Good morning, everyone, and welcome to the Q&A session following SATS Q2 presentation this morning. I'm joined by CEO Sondre Gravir and CFO Cecilie Elde, and we are now ready to answer your questions. But before we do that, maybe you will give a short summary, Sondre, of the key takeaways from the quarter before we let everyone into the meeting.
Yes. Thank you, Jonas, and good morning, everyone, and thanks for taking the time to join this Q&A session. We presented the Q2 figures earlier this morning, and we started the presentation with a summary of where we stand, and we are delivering record-high financial results for the sixth quarter in a row. We've been consistently following the path we outlined on the Capital Markets Day for SATS in October 2022, where we have improved revenues and improved EBITDA and EBIT consistently over the last six quarters. If you look at the revenue growth last 12 months, we have delivered a growth of 10%.
But due to our strong operational leverage, where we see that new revenues are dripping through to EBIT at a high level, we have increased EBIT last twelve months with 260% to NOK 438 million. We also guided that we would stay at the leverage ratio between 5.0-2.0 net debt over EBITDA. We have, after Q2, reached a level of 1.7, so we are well within the communicated range. We have, we have said that we want to stay at the lower end of this range. We expect to be there by end of this year, and our plan is to stay at this level, but not go significantly below the level.
We have also, as we announced towards the end of July, successfully, one year before maturity, refinance our revolving credit facility of NOK 2.5 billion. We have extended maturity to 2027, with options for extension for up to two one-year terms. We have renewed the agreement on pretty similar terms that we had in the previous agreement, which we consider are good terms. And then lastly, we also communicated today, given the current development, given the current cash generation, the liquidity position we have, and the current expansion plans, we have capacity for shareholder distribution going forward. So we announced that we will start with semi-annual earnings distribution of at least 50% of net profits, starting with dividend payments based on H1 of 2025, and then earlier than that, initiate the share buyback program.
So that was the key highlights from the presentation today. All these financial results are, of course, driven by the fact that our members seem to love our product. They work out more than ever before. We have done several new product launches, also new product launches later this week, and we see that these new products are well received in the market, so we are growing across all segments, from young to seniors. So with that, I open the floor for questions from the audience.
Perfect. If you wanna ask a question, please raise your hand, like Joakim has done already. So please, Joakim, go ahead.
Hi, thanks for taking my question, and congrats on a really solid report, yet again. That's, it's always good to see. I was just wondering a bit more about the shareholder distributions. Could you share some information regarding the split between dividends and share buybacks?
We haven't decided on the split between the two. The reason why we're communicating buybacks is also because we believe we will be able to start that earlier than the first dividend payout. So we will come back with how that program will look like and the balance between the two.
But so likely, share buybacks based on some 2020 to 2024 results then, and dividends for the 2025 results.
Yes.
Okay.
When we see that leverage is really down in the lower end of the target range, then we will look at the share buybacks.
Yes. Fantastic. Thanks. That's all for me for now.
Thank you, Joakim. Then it's Petter Nyström, who's next in line.
Thank you. Question on Denmark. Can you give some considerations regarding Denmark? Does it make sense for you to continue staying in Denmark, given relatively soft profitability? And if yes, what is needed to lift the profitability? Thank you.
Thank you, Petter. Yes, we will continue with our operations in Denmark, and what is needed is very simple, but also hard, but it's basically just to continue what we have done over the last couple of quarters by improving the yield, improving the product offering and keeping cost control, hence profitability will improve. We see that the Danish market, at least as it has always been, is very competitive. Even though, if you look at the competitors in the market, they are now taking down some capacity, which we believe is good, closing quite a lot of clubs. We have a good performance on our central Copenhagen cluster, and we also see that our new product launches are delivering good in Denmark, as in the other countries.
So this will contribute to profitability improvement and higher yield going forward.
Thank you. And when you say, you know, will lift profitability, is it possible to give a timeframe on that? Is this something for 2025, or is this further out? Thank you.
We haven't put a concrete or communicated. Of course, we have our internal plans, but we haven't communicated externally different targets and timeline for different markets. So, we will continue on the path we have seen over the last couple of quarters with improving yield, and that's the focus also going forward.
Thank you, Sondre.
Thank you, Petter. Then it's Eirik Rafdal next in line.
