Good morning, and welcome to SATS Second Quarter Presentation. I hope you are all doing well. It's the middle of July, so I assume many of you are following this presentation remotely from a holiday destination. So thank you for taking the time to listen in. We are presenting from our office in Nydalen in Norway. My name is Sondre Gravir, the CEO of SATS, and together with me here today, I also have Cecilie Elde, our CFO. We will have a Q&A session towards the end of the presentation, and you can post questions online during the presentation through the webcast interface. The second quarter have been significantly affected by COVID-19, as you will see in our presentation today. I would like to start off by summarizing the situation for SATS as we, as management, see it today.
We estimate the COVID-19-related revenue loss in Q2 to be NOK 520 million, and the EBITDA loss to be NOK 270 million compared to Q2 expectations without COVID-19. Net profit in the quarter ended at NOK -114 million. And we ended the quarter with a member base just above 650,000 members, 5% below Q2 2019. The reduction in the member base is mainly a result of lost sales during the club closure, as drop-off has been comparable to last year. Hence, the overall financial impact of COVID-19 has been severe for SATS in Q2. As a company, we have all the way since the closure of our clubs on March 12, been very focused on combining a short and long-term focus in our crisis management.
We took early steps to reduce our operational costs to bring down the cash burn and had strong focus on giving our members information and flexibility. At the same time, we wanted to build a strong fundament for our future growth by significantly improving our digital product offering and improving our operational routines. We also believe that the COVID-19 situation has accelerated the mega trend around healthy lifestyle in the Nordic population in general. We are now in a situation with all clubs being open, with a safe environment. We have an overall very positive visit development. We see significantly improved member feedback, and we see better sales than expected. Hence, we are positive to development ahead. The main focus in the short term will be to recover the member base and get back to pre-COVID-19 financial run rate.
Then, if you just look at the high-level numbers, we had total revenues of NOK 774 million in the quarter. As you can see, adjusted EBITDA before IFRS 16 impact ended at NOK 38 million, and net profit ended at NOK -114 million. We closed the quarter, as I said, with 652,000 members and 252 clubs, and Cecilie will, of course, come back with more details on the numbers in the financial section. We will now, as we did in the first quarter presentation, look more into the details into how COVID-19 actions and consequences have affected us. Today, we will focus on the reopening of our clubs and our infection control measures to ensure safe club environments. So let's go one month back to June 15th.
That was a fantastic day, the first day after March 12, with all our SATS clubs being fully open and operational. And as you might remember, we closed all clubs in the Nordics during the morning of March 12. We did this on our own initiative to limit the contagion of COVID-19 in the society and according to our values of putting members first and being accountable. The COVID-19 situation developed different per country, and we had close dialogue with the national authorities and decided early on to follow their advice country- by- country. This resulted in the opening of our Swedish clubs March 26, after the initial 14 days closure period, and then opening of our Finnish clubs April 24, our Danish clubs June 11, and Norwegian clubs June 15.
When we reopened our clubs, our top priority has been to make sure that we have a safe club environment for members and employees. We take this very seriously and have implemented new operational routines in all clubs across the Nordics. The two single most important infection control measures are ensuring good hygiene and social distancing. Hygiene has always been in focus at our clubs, but we see this as a good opportunity to improve and aim to carry forward with most of these measures also after the risk of COVID-19 contagion is reduced. On the social distancing side, we have implemented a range of measures. We have reduced the capacity on our group training classes by around 50%. We are helping our members to choose less busy clubs and time slots through our Traffic Light functionality in our app.
We have been restricting access when the clubs are perceived full, and we have moved and restricted access to equipment. I have to say, I'm really, really impressed by our members. They are, in general, acting very responsible, keeping distance, respecting guidance from our staff, and in general, behaving with caution and respect, which we are truly grateful for. They are really appreciating the fact that we take this seriously, and acknowledge the improved operational routines and measures. Capacity has been reduced in some areas, and we have been asking our members to contribute to ensure safe club environments. In the reopening, we have learned a lot from operations across our four countries, from other operators across Europe, and we have shared best practices and learnings. Hence, the opening has been very successful. We have good routines, safe clubs, and happy members.
