Flexible Workspace Shift Will Drive Asset Light Expansion And Stronger Long Term Earnings

Catalysts

About International Workplace Group

International Workplace Group provides flexible workspace solutions through a global network of company-owned, managed, and franchised locations.

What are the underlying business or industry changes driving this perspective?

• Accelerating shift by enterprises to flexible workspace and converting CapEx-heavy office leases into OpEx is driving structurally higher demand for IWG's platform, supporting sustained double digit system revenue growth and higher EBITDA.
• Rapid expansion of the asset light Managed and Franchised network, with over 200,000 rooms in the pipeline and fee income expected to more than double in 2026, is compounding high margin recurring fees and expanding group net margins.
• Record global coverage with 5,500 locations across 121 countries and 9 million customer connections creates a powerful network effect, improving pricing power and occupancy and supporting continued revenue and earnings growth.
• Ongoing mix shift to capital light growth with declining new center and maintenance CapEx, combined with rising Company-owned margins targeting 30 percent, is translating operational gains directly into higher free cash flow and net income.
• Deployment of automation and AI across finance and operations, together with falling core overheads, is providing a structural cost advantage that can widen EBITDA margins and accelerate earnings growth as volumes scale.

Assumptions

This narrative explores a more optimistic perspective on International Workplace Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming International Workplace Group's revenue will grow by 6.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.6% today to 10.8% in 3 years time.
• The bullish analysts expect earnings to reach $480.5 million (and earnings per share of $0.49) by about December 2028, up from $22.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $320.5 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.9x on those 2028 earnings, down from 133.9x today. This future PE is lower than the current PE for the GB Real Estate industry at 15.6x.
• The bullish analysts expect the number of shares outstanding to grow by 0.41% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long-term plan hinges on a sharp ramp in Managed and Franchised fees, yet current fee income of $50 million on nearly $400 million of system revenue shows a relatively low monetisation rate. Any slowdown in signings, openings or partner appetite could leave the business structurally short of the fee scale needed to support the targeted $1 billion EBITDA, pressuring revenue and earnings growth over time.
• Management is deliberately pulling forward significant operating expenditure into sales, marketing, construction support and people to open around 2 centers a day and to double recurring fees by 2026. This raises the risk that rising discretionary overheads and delayed payback from these investments cap margin expansion, keeping EBITDA margins and net income below expectations for longer than the market anticipates.
• The pivot to lower CapEx, asset light growth and heavy use of promotions to fill Company-owned centers relies on achieving and sustaining 30 percent margins as contracts renew at higher effective pricing. If underlying workspace demand weakens, competition intensifies or customers resist post promotion pricing, occupancy or pricing power could disappoint, constraining revenue growth and net margin improvement.
• Although debt is termed out and fully hedged, the strategy assumes continued EBITDA growth and flat net debt to maintain an investment grade rating while simultaneously funding buybacks of $130 million and ongoing dividends. If cash conversion underperforms or one off costs persist beyond 2025, leverage could remain elevated, limiting future shareholder returns and weighing on earnings through higher financing costs.
• The long-term narrative assumes that technology, automation and AI will structurally lower core overheads and enhance scalability, yet these programs have already required multimillion dollar spending and complex transitions to U.S. GAAP, U.S. dollar reporting and a new ERP system. Any execution missteps, integration issues or slower than expected efficiency gains could keep core overheads from falling further, compressing EBITDA margins and dampening earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for International Workplace Group is £3.27, which represents up to two standard deviations above the consensus price target of £2.74. This valuation is based on what can be assumed as the expectations of International Workplace Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £3.27, and the most bearish reporting a price target of just £2.06.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $4.4 billion, earnings will come to $480.5 million, and it would be trading on a PE ratio of 12.9x, assuming you use a discount rate of 11.4%.
  
• Given the current share price of £2.21, the analyst price target of £3.27 is 32.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.