Good morning, everyone, and welcome to SATS first quarter presentation. We hope you are all doing well and staying healthy. We are presenting today from our office here in Nydalen in Norway. My name is Sondre Gravir, the CEO of SATS, and together with me, I also have Cecilie Elde, our CFO, who will run through the financials. This quarter is, to a large extent, characterized by COVID-19 and the closure of clubs specifically. 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. Before we dive into the numbers, I would like to remind us all on what is the core of SATS, our vision and our guiding star, and that is to make people healthier and happier.
This is the motivation and passion for all of our 10,000 employees when they go to work every day, and public health is now more important than ever. On a normal day, during the winter last year, our members did more than 170,000 training sessions in our clubs daily. When all our clubs were closed this winter, this number was zero. And I can tell you one thing, only a part of all these 173,000 training sessions are replaced with other forms of activity and training, either outdoor or at home. The activity level in the Nordic population is going down. Surveys in different countries, both in Norway, Denmark, Sweden, and Finland, shows that people are working out significantly less when fitness clubs remain closed.
They are getting more inactive, and this is threatening both the general physical and mental health in the population, which should be more important than anything these days. So our clear message to especially the Danish and Norwegian government is: prioritize public health in the reopening of the countries. SATS and the rest of the fitness industry is ready to open in a safe and responsible way, so the population can get healthier and happier. If we then turn into the numbers of the Q1, we ended the first quarter with 252 clubs and 695,000 members. Total revenues was NOK 990 million, and the adjusted EBITDA was NOK 40 million, highly affected by the club closures. We will now look more in detail into the COVID-19 actions and consequences.
The past two months, as for the whole society, has been very different in SATS. On this slide, you can see the highlights in the timeline of the actions we have taken. COVID-19 affected the operations in SATS already from early February. We early on had employees in quarantine at home because they had been traveling to affected countries. Actually, we enforced this to SATS employees several days before Norwegian government did the same for health workers in order to make safe environments for our members in our clubs. We also early on implemented new operational routines to improve cleaning and ensure social distancing in our clubs. We did not see any major changes in member behavior or visit levels in our clubs before early March this year. Then, during March 11th, we received information that infected members had visited two of our gyms.
Danish government informed about the closure of the country, and signals from governments in all the Nordic countries indicated very strong actions. After new confirmed COVID-19 cases in two more clubs, and given the signal from the Nordic governments, we decided proactively in the morning of March 12th to take social responsibility and close down all clubs for two weeks to limit the spread of COVID-19 and to make sure that we could offer our members and employees a safe club environment. This was a very tough decision, as we knew this would have negative effects on public health in the Nordic population, create uncertainty for our great employees, and result in economic losses for our investors. However, given the knowledge we had back then and the situation during morning, March the 12th, we believe this was the right thing to do.
Then later the same day, the Norwegian government imposed a lockdown of all gyms, and the Danish and partly Finnish government followed following the subsequent week. Then, as we all know today, the situation developed differently in the four Nordic countries, and the governmental decisions and actions have also been very different... We have been in close dialogue with the health authorities along the way, and it was important for us to follow their recommendations in each country after the first initial two weeks of closure. In Sweden, the government did not ask fitness clubs to close, and all our competitors remained open, hence, we decided to open all our clubs after the two weeks closed down. In Finland, the government strongly recommended fitness clubs to close, and we followed this recommendation. But all other competitors, except from one operator, decided to not follow governmental recommendations and stayed open.
Then, when the government decided to reduce the restrictions in the Helsinki area, we decided to open all our clubs in Finland April 24th. On March 12th, when we decided to close all our clubs, we immediately focused our organization on the work around two main priorities. First, to handle the crisis in the best possible way, of course, but also to immediately start to work with a positive revival plan, and how we could engage positively with our members even though our physical clubs were closed. We acted very swiftly and immediately took actions to reduce operating costs, as Cecilie will go more into the details of in the financial section. But most importantly, we kicked off the ambitious plans for member activation and digital product offering. Today, the status is that we are open and fully operating in Sweden and Finland.
