, and we’ve been very happy with the progress there.
Why didn’t the cash flow benefits of IWG’s capital-light growth show in its first-half figures?
Charlie Steel: First of all, we’ve given guidance on the full-year numbers, and the main guidance we’ve given is our EBITDA range of $585–625m. That guidance was reiterated at the first half. We believe we will come in within that guidance range for the full year, and we remain very confident around that.
In the first half, though, when we look at cash flow, we’ve been updating a lot of our systems and making a lot of investment in our systems and processes. Some of the investment that we’ve made in the accounts payable system has also had the effect of accelerating some of those payments out. We’re currently working through those at the moment. So that’s not a structural thing within the business.
When you look at the level of capital expenditure within the business, it’s nearly at an all-time low. To give you some context, we were spending close to $0.5bn a year in 2017, 2018 and 2019, and the guidance for this full year is $150m. So you can see capex has come down a lot, and we expect the cash flows to come through on that. We’ve got a medium-term target of $1bn of EBITDA, and the guidance that goes with that is 50% free cash flow conversion at current levels of leverage. We’re very confident that we can deliver that.
And look, the EBITDA guidance for this year is up nearly $100m on last year. That shows the growth coming through in the business, and that will also deliver cash flow generation.
Is IWG overly leveraged?
Charlie Steel: I think it depends how you look at leverage overall. Some people include the lease debt. We don’t think that’s a valid way to look at leverage for IWG. The reason for that is that we have non-recourse leases, all held in their own special purpose vehicles, and we use that as a way to manage our risk.
The second thing – and more importantly – is that the market doesn’t look at it like that either. None of the equity research analysts include the lease debt within their debt metrics. And Fitch, the credit rating agency that rates our bonds, doesn’t look at it that way either. So the only debt that we have is the two bonds that we have outstanding.
We’ve got one bond due in 2030 and another due in 2032, then a revolving credit facility that ticks up and down alongside that, which we use for working capital, and then obviously our cash. That’s how we look at debt, and that’s how everybody else looks at the debt as well. It excludes that lease debt. I think that’s quite an important point when you’re analysing IWG and thinking about our overall liability stack.
Are lease payments already reflected in IWG’s reported EBITDA, so that counting lease debt would double count them?
Charlie Steel: Yes. The way we see those leases is that it’s basically just rent. It’s a cost of doing business, in the same way that the people we have in those centres are also a cost of doing that business. As I say, the credit rating agency Fitch has rated us investment grade at triple B flat, and that does not include the effect of leases within those numbers.
How will IWG use the cash from its $1bn EBITDA target and 50% cash flow conversion?
Charlie Steel: Right now, our capital allocation policy is to buy back shares. We have a small dividend, and that is a progressive dividend, but fundamentally it’s increasing on a dividend per share basis. Through the share buyback programme that we’ve been executing, we’ve bought back nearly 10% of our market cap over the last two years.
We’ll continue to do that as the EBITDA grows. That growth also means we’ve got more debt capacity within the business, so we can use some of that to buy back even more shares. Fundamentally, we will continue to do that because we think it’s a very efficient use of cash flow. We’re very happy with the progress of the buyback scheme so far, and for the foreseeable future, we’ll continue it.
Is it fair to compare IWG with hotel operators, which were rewarded with much higher valuations after moving to capital-light business models?
Charlie Steel: I think in the long term it is. In fact, we believe we’ve fundamentally got a higher-quality business model than hotel operators, because all of our revenue is long-term contracted, whereas hotel operators are night by night. Hotel operators have also got a lot more competition. As I mentioned earlier, we’re opening more locations than our largest competitor has in existence. So we’re just so far ahead of the pack at the moment, and we see that as a big advantage over hotel operators.
What I would say, though, is that the hotel operator model is now very well understood. It’s been proven over more than a couple of decades. We’re still fairly early in that transition, and I think the market will start to see the benefit of that coming through fairly quickly.
Right now, though, I’m very happy buying shares extremely cheaply and reducing that share count. At the point at which the market flips, I think those people who have been patient and have invested in us for a long time will really see the benefits of that come through – as they actually are already.
From our perspective, if we deliver operationally, the cash flow will come and the market re-rating will happen in its own time. In some ways, the best way to get that market re-rating is just straight delivery. And as I mentioned earlier, we’re very happy buying back our shares cheaply, and we’ll continue to do so.
This transcript has been lightly edited for clarity and readability. Verbal fillers, false starts and minor repetitions have been removed from the interviewee’s responses only. Punctuation, spelling and formatting have also been standardised in line with Edison house style. No substantive changes have been made to the meaning of the discussion.
