International Workplace Group (IWG / IWGFF) remains our largest position, and its latest results only strengthened my conviction in the long-term thesis.
The market’s reaction has been quite different.
IWG’s shares remain depressed despite what I view as increasingly strong evidence that the business transformation is working.
I think investors may be asleep at the wheel here.
The headline first-half numbers were admittedly somewhat mixed. Revenue growth was excellent, but EBITDA barely moved and free cash flow was weak.
However, once you dig deeper into the numbers and, importantly, listen to management’s comments on the earnings call, I think the setup has actually become even more attractive.
The capital-light network is expanding at a record pace.
Revenue growth is accelerating.
They are aggressively buying back shares.
Management expects cash flows to surge in the second half.
And CFO Charlie Steel went considerably further than simply reiterating guidance. He indicated that he sees a good chance of exceeding the company’s $585-$625 million adjusted EBITDA guidance range.
If that happens, I think investors could finally begin to appreciate what this business is becoming.
The Thesis Ultimately Boils Down To Two Charts
Before getting into the quarterly numbers, I think it is worth stepping back because our IWG investment thesis ultimately boils down to the two charts below.
The first shows the rapid growth of IWG’s managed and franchised business.
The number of managed and franchised rooms has risen from roughly 154,000 in the first half of 2024 to 358,000 today, and based on the existing signed pipeline, management expects this to approach 600,000 by the end of 2027.
Recurring management fees are following the same trajectory, rising from just $7 million in the first half of 2024 to $35 million in the first half of 2026, with management forecasting continued rapid growth from here.
This is transforming the economics of IWG.
Historically, the company grew primarily by signing leases, investing significant capital into new centers, and taking the occupancy risk itself.
That made the business capital intensive, cyclical, and relatively risky.
The new model is completely different.
Increasingly, landlords provide the real estate and most of the capital, while IWG contributes its brands, distribution, technology, customer network, and operating platform.
IWG then earns recurring fees from operating these locations.
As this part of the business becomes a larger share of the group, IWG should become:
less capital intensive
higher margin
faster growing
more cash generative
less exposed to lease liabilities
less risky
more recurring and fee driven
And yet, this improvement in business quality is occurring at the same time that overall growth is accelerating.
That combination is what makes the opportunity so compelling.
Usually, investors have to choose between a mature, high-quality business and a faster-growing but riskier one.
IWG is potentially moving in the opposite direction: its growth is accelerating while its business model simultaneously becomes higher quality.
The second chart captures why this matters so much for the valuation.
Management compares IWG’s evolving model with the hotel industry, and I think the analogy is useful.
Large hotel brands such as Hilton, Marriott, and IHG have spent decades moving away from owning or leasing hotels themselves and toward capital-light management and franchise models.
The result is highly recurring fee income, strong free cash flow conversion, high returns on capital, and much higher valuation multiples.
IWG is increasingly following a similar playbook in flexible office space.
Of course, IWG is not Hilton or Marriott today, and I would not argue that it deserves the same valuation multiple overnight.
But the gap is enormous.
The chart shows IWG trading at roughly 5x estimated 2027 EBITDA compared with high-teens or approximately 20x multiples for the major hotel platforms.
The exact multiples are less important than the direction of travel.
If IWG continues to become more capital light, more fee driven, more cash generative, and less risky, then I don’t think today’s valuation will make sense indefinitely.
This is why we see multibagger potential.
We don’t need IWG to suddenly trade at 20x EBITDA.
If earnings continue growing, the share count keeps shrinking, free cash flow improves, and the market gradually awards IWG even a moderately higher multiple as the business quality improves, the upside from today’s valuation could be enormous.
And the latest results suggest that this transformation is accelerating.
