Specialist
Former VP at WeWork Cos Inc
Agenda
- IWG's (LON: IWG) 2021 occupancy and pricing trends across regions
- 2021 EBITDA declines amid soft demand environment and cost mitigation tactics, including lease negotiation opportunities
- Favourable underlying trends towards flexible working in the medium term and estate repositioning requirements to match the new demand environment
- Master franchise growth outlook in the short and medium term
Questions
1.
How might this recovery pace affect occupancy growth? What is your outlook for occupancy in 2021, particularly for IWG? Could you break this down by market?
2.
What’s your assessment of churn during the pandemic? Is this a factor leading to low occupancy?
3.
IWG is hoping to achieve a low-70%s occupancy towards the end of 2021 and then into the low-80%s range in 2022. How achievable is this, based on your market estimations?
4.
Do you have any thoughts on the differences in occupancy by region? Would you cite any figures comparing the UK vs Europe vs the US?
5.
How could an uptick in occupancy affect revenue growth, service revenue included, and pricing?
6.
What are your pricing expectations over the next 12 months? You mentioned an 8-10% decrease on listed prices.
7.
When could prices recover to 2019 levels, or will they ever recover to those levels?
8.
What is the typical revenue share between major and non-major cities?
9.
What service revenue growth are you expecting as occupancy recovers?
10.
I believe IWG has historically had service revenue levels in the high 20%s. How is that likely to trend in 2021 vs 2022 vs 2023?
11.
IWG will have a considerable drop in EBITDA vs 2020 levels. Its 2020 EBITDA was roughly GBP 134m. What do you think is causing this drop?
12.
What would the costs be for exiting a lease or right-sizing a building?
13.
How do IWG’s contracts with landlords compare to contracts made in earlier crises? What progress has been made with landlords since the 2009 financial crash around the flexibility of leases?
14.
What are the opportunities to exit or readjust legacy leases in some of the urban areas where both IWG and WeWork are present, given these areas might recover slower than suburban areas?
15.
What does this environment mean for IWG’s 2021 EBITDA? We’ve heard it will be considerably below 2020 levels, with the company forecasting a relatively broad range of GBP 50m-100m. Where would you say its EBITDA might fall in that range?
16.
What estate closures or repositionings are you expecting from IWG due to demand?
17.
How much of the necessary work for repositioning do you think IWG has already done? What more are you expecting? The company opened 43 locations and closed 55 during Q1 2021, and its total global network size is about 3,300 locations.
18.
What would you say is an optimal building footprint size for an operator such as IWG, based on this environment?
19.
Would the lack of major increases in flexible operators’ portfolios that you suggested be excluding or including any potential consolidation, given we’ve heard about the potential opportunity to acquire smaller, underperforming operators?
20.
Why do you expect no inorganic expansion over the next 3-5 years?
21.
What are your consolidation expectations over the next 1-2 years? You’ve mentioned landmark buildings.
22.
Are you expecting any acquisitions from IWG or WeWork in the short term?
23.
Has the pandemic led to an increase in distressed operators in the sector? Could this lead to consolidation via picking up distressed assets?
24.
What is your outlook for capital-light expansion through deals with landlords? You’ve mentioned management and franchise agreements as an opportunity to grow.
25.
How willing are landlords to participate in management agreements with operators such as IWG?
26.
Are large operators interested in management agreements only on new buildings? Is there scope to move current retail models into a management agreement model by changing the agreements on existing leases?
27.
How will this shift towards management agreements impact the unit economics of IWG’s model, particularly on second-hand sites?
28.
What is the typical CAPEX-sharing arrangement in a management agreement?
29.
What percentage of leases do you think will be under company management agreements in the next 2-3 years?
30.
What threat do landlords present to WeWork and IWG, perhaps by setting up flexible working solutions independent of the companies?
31.
What is the growth outlook in franchise agreements for the flexible working market?
32.
Which regions do you think master franchise agreements will be most prevalent in?
33.
What competitive threat does WeWork considering potential franchise relationships present to IWG’s ability to acquire new franchisee partners?
34.
What growth in enterprise membership are you expecting, given this is something IWG is discussing?
35.
How could drop-ins improve occupancy with the growth in enterprise membership?
36.
Could you describe the enterprise model’s unit economics, given you mentioned they’re particularly strong?
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