Yes. Hi, guys. Thanks for taking my questions. Got a couple. Number one, I feel you you've delivered on what you've set out to do over the last two years plus. Spent about a year and a half regaining the volume after COVID, and then, you know, more selectively now working maybe more on ARPM and less on volume. And the first question is a bit short term. Is the ARPM growth, you know, mid-single digits, and moderate volume growth that we've seen in the H1 of this year, is that representative for how we should be thinking around the H2 of this year as well?
Yes, I think seasonality-wise, it will look more or less the same as what we've seen over the last twelve months, and so yes, we will continue on the path on optimizing revenues, so that means that a higher share of the growth will come from yield rather than volume.
Perfect, thanks. And I know it's early and we're only in August, but could you share a bit of thoughts around that growth mix that you're looking for for next year on volume versus, you know, price mix, what you've got in the pipeline for new clubs, refurbishment, stuff like, like this? And if it should be what we're seeing today, more aggressive on volume, just your thinking there for next year would be great.
No, we are not guiding any complete development for next year. We will continue on basically on the path we have now. We have guided on, as we also say clearly in the outlook, we see a significant available capacity in our existing clubs. The main focus is, of course, to utilize that capacity even better. And then we have guided on opening eight to twelve clubs on average over the next coming years. It might be some variances from year to year. And that's basically the guidance we will stay at. And now we've been clear on the capital allocation, so we will not guide any further in detail for twenty twenty-five.
That's perfect. Thanks. And just one final one from me. If you could share your thoughts on the more discretionary spending, like PT and retail, at least, you know, Sweden, they're a bit ahead of the other Nordic countries in terms of rate cuts. What we're hearing is that the Swedish consumers have responded quite quickly to the first cut. Now, we had another one earlier this week. What are we seeing in terms of more discretionary demand in Sweden, and your views for he next six to 12 months there?
No, it's an important area, as we have been focusing on a few quarters ago. We, we have not seen the macro, so to say, environment really affecting our membership revenue, the core business, but we've seen it on other revenues, as you're alluding to. And that is still the case. What you see in the report today, though, is that, that, so to say, the, the PT revenue is not declining. It's, it's developing, somewhat better. We also see improved margin. The same goes for retail, where we see significant improvements in margins. So we expect other revenues to come back to, so to say, growth trajectory when we see that the macro situation in the market turns.
There's nothing underlying in our business that indicate that that will not be the case, and we see some early signs of improvement, but it's too early to say in-depth. I think, you know, luckily, we have not seen a strong negative impact from the macro situation we have been in. So it will not, you know, we don't expect the membership sales, for example, to explode just because interest rates in the markets are coming down, because it's been a decent development over time.
That's very clear. Thanks for taking my questions.
Thank you, Eirik. Then it's Trygve Bruland next.
So we have action items that sit there and give you an idea of it.
I take it. Can you hear us?
N ow I can hear you. Sorry, I lost the battery in my headset, so I had to change it, especially when t he question, that's always amusing. Sorry for that.
No worries.
My question is on the competitive situation. I mean, it's very good to see the macro coming back and you're optimizing your revenue. But in Norway, which is the key or the biggest market or earning market for you, and partly so in Sweden, do you have any? So on the general view, do you see any key threats, worries on the competitive side, that you would like to mention? Or is it, like, more stable market now, where everybody is trying to optimize revenue in a rational way? Or do you see any initiatives that we should be worried about, or how is that picture? Thank you.
It's a very relevant question. I wouldn't describe the market, either in Norway or the other countries, as stable. It's fierce competition, I think it's fair to say. It's been fierce competition ever since the pandemic, which we understand. It's a growing market, so that's just as expected. I think the competitive situation is quite strong in all markets. Some of different type of competition, though. We see, for example, in the Swedish market and the Danish market, you have more national competitors. So we have big national chains that we are competing with in our local city clusters, while in Norway, you have more regional and local competition. And then we see several competitors opening a lot of new capacity.
But it's important to keep in mind that it's somewhat another type of product offering than we have. We have our fully staffed clubs with classes or group training being a key part of, and personal training being a key part of our product offering. And there, I would say that we have strengthened relatively our competitive situation. So, in terms of market share, and especially when it comes to group training, which is key for us, I would say that we are on a positive trajectory also, in terms of market share and competition.
Thanks.
Perfect. Ole Martin, you're next.
Thanks for taking my question. I'm gonna drill a bit back on the question from Eirik on the member growth and the price increases. It looks to me like you had a slightly soft Q1 on membership growth, and then in the Q2, we had a normal seasonality. And then now, when I look at pricing now, it looks to be not very aggressive, I would say. It looks like you're actually being less aggressive than usual. Are you seeing that still, you're getting a normal seasonality on those prices, or should we expect you to be more aggressive on campaigns further out? If you can give some color on how you're thinking about that. And then also in that comment, if you can...
