Hi, everyone, and welcome to this Q&A following SATS Q3 reporting this morning. I'm Stine Klund, Investor Relations in SATS, and I am joined by CEO Sondre Gravir and CFO Cecilie Elde. Everyone, please mute. Sondre will introduce the session with a short summary of the Q3 highlights before we open up for questions.
[Foreign language]
Yes, good morning, everyone, and welcome. As Stine said, welcome to this Q&A session. We will spend most of the time on answering your questions. Hopefully, you have a lot. First, I thought I could just summarize the quarter seen from our side. We're delivering another strong quarter reported from SATS, progressing in line with the communicated midterm ambition, reaching an EBITDA of NOK 1.1 billion. If we look at the quarter, we see that member engagement continues to rise. We see that the number of workouts is increasing with 7%, and also member satisfaction is delivering strong. We also have a 4% member growth and higher workouts per member.
These are very important operational KPIs to indicate the direction we're heading towards, and that the growth in the activity is fueled especially by the growth in attendance to our GX, or to our classes, group training, where we see that visits are up 10%. In the presentation earlier today, we went through more in detail how granular we work on our group training offering and are able to scale this really depending on fitness trends and demand in the market. We deliver an 8% revenue growth, and we see an EBITDA growth of 13%, reaching NOK 192 million.
We also have, as Cecilie commented on in the presentation, a strong operational cash flow with a cash conversion of 74%, maintaining our leverage ratio stable at 1.3 net debt to EBITDA despite both dividend payment of NOK 127 million in the quarter and NOK 40 million in share buybacks in the quarter. We also see a positive development in our Swedish operations, where we see an increase in the country EBITDA in Sweden of 19% compared to Q3 2024. Despite that, we of course have observed that the consensus was slightly above our delivery on EBITDA. We believe this, and we see this as a strong quarter and fully in line towards the direction we communicated on the Capital Markets Day and well aligned with our internal planning. We are happy with the current development and are positive to the momentum going forward.
That's what we plan to just summarize in the introduction to this call, the presentation we have already gone through earlier today. With that, I open up for questions.
[Thomas Helge] , please go ahead.
Hey, good morning. I can actually take it in English, so excuse me. Can you explain in detail how the earlier marketing campaign this quarter worked? Has it been, you know, two months of free training until you lock in 12 months, or has this changed? Also, why have you been more aggressive on the marketing push this year compared to earlier years?
Yeah, I can comment on that. If you compare to earlier years, we have different marketing mechanisms from the different campaigns. If you just compare to earlier years, and especially last year, we did a big marketing push and a campaign push that landed in Q4 last year, primarily in October. This year, we did a stronger push earlier in the fall, starting in mid-August, second half of August, and coming into September. We had the same campaign mechanism as we used earlier in Q1 in that campaign. In average, it was giving away one and a half months, between one and one and a half months in the beginning of the membership, and then you enter into, so to say, full prices. That's why if we compare to last year, we see that marketing cost is elevated in this quarter compared to Q3 last year.
That's primarily what we talk about when we talk about the timing effects, and when you also see that this has resulted in a stronger net growth on the membership side this year compared to last year. We see positive development on churn, meaning that we have a somewhat lower churn compared to previous periods. The sales in this quarter have been strong due to this campaign effect. We also, as we indicate in the presentation today, are guiding that we don't expect net growth for the second half in total to exceed last year's second half. This is just, so to say, the timing of where we place the campaigns, and it's nothing, so to say, extraordinary.
We also are commenting on the yield side that, of course, the yield is then affected by this campaigning, and also the fact that we have seen a somewhat higher student and senior and corporate share in the sales that we have done this quarter, which is then somewhat affecting yield. Again, the yield development long-term is still expected to be positive.
Thank you for that. Can I just elaborate before jumping on? The churn that's a bit lower, you said, in this period compared to earlier periods, is this a reason why you are a bit more aggressive on the marketing campaigns as it makes more sense to have more members come in at a higher cost than earlier because they stay for longer, or is it something else?
Partly. We don't report specifically on churn from quarter to quarter. We gave some more insights around our churn development on the Capital Markets Day in the spring. The leading indicator for churn is the activity level. The more active members are, the lower the passive share of members is in the base, and the lower the churn levels are. Of course, what we see is we do mostly digital marketing. We do mostly digital performance marketing. The lifetime value of a new member is affecting our willingness to invest in marketing, and our acquisition cost per member is in, of course, a relationship to the lifetime value of a membership. When we see that we activate more GX members, the answer is yes.
You see a longer member duration, you see a higher lifetime value, and you would be willing to pay somewhat more in the acquisition cost of new members. It's not solely driving the marketing spend decisions because we also do brand marketing. In selected performance campaigns, it might trigger increased investments.
Thank you so much. That makes sense.
Over to [Audun Nordfeldt].
Yes, thank you. It's actually quite a bit of a follow-up from Thomas's question. As you said, the membership growth in the quarter was very strong, and that partly affected the average revenue per month you achieved in this quarter. If we compare this quarter to Q3 and also to some extent to Q4 last year, should we sort of expect the average revenue per month to accelerate more going into Q4 this year than last year as you sort of timed your marketing campaign where you gave away one to one and a half months of training for free at an earlier stage this year compared to last year?
First of all, the yield is normally lower in the third quarter due to just the activity level and the first half of the quarter being summer months. As we've said before, we actively sort of manage the trade-off between price and volume, and that's what Sondre talked about. We want to maximize revenue, so we will increase campaigning when that makes sense. If you followed us and looked at the campaigning we have done throughout the year, we have had a very strong growth this year, and it is partly driven by the campaigning that we do. The impact that you see now and will probably see in the next quarter is because we defer the campaign cost throughout the binding period of the membership, you will get a delayed hit on the yield from earlier campaigns.