We expect to open in Norway, all our clubs, on June 15th, and in Denmark, early August. We are disappointed about these late opening dates in Norway and Denmark, because we believe that public health should be a priority, and urge, especially, again, the Danish government to open the fitness industry in Denmark before the summer. As I said, after closing the clubs, we decided early on to be very proactive in the member communication, and hence, give our members several options around how to handle their membership while our clubs were closed. We early on received feedback from our members, both directly and in social media, that they really appreciated this flexibility. We have had two main touch points regarding compensations with our members. The first communication covered the first two weeks, and then is reflected in the Q1 financial figures.
The second round covered the remaining closed period, with the options described on the slide you can see here. We have seen that the majority of our members have continued with the digital membership during the period our clubs are closed. With these actions early on, we managed to keep a good and positive member dialogue, and at the same time, retain parts of the membership revenue. In addition to having a very active member dialogue, we have had major focus on our digital product offering in the period our clubs were closed. SATS has invested in digital products for a while, and over the last 12 months, also established a very strong internal technology team, and this gave us a strong starting point for our digital offering. During these weeks, we have expanded our digital offering, as you can see on the slide, significantly.
We have taken our one-to-one services from a physical to a digital delivery platform, both for personal training sessions, physiotherapy sessions, and nutritional counseling. This will also be a strong complementary digital product offering when we reopen our clubs. We have also launched an e-commerce offer with selected partners. Different product categories are covered, including a link to product used in our online classes. This will also be a good digital offering in addition to the physical retail shops in our clubs when we reopen the clubs. We are further exploring new parts of the health and fitness ecosystem, and have launched several webinars focusing on training, rehab, and nutrition, and we have also piloted selected audio concepts on mental health during the period. But most importantly, we give our members a wide range of digital workouts, both training programs and classes.
We have around 120 digital classes available, and more than 100 digital training plans. We have launched live digital GX classes two days after closing our clubs. We have, since March 15th, been running around 10 live GX classes digitally every day, and we are also now doing open live classes in social media. We have also launched live classes for corporate clients, which has been very popular. All our members who have chosen a digital membership have access to this product offering, and we also have launched a separate digital membership in the market. The digital product offering has been very well received, both from members and non-members, and this has been a way for SATS to deliver on our vision even during the period when our clubs were closed.
We see a great usage of the products and a lot of positive buzz in social media. In total, we have had more than 1.5 million digital user sessions in the Nordics during March and April, and we have seen more than 350,000 participants taking part of our offering. The average attendance for each of the digital GX classes we've been running tens of daily, has been around 1,100. The overall digital boost has been very positive and very strong, and will, of course, remain as an important part of our product offering going forward, also when we open the clubs again. But we also know that our members really want to work out regularly in one of our 252 clubs.
So of course, our main focus have been around on how to reopen the clubs in a safe and responsible way, and we have proved that we are able to do so based on the reopening now in Sweden and Finland, and this gives us important learning for the coming opening in Norway and Denmark. We have adjusted our operations to match the new reality, making sure we follow governmental recommendations and make members feel safe in our clubs after reopening. And as you can see here on this slide, we take many, many actions to ensure that we offer our members a safe club environment when we open. The changes includes cleaning routines, reduced capacity in the club, reduced capacity at group training classes, outdoor training, and initiatives to spread member visits across our clubs and across during the day, as examples.
Every part of the operation in the club is affected by all the measures we are taking, from capacity planning within the club to ensure physical distancing between our members when they work out. We are temporarily closing, for example, our M ini Sats installations, and so on. We have demonstrated now with, for example, more than 25,000 daily visits to our clubs over the last couple of days in Sweden, that we are able to operate the fitness clubs in a safe and responsible way. The member feedback in Sweden and Finland after reopening the clubs is very strong. We do daily member surveys using NPS, and we have seen a very positive jump in our member feedback after the reopening. Our members appreciate the strong measures and action we are taking to ensure a safe club environment.