The price increases that we saw in Q2, does that fully reflect all the price increases that you implemented, or should we have a further tailwind going into the Q3 and Q4?
For the last question, when it comes to the price increases, yes, they are now fully integrated into the quarter. We had the last price increase was in February, so you didn't get all of that effect into the Q1, but for the Q2, it's fully integrated. But of course, new members coming in come in at a higher price than the average in the base. So throughout the fall, when we have a lot of new members coming in, you should see a slight uptick in the pricing the rest of the year as well.
And then to your first part, Ole Martin, of course, you're absolutely right. This is a trade-off between, so to say, I guess when you're referring to less aggressive on pricing, I guess you're referring to the, so to say, campaign levels we're doing and the discounts we've given in the campaign. And you're right, we are not very aggressive, which has been our strategy over the last few quarters. We get a lot of questions about this as everyone sees that our competitors are maybe more aggressive than ever when it comes to discounts. This is a trade-off, of course, you know, building revenue growth long term, the quality of the new members you get in, how long they stay, and how much they pay.
We have a strategy, as Cecilie is saying, that you know we want the new memberships to come in at a higher level than the average base price, lifting up the yield in the base, and that will be our strategy going forward. And given that we don't do super aggressive campaigning now, I guess that it's also an indication that the development is as we expected.
Another question on your clubs. You look to close three clubs in Sweden at the same time as you're opening some new ones. Can you comment on how the rate levels are on new clubs versus the clubs you're closing?
Rate levels in terms of cost base?
Right.
Rent levels?
The rent.
Those clubs are fairly on average, I would say. So not big of a difference between the ones that we're closing and the ones that we're adding in. In general, the closing that we do now is due to contracts coming to an end. Some of it, these are relocations, where we're able to move the members to nearby clubs. So in practice, this should increase our members per square meter because we try to absorb that member loss from that club into the other clubs.
So we can't say that the lease rates have come down on new clubs. It's the same level as for the old ones, despite the significant deflation that we've seen on old lease rates?
On average, yes.
And then, a final one for me. You now look to aim for a net debt EBITDA, which is on a 1.5-2 times. I think previously you had a net debt EBITDA target, which was closer to 2. Can you share some reflections on why you should have lower leverage this time around?
Yes, we have guided on the 1.5-2, and then we have also reiterated that we will stay at the lower end of that interval. And we believe that is right, given the current financial environment, and we believe that it's the right, so to say, balance sheet to have. Of course, interest cost is also higher than, compared to the levels we saw back when we guided at a leverage of 2. So that's why we believe it's right of us to stay in the lower part of the interval.
But also, you know, your balance sheet is now already in very good shape, and you could have probably initiated the dividend payment earlier. Instead, you looks to have a preference for share buybacks. Is it possible to say anything about the size of these share buybacks?
No, as Cecilie said in the question earlier on, we will come back to the balance. It's not that we have any strong preference for the one instrument ahead of the other. We think that we can start the share buybacks earlier, as we guided on dividend payments based on the H1 of twenty twenty-five. Then, yes, you're right. It's of course a trade-off between debt and when you start shareholder distribution. I think we've been quite consistent in our communication. We have a guidance of 1.5-2. We will stay in the lower end of that interval. Now, we currently are at 1.7, hence we prioritize to further bring the leverage a little bit more down before we start the shareholder distribution.
And then, there's different views on what is the absolute right balance, but that's the choice we have made.
Okay, perfect. Thank you.
Petter, please go ahead.
A follow-up questions from me, and it might go to Cecilie. I might have missed it, but obviously, new members are coming in at a higher average revenue per month. Is it possible to say, you know, roughly how much that spread is between, you know, new members and existing base? Thanks.
In general, it's not a huge spread because we do consistent price adjustment in the base as well, but we always have a part of the member base that we don't price adjust, and the deviation between the newest members and those members, that's what's driving a small, gradual uptick of the average price over time, but of course, now we have done the price adjustment consistently over several years, so that lag and that gap minimizes as time goes on.
Okay, thanks.
Thank you, Petter. Any other questions this morning? If not, I think that concludes today's Q&A session. Thank you for all your questions, and have a nice day, everyone. Thank you.
Thank you.
Thank you.