This was also proved by an external research project, which was unique also in the global context. The project was carried out by the Clinical Effectiveness Research team at the University of Oslo, in collaboration with Oslo University Hospital, Virke Trening, SATS, EVO, and STOLT in the weeks before the full reopening on June fifteenth. The purpose was to investigate whether it's safe to reopen Norwegian training facilities after the COVID-19 pandemic. Half of the participants in the study were invited to go back to their gyms and to work out, and the other half were not permitted to return to their gyms. The total number of participants in the study was close to 4,000, and SATS was the main contributor, with 19% of the participants being SATS members.
And the conclusion from the study is very clear: It's safe to work out in our clubs, and there is no increased risk of COVID-19 if you do so. And that was important for us, and that's an important message to our members. And now, we see the result of all of this coming together. Good operational routines, increased focus on healthy lifestyle in the Nordic population, and clear and safety focus in the member communications, results in the fact that members are returning to our clubs faster than expected. It turns out that they are more than ready to do so. As you can see, the opening week varied across countries. Bear in mind that the situation and timing of reopening have been different. Denmark and Norway clearly started at a higher pace, as these clubs reopened later when the society had moved closer to the new normality.
Then, if we move forward just to last week, week 28, we see that visit levels are really back to normal, with Sweden and Norway being higher than last year. Especially the Norwegian number is very positive, even with strong measures in place on reduced number of participants per class. And many of you who are following us closely might ask: How is this possible, to have these visit levels way above last year, while at the same time enforcing infection control measures and social distancing? And there are several answers to that question. First of all, it's explained by our very strong club clusters. An important strength for SATS is to give our members flexibility and variety, and we do this through our very strong club clusters.
With, for example, 58 clubs in Oslo and 65 clubs in Stockholm, you will always find a club nearby or an available class at the time you want. This enables club specialization and makes SATS an aggregator of training opportunities for our members. And now, with the COVID-19 operational measures being implemented, we see this as an even stronger competitive advantage. Pre-COVID-19, we had significant available capacity in our clubs, and now we are able to utilize this capacity to give our members a good experience with social distancing being maintained. The extensive and broad offering in the cluster, and the ability to increase the number of classes, compensate for some of the reduced capacity per class. We also see an increased distribution of visits between the clubs in the clusters and throughout the day.
Members work out at clubs close to their homes rather than their offices, and they work out more during the day than only in the afternoon peak that we typically saw pre-COVID-19. It has also been important for us to enable our members to make their own choice by giving transparent information. Our digital team has been very active during COVID-19, and among others, we have launched a traffic light functionality in our new app. Members can use both real-time data right before going to a club or visit predictions to plan their workouts for the coming days. If I take my app and see that the club I plan to go to is full or close to full, I can either wait an hour or go to a gym nearby, which is never far away, given our strong clusters.
It's also important to highlight that we have large and modern clubs. Hence, we are able to absorb many members before social distancing is threatened. The average SATS club has the similar size of five basketball courts, with approximately 90% of the clubs being between 1,000-3,000 sq m . This makes us very well positioned versus other operators with smaller and often unmanned clubs. As I said, this period, throughout the whole COVID-19 era, has been very important for us in order to strengthen our digital product offering. On March 12th, when we closed all our clubs, we were no longer able to give our members our core products: training out and working out in our physical clubs. With our core value being members first, we went all in to be able to give our members the best alternative product offering we could, given the situation.
Hence, we significantly improved the digital product offering, and we had a good online offering, even pre-COVID-19. With a strong digital platform in place and a new established and very competent internal development and digital team, we were able to significantly expand quickly our digital offering. Our members were given access to 10 digital live classes every day within 48 hours after club closure. We are now offering more than 120 online classes. We have a digital PT product, physiotherapy and nutritional counseling. We offer digital office training programs, audio programs, webinars, and online lectures, and the list could be continued. For the period, we had to close our clubs in, for example, Norway. We gave our members the flexibility around how to handle their membership.
