Good morning, everyone, and welcome to the SATS Q4, Q&A session. My name is Jonas Fougner. I'm the current IR manager of SATS, and I'm joined here today by our CEO, Sondre Gravir, and our CFO, Cecilie Elde. We are ready to get going and answer your questions, so I suggest that you raise your hand if you have any questions, and we will answer accordingly. Should we kick off then? Any questions? Petter Nystrøm, you are first in line. Go ahead.
Thank you for that. First of all, congratulations with the strong set of numbers. Definitely impressive. On page 13 in the presentation, you say, "Cost increase expected in line with inflation." Isn't that, you know, somewhat defensive? Shouldn't we expect that? Your cost focus or your cost-cutting program also should neutralize some of these effects in 2024. Thank you.
Yes, you might say that, but that's, I think, we should expect the cost to be in line with the inflation, as we say. I think we took out most of the effect from the cost-cutting program last year, so we're sort of meeting that level in our comp numbers, now in the coming year. But, of course, we will always work on trying to be more efficient on the cost side, but we don't want to overpromise anything here.
Also, Petter, I think it's fair to say that, as we are also showing it in today's numbers, when we see such a strong development in the member activity and also especially when attending group classes, it's also important for us to invest sufficiently in our product and to make sure that we have even better schedules going forward on, for example, classes, which is also driving somewhat operational costs. So I think that's also part of the explanation why we expect it to be in line with inflation.
Understood. Thank you.
Great. Eirik, you are, next in line. Please go ahead.
Yes, taking my questions. I got a couple. Number 1, just on the short term now in the quarter, the membership level, you know, obviously holding up very well, better than what you thought at, at Q3. Could you just share your thoughts on why it kind of turned out better than you expected just a couple of months ago? And also if that's any sort of indication for how 2024 has started, would be helpful.
Yeah, I can start to comment. So it's basically as expected. We indicated on the Q3 presentation that we might see a slight decrease in the member base, and it kept stable, so it's not a very big difference. Basically, it's, you know, sales has been according to expectations, and also, of course, with improved activity levels, we see some movement in the member base of having more active members, which is also having a somewhat positive effect on churn. But it's pretty much according to the plan. And then, as we also indicating in the presentation earlier today, we say that 2024 has started according to expectations. We have invested in our products, and also raised prices, as we also see in the numbers.
And this yield increase is expected to continue. And then, of course, we are focusing on optimizing for revenue growth. We are a premium provider, and we are not focusing, you know, only on the volume growth as a typical low-cost provider would do. So I would, you know, focus on the activity level, the product improvements, and the revenue development going forward. But so far, start of 2024, been according to expectations.
Perfect. That's very clear. Thank you. I think, either for you, Cecilie or Sondre, on the capital allocation slide, number 19 in the presentation deck, could you be a bit more precise in terms of, you know, timeline? What's the short term? What's long term? Kind of when you will see you be a bit more forward-leaning in terms of club rollouts, but also how you prioritize, rollouts versus returning excess cash to shareholders?
Well, we've said that we, in the short term, will prioritize to reduce that to get down to a leverage below 2. Short term is normally within 1 year. So you've seen the rapid leverage that we've had over the last year. So we expect to reach below 2 within not that long of a time. And then we said that in the long term, in a stable situation, we aim to be inside the range of 1.5-2 times the net debt to EBITDA. And that means also that when we sort of get below 2, we will start balanced expansion. And we say that that's around 8-12 new clubs per year. It might be other, other areas of growth. We know that we want to continue to grow in our existing portfolio as well.
But I think the message is that we will be able to grow when we get leverage down below 2 and keep that in that range. So the growth is expected to be balanced. Then in terms of dividends, that's up to the board to decide if we should focus more on growth or on dividends.
I think it was important for us to be very clear on the guiding also on the leverage ratio in the long term when we also indicate that we're starting to look into a balanced growth. This is exactly according to what we communicated on the Capital Markets Day. We had three building blocks: increasing revenue, increasing members per club, increasing revenue per member, and also building on the operational leverage we have. And then in the longer term, start to look into growth. Now we're getting there, but then at the same time, it's very important for us to indicate clearly where we target our leverage ratio to make sure that we have a sound balance sheet.
Yeah. And very appreciated. So thank you for clarifying that. Just on the follow-up, on the potential club rollouts when we get there, if we go back to, you know, the IPO process a couple of years back, there seemed to be a lot of white space really across the entire portfolio and the different countries. You were quite aggressive in Norway and Sweden in particular, kind of in the last rollout phase. What are your thoughts there in terms of kind of prioritized markets to ramp growth in?
I think it's way too early to focus on that. As we are just indicating here what's our long-term guidance. But as we also say in the presentation today, short-term focus and short term being 2024, it's clearly on utilizing the unleashed potential we see in our existing portfolio. We will invest in our current clubs to increase the capacity in our current clubs, to improve the product offering in our current clubs. We have available capacity, and that's our focus. And then we will get back to later on, indicating areas of growth when we get to that point. But we are not at that point now.
That's very clear. Thank you, Sondre.
Great. Any other questions? I don't see any hands at the moment. Okay, Petter, please go ahead.
Yeah, I just have a short follow-up question. You talked about slower development for PTs, and I might be that I missed this, but is this mainly driven by, you know, weaker demand, or is it also challenging for you to onboard new PTs? Thank you.
Yeah, I think it's a bit of both. We have fewer PTs now, and that, of course, affects revenues. But in general, this is an area where we actually see somewhat weakened demand compared to a year ago. But at the same time, we have also increased the prices for personal training, and we are not driving that many campaigns as we used to do, with discounts on personal training. So the margin on the product itself is higher than last year. So for us, this is an important secondary revenue stream, and we will continue to focus on it, and we expect it to pick up when sort of the macro environment stabilizes.
Thank you.
Great. Any other questions this morning? Oh. If not, then I suggest we can round off this Q&A session. Thank you, everyone, for participating, and we wish you all a pleasant and healthy Tuesday.
Thank you.
Thank you.