That will sort of continue into the fourth quarter before you sort of have turned the effect from previous campaign out of the numbers. We expect to see that the yield will continue to increase going forward. Since we've had more campaigning this year, it will affect this year's yield somewhat.
This is the CFO's favorite topic. This is the beauty between the reported yield, where you, from an accounting point of view, have to defer the campaign effects versus the underlying contractual price that the members actually pay.
I think the most important thing is that we are not very worried about the yield development going forward if you look at the longer picture. We will continue to optimize for revenues and follow the yield closely, and expect the yield to increase also going forward.
Thank you. Just to understand this a bit better, when you have marketing campaigns and you get customers with a 12-month lock-in, you essentially distribute the marketing cost over those 12 months. If you give away one or one and a half months of free training, you sort of just distribute that over the next 10.5- 11 months.
Yes, that's correct.
From a cash flow point of view, basically, if you give away two months and then you get full price, the members will not pay the membership fee the first two months, and then they pay full price from month number three. From an accounting and reporting point of view, those two months of free membership, so to say, are distributed over the whole membership binding period, bringing down the monthly reported yield somewhat every month. The underlying payment, the underlying contractual price that they actually pay is then somewhat higher the last 10 months.
Okay, thank you. That's very clear.
[Eirik Berg].
Yeah, just a short question. I've just seen more comments recently that people argue that the performance of the Swedish centers should be in line with the Norwegians, and that's sort of a driver to create value. To me, that sounds a bit strange given the difference of competitive situation in Stockholm, especially compared to Norway. Do you have any comments on those comments?
I think, as we also show in the numbers this quarter, Swedish has a great potential to improve profitability. What we said on the Capital Markets Day in May was that we do not believe that the margins will reach the Norwegian level, but we should see that it will come up to the average of the full portfolio. Yes, the competitive situation in Swedish is more intense than in Norwegian, but we have intense competition in Norwegian as well. I think what we see now with the product improvement that we're doing and the impact that has on visits, group training workouts, average revenue per member, and revenue, that will improve profitability going forward. Not necessarily to the Norwegian margin level, but significantly up from the level that we've seen in recent years.
Yeah, I see the background for your question, Eirik. Of course, this fall, there have also been a couple of banks sharing some quotes and insights on the competitive landscape in Sweden. The way I see it, to say it a little bit tabloid, our strong position, the so to say driver behind our strong position being lacking competition, that's 10- 15 years ago. That's not the case, and it hasn't been for the last 10 years. The competitive landscape in Stockholm has been super strong over the last seven, eight years. There have been tons of new clubs being established. I think that the current development in Sweden is proving that our model is working, even in an intense competitive landscape. We have competitors establishing new clubs around nearly all our clubs in the greater Stockholm area.
We still see that we are performing strong, even with that competitive landscape. Competition is fierce in all markets, and it will continue to be because it's an attractive sector.
Thank you.
[Øystein Kvaerner].
Good morning. Just following up on the same topic, you mentioned that your marketing costs are a bit up this quarter, and you also alluded to the reason behind that. I'm just wondering, given that it seems to be some correlation between competitive intensity and the marketing costs coming up a bit here, do you expect to be able to take marketing costs down again ahead, or do you think you'll need to just sort of stay at this level to meet that potentially somewhat more intense competition in the market these days?
We use some marketing as a tool for growth, of course. We monitor the impact the increased marketing has on volume. As long as we think that it is beneficial and will affect the sales positively, we will increase marketing. I think it's just looking at the return on what we get from that additional marketing. I think we might increase it also in the future, but it will be because we see a positive effect of it.
The main driver for this somewhat elevated marketing cost in the quarter now is not driven by what we see considered as more intense competition. That's not the key driver. We don't see reduced, so to say, marketing spend effectiveness.
Okay, thank you.
Any further questions before we round off? No? Thank you. Yeah, [Thomas Helge].
Yes, thank you. Just the last one for me, and back to the campaigns. Sondre, you mentioned one to one and a half months more of like new members getting free training before they bind themselves. Is that normally the Q4 campaign that's gone into Q3, or is it also a part of this? I looked into the summer campaign, and it actually was extended by one month. Normally, new members could work out for free until the end of June or something, and now it was the end of July. Is that also a part of the one to 1.5 months?
Yeah, that's a part of it. We had a different campaign mechanism last year in the second half of the year, so it's not fully comparable, so to say. We changed; sometimes we followed the same path as the previous year in terms of campaign mechanism from month to month because we sometimes also changed both based on, so to say, analysis. We do A/B testing of campaigns and see what campaigns get most traction, and then we use that campaign mechanism, also depending a little bit on what we see in the landscape around us. The campaigning we did now, the second half of August and beginning of September, was not an extension of the summer campaign. It was a different type of campaign mechanism.
Okay, thank you.
[Audun Nordfeldt].
Yes, apologies for all of these questions around marketing. When you have a higher marketing intensity, I guess you're sort of capitalizing the part or deferring the discounts you give to your customers. Just to understand it correctly, you expense in the quarter the billboards and the digital marketing spend. Is that the right way to think about it?
Yes, correct. We do not defer the direct marketing spend; that stays in the quarter. It is only the part of the membership fee that we give away that we distribute throughout the binding period.
What is roughly the split between the through paids, the discounts, and the more direct marketing spend? The portion you defer and the portion you expense?
That's details we don't comment on.
Okay, thank you.
Thank you, everyone.
Thank you.
[Foreign language]
Great.