We changed the membership so all members had full access to this increased digital product offering at a significantly lower price point than their normal membership and gave them the option to easily freeze their membership if they wanted this instead. Some of you might have noticed that we have an ongoing dispute with Forbrukertilsynet in Norway exactly on this topic. They argue that we moved our members to a new membership that required explicit approval. We see this differently, both legally and practically. We temporarily adjusted the memberships to the new situation, offering our members the best alternative offering we were able to do. According to consumer law, we are obliged to give our members an alternative, and we have this flexibility in our member contracts. We are very happy to see that our members both appreciated the flexibility and also used the digital products we offered them.
Many members choose to freeze their membership, as we gave them this opportunity with a very easy one-click digital option. Then many members continued with their positive training habits digitally with SATS while the clubs were closed. As you can see on this slide, digital usage exploded, and in total, we had close to 600,000 unique digital users throughout the club closure period. Our vision is to make people healthy and happy, and we are very proud that we were able to deliver on this vision also in the period where our clubs were closed. We also see that our members continue with their digital training also after the club opening, and this is a great complementary offering to our physical experience, giving our members the flexibility and improved offering.
As you can see on this slide, online usage has been around 180% higher after club reopening compared to pre-COVID-19. Our main focus has all the way been to give our members as good alternatives as possible and flexibility to choose what they want. Hence, when the authorities opened up for groups to gather outside, we launched a significant outdoor product offering the same day. This we made available for all members with no increased cost for them. Before opening our clubs, we had close to 150 daily outdoor classes in Norway, and these classes were very popular.
Now, after opening the clubs, we really wanted to continue to give our members the opportunity to train outside, and now we offer more than 400 weekly outdoor classes in Norway and Sweden, in addition to all the indoor classes, with the most popular classes being cross-training, running, and yoga. I hope it's getting clearly through that we have been very focused on being able to make our members healthy and happy, even with closed clubs, by giving them the best alternative offering we could, and by giving them the flexibility to choose how to handle their membership. As a result of this, even with high visit numbers now, we experience limited impact from capacity constraints, even on the most visited clubs. Here is a quite complex graph, but it's a visit graph from one of our most popular clubs in Oslo.
The green, yellow, and light color illustrate the traffic light functionality levels in the app. As you can see, if visit patterns were kept at pre-COVID-19 levels, we would hit the new COVID-19 maximum capacity, especially in the afternoon peaks. Since members are visiting our clubs, as I said, throughout the whole day and really use the full club clusters in our cities, we are able to absorb the high visit levels, even with social distancing being enforced. This might, of course, be more challenging during the autumn if visit levels strongly increases, but we still believe we will have the capacity in our total network to give our members a good offering and safe experience. To sum it up, the opening has been very positive. We have strong operational measures in place to secure a safe club environment. Members are coming back quicker than expected.
We now have an improved product offering compared to pre-COVID-19, with strong digital and outdoor products in addition to our physical clubs. The total effect is that we actually now see a higher level of workouts and visit per member compared to last year, which is a very important KPI for us. In addition, the Net Promoter Score, our member feedback system, is significantly improving. Hence, we are making our members healthier and happier, which is the main motivation for all of us in SATS. Turning quickly over to a club update. We have now opened four new clubs during the first half of 2020, and going forward, we have so far signed additional four greenfields with expected opening in the second half of 2020. Two of them in the Stockholm cluster, one in the Helsinki cluster, and one in the Copenhagen cluster.
On the first of July, we divested nine clubs in Jylland and Fyn in Denmark, and I want to comment a little bit more on that. This divestment of those nine clubs was in line with the strategy of focusing on the key clusters in Denmark, and a part of many initiatives to make Denmark more efficient and profitable. The club upgrades we have done in Denmark have been focused towards the Copenhagen clubs, bringing these clubs up to the same level as our Oslo and Stockholm clubs, and now they truly are. The nine clubs we divested have contributed in 2019, with 14% of total revenues in Denmark, but 75% of the negative club EBITDA.