We also use our app and digital platform in addition to the physical changes in the club to ensure distancing. We give members information real time on the visit levels in our clubs, and also information about the available capacity in different clubs. We know that many of our members use 3-4 different clubs regularly. Hence, we are able to distribute the club visits in the overall club cluster, especially in the capital cities. For a period now, we give our members full cluster access to stimulate usage of different clubs. Further on, we have really done a significant step up in our outdoor product offering. We are doing PT sessions, boot camps, and group training classes outside at the moment.
In Norway, after the government increased the number of people in gatherings to 50 last Thursday, we are offering a big variety of outdoor classes, offering our members between 100 and 150 classes every day going forward outdoor in Norway. One of the most important measures that will probably be important in our society for many months to come is social distancing, ensuring physical distance between our members when they work out in our clubs. We want to emphasize that this can be done in SATS clubs. The average SATS club has the similar size as 5 basketball courts, and we have big and modern clubs, many of them about 2,000 square meters, so we are well positioned to secure the social distancing between our members when they work out. We don't expect distancing measures to create any significant capacity constraints in our clubs.
As you can see, based on the analysis on this slide, even with strong distancing measurements in place, only a relatively low share of the visits in just a few clubs during the day needs to be redirected to other times or to other clubs to absorb the total demand. And we also see that the demand in our clubs now are more distributed as more people work from home, are more flexible in their daily routines. So we have the capacity in our clubs, and we have the technology in our digital platform that we need in order to utilize this capacity in an efficient way. As you understand, we believe that we can return to business in a very good and safe way for our members and for our employees. And we are proving this every day with our operations in Sweden and Finland.
As you can see here, we see that visits has been gradually increasing back to a level of 75%-80% compared to the same period last year, with very positive member feedback in Sweden. So to summarize, we are very pleased to see that our members have been using our digital products to remain active during this period. At the same time, we see that the activity level in the population and among our members have been reduced. We operate in a safe and responsible way today in Sweden and Finland, and we are ready to open our clubs in Norway and Denmark as soon as possible, because we want to make people healthier and happier. And with that, I leave it to Cecilie for the financial section before we will round off the presentation with the outlook and the Q&A session. Cecilie?
Thank you, Sondre, and good morning, everyone. Before we dive into the figures, I would like to take a step back and just recap briefly where we stood before the COVID-19 pandemic hit, and we were forced to close all of our clubs. We came out of 2019 with a strong financial platform, continuing the positive trend from recent years, with a robust top line growth and solid margin expansion. We continued our strong momentum from 2019 into January and February, and the financial performance in those months were solid, with all business units performing ahead of plan. This means that we entered this crisis with a strong financial position.
Our product and value proposition was highly appreciated by our members before the close down, and we believe that this puts us in a good shape for when we reopen also in Denmark and Norway. Starting off with the member development, the member base after Q1 shows a slight decline, mainly as a result of a lack in sales during the closed period. We further see the effect coming out of April, where the member base has dropped with an additional 20,000 members. The typical seasonal pattern in April is a net reduction in the member base. But this year, the decline was stronger due to lower sales in Sweden and a complete stop in sales in the other closed business units.
The full effect of the increase in churn will not be fully reflected in the member figures until May and June, due to the delay caused by the one-month resignation period on our memberships. We do, however, see an increase in terminations after reopening in Sweden and Finland, and we expect to see the same when we reopen in Norway and Denmark as well. So key focus for us and everything we do going forward will be to regain the member base and reactivate our members. ARPM and revenues are impacted by the club closure, mainly as a result of members on freeze during the closure period, but also lower new member revenues and revenues from PT and retail. The loss in revenues is partly mitigated by the presented alternative