From a financial point of view, our assessment was that we would not be able to operate these clubs profitable going forward, and hence, we made an agreement with a cash compensation of one and a half years negative EBITDA contribution to exit these clubs and the long lease commitments. We will keep 85% of the members in Denmark after this transaction, indicating a higher member base per club on average than the divested clubs. And it's worth noting that the pro forma figures we show here for 2019 are not representative for our expectations for 2020 due to the COVID-19 outbreak, but they give an indication of the profitability differences between the clubs in Denmark. So without COVID-19, we would now be at a break-even run rate on our operations in Denmark with our current club portfolio.
With that, I leave it over to Cecilie for the financial section.
Thank you, Sondre, and good morning, everyone. Before we dive into the numbers, I would like to take a step back and just look at where we were before the COVID-19 pandemic hit and we were forced, of course, to close our clubs. Because we came out of 2019 with a strong financial platform, continuing the positive trend from recent years, with a robust top-line growth and a solid 15% annual improvement in profitability. And we continued our strong momentum from 2019 into the first month of the year, and financial performance in those months were solid, and all business units were performing ahead of plan. So this means that we entered this crisis from a strong financial position.
We are very happy to see that our members are eager to get back to our clubs, and visits are already on par with last year. This development, in combination with such a strong market position, is promising for the period to come. The key focus now will be to win members back, and we aim to systematically recover the lost sales from the closure period during the autumn, securing the run rate into 2021, and regain the profitability levels that we had before the COVID-19 hit our business. If we start off with the member development, as Sondre already presented, the member base is down 5% year-over-year, and the typical seasonal pattern normally show a net reduction in the second quarter. But this year, the decline, as expected, was worse due to the closed clubs.
However, the reduction is not a result of increased drop-offs, as you might assume. It's rather a result of loss in new sales during the closed period. After reopening in Sweden and Finland, we saw a slight increase in number of terminations, but we've not seen the same after reopening in Norway and Denmark. Our member base has proven to be quite resilient, as the overall number of drop-offs in the quarter is in line with what we had last year. This can also be seen on the right-hand side graph, where the member decline versus last year has stabilized throughout the end of the quarter when we reopened our clubs, and we also have better sales performance than expected after reopening. So as mentioned, the key focus in everything we do going forward will be to regain and reactivate our member base.
Average revenue per member is, of course, also impacted by the club closure, mainly as a result of members on lower priced memberships or on frozen memberships during the closure period, but also due to lower additional sales related to personal training and retail. The governmental fixed cost compensations are recognized as other revenues and inflates the yield for other revenues in the period, which would be 65 without the compensation and reflects the, the yield from PT and retail in the period. Worth mentioning is that the average contractual membership price is not affected by the club closure and continues to show a strong underlying development following the ongoing yield initiatives that we initiated last year. Moving on to development in revenues. The second quarter financials are, of course, heavily affected by the COVID-19 as the majority of our clubs were closed.
Compared to the second quarter last year, total revenues of NOK 744 million is down 26%, or 31% if you adjust for currency. The loss in revenues is partly mitigated by the alternative member compensation models that we presented last quarter, like adjustment to digital memberships, gift cards, or no refund options. As mentioned, other revenues include the fixed cost compensation packages of NOK 126 million from the Norwegian and the Danish government. This covers salaries and parts of the unavoidable fixed costs.
But still, the negative impact of COVID-19 is substantial, and as shown on the right-hand side graph, assuming that the year-over-year revenue growth in the second quarter would have been the same as in Q1, with a scenario without COVID-19, the estimated currency-adjusted revenue is down NOK 520 million in the quarter before adding back the compensation packages of NOK 126 million. Moving on to performance in profits, and as in previous quarters, our main commenting will be on adjusted EBITDA before impact of IFRS 16. This is more closely aligned to the way that the management and the board view the results. But we've also added in some numbers for reported EBITDA for reference. But in the interim report, you will find the full reconciliation of these APMs to profits according to the new lease standard.
Adjusted EBITDA of NOK 38 million in the quarter is down 78% from last year as a result of the massive loss in revenues. We took swift action to reduce the cost base during the club closure, and we were able to reduce operating expenses by 24% in the second quarter compared to last year. The cost reductions are mainly a result of temporarily laying off employees in Norway and Denmark, reduced marketing spend, reduced lease and other lease-related costs like utilities and cleaning. However, the COVID-19 negative impact on EBITDA is, again, very significant, and as shown on the right-hand side graph, assuming that the year-on-year EBITDA growth in the second quarter would have been the same as in Q1 with a scenario without COVID-19, the estimated adjusted EBITDA is down NOK 270 million in the quarter, before adding back contribution from governmental compensation packages.
Similarly, looking at the first half-year results, which are down 73% compared to last year, the estimated COVID-19 impact on EBITDA since March amounts to NOK 365 million. There are some differences per country related to when the different countries opened. The Norwegian clubs, being the last to reopen, have experienced the most severe financial consequences of the closure, despite receiving government support. With an underlying loss in revenues of NOK 301 million, and despite reducing operating costs significantly, EBITDA is still down NOK 181 million in the quarter. Given the circumstances, Sweden performs fairly well. Revenues are up 6% due to improvement in yield, and EBITDA ends in line with last year.
The Swedish clubs were only closed for two weeks, but the general activity level has been somewhat slower than normal due to the corona infection levels in Sweden. The six-week closure period in Finland affected the second quarter financials negatively, with lower sales and higher freeze impacting revenues. And with no governmental support to relieve cost base, EBITDA is down NOK 23 million compared to last year. And with nearly all members on freeze in Denmark, most parts of the quarter, revenues are hit hard, and the Danish governmental packages partly cover fixed costs, but EBITDA is still significantly down compared to last year. As we communicated last quarter, we have continued to invest in the club portfolio throughout this period, and maintaining great clubs is important for us to ensure sustainability of profits for the future.
Maintenance CapEx in the second quarter is back at normal levels in line with last year. We have an increase year to date in maintenance CapEx compared to last year due to front-loading of spend prior to the COVID-19 outbreak, mainly related to several major upgrade projects, as well as investments in our new commercial platform. Further on, we will be open for acquisition opportunities arising now in the wake of the crisis, and we have already signed greenfields, and all planned acquisitions and relocations will continue as planned. Operating cash flow for the second quarter is, as expected, negative, additionally impacted by extraordinary deferral effects on working capital. As you might remember, we had a corresponding positive effect on working capital last quarter, mainly caused by prepayment of membership fees, and these are now reversed after we have opened our clubs.
In addition, the governmental compensations are reserved as revenue in the second quarter, but the cash payment will be received in the third quarter. Overall, we have a strong cash position, with a cash balance of NOK 609 million after the second quarter, and we are confident that we will have sufficient liquidity and financial strength in the foreseeable future. Now, finally, looking at the group's net debt and leverage position. As a result of the COVID closure, net debt temporarily increased to NOK 1.3 billion, with, which with the weakening LTM EBITDA results in leverage ratio of 3.7x. This is also well above our long-term target of 2x adjusted EBITDA.
As previously communicated, we have been in close dialogue with the banks throughout this closure period, and an amendment to the revolving credit facility was signed on July 2nd, waiving the original financial leverage-based covenants. The amendment period lasts for one year, until June 30th, 2021, but we have the flexibility to step back to the original agreement at any time, and we will do so if we see that the leverage ratio recovers to pre-COVID-19 levels prior to June 2021. The new financial covenants applicable in the amendment period are minimum levels for LTM EBITDA and maximum levels for CapEx. We do not expect to distribute any dividend to the shareholders as long as we are in the amendment period. Lastly, I will hand the word over to Sondre Gravir for some insights into the outlook.
Thank you, Cecilie. As we said, we see that the focus on healthy and active lifestyle has increased as a result of COVID-19, and this is really supporting such long-term value proposition. The strong visit development after opening of our clubs indicates members' willingness to come back. As Cecilie commented on, and as I said in the introduction, our focus during the autumn will be to recover our member base and secure the financial run rate into 2021. We are well-positioned with strong club clusters and operational routines, large and modern clubs, strengthened digital and outdoor product offering. We also have the financial strength to participate in the potential industry consolidation following the COVID-19 crisis, so we will be active in the M&A field.
So all in all, we are energized and ready for the second half of 2020, and the first weeks of the new quarter has been very positive. We will now turn over to the Q&A session, so please feel free to post questions in the webcast.
Yes, we'll start off with a question from Adrija Chakraborty in Morgan Stanley. You say you aim to recover lost sales from closure during the autumn. Does that mean you expect membership to return to pre-COVID levels by this time?
. We don't give any exact guiding on when we expect to be back at the pre-COVID-19 levels on the member base. But we give a clear signal now that this will be the clear focus going forward, and with the early start of the club opening, with strong visits and good sales, so far it looks promising.
A question from Herman Børresen. Many members got access to an online membership while the gyms were closed, which was even cheaper than the original memberships. Are these members now transferred back to the pre-COVID memberships?
Yes. As I said in the presentation, we gave all members access to the extended digital product offering. This was not a new membership at all. It was just a temporary adjustment of their current membership, as we have room for in our members' contracts, to give our members the opportunity to work out even when our clubs were closed. And then, as I said, since this was a temporary adjustment, when we then reopened the clubs, the memberships were adjusted back to a normal membership, where you have access now to both the physical clubs, the outdoor classes, and the digital training offering.
Then two questions from Barbara Smith. The first being: What are the prospects for the monetization of the digital offering?
We believe that, digital, our digital product offering is a core part of our product, and we have invested in our digital platform over the last couple of years, and we will continue to do so significantly going forward. Because we believe it's important for our members also to have the opportunity to work out with SATS, even on the digital platform. And when it's important for our members, we also see interesting commercial opportunities, around the digital memberships and the digital product offering in general.
The second question: To what extent could the increase in visits in Norway be attributed to staycations?
Of course, this is a special summer for societies and population across whole of Europe, not only in the Nordics and Norway. But of course, when we see the visit levels, we are seeing, for example, currently in Norway, as we've shown 17% higher visits last week than the year before, we think this is a result of many things. We think that, you know, people have been longing to work out in their gyms and in the SATS clubs during the club closure. We believe it's due to an increased focus on health in the society. We believe it's because we have safe clubs and good and modern clubs, but also, of course, because people in the Scandinavian countries are not traveling abroad now in July. They are staying home, and they want to work out.
Then over to Schmidt from Kepler: Are there mostly younger members returning, or is it more a widespread age group in the members that are returning?
That's an interesting question, and we have seen differences, I would say, across the portfolio. So in the beginning, when we opened the Swedish clubs, as we did quite early on, on March 26th, we saw clearly that it was mainly the younger members returning quickly. But then as the period has gone on, we don't see the same differences. So when we now look at our Norwegian clubs, and now in the portfolio in general, when the situation is more back to normal, we see all members coming back, and we believe this is also the sign of us taking this seriously and giving our members a safe and positive experience when they visit us.
Then back to Morgan Stanley: Do you expect the new financial covenant on maximum CapEx to limit your organic or inorganic expansion plans in the near term?
No. We have restrictions on CapEx, but we have been in close dialogue with the banks to ensure that we have the needed flexibility to do the investment that occur. And this is also only a 12-month period, so we do not believe that this will be any major restriction for us.
Thank you. That was all the questions.
Okay. Thanks to everyone for following this webcast, and we wish you all a pleasant summer, and of course hope to see you soon in a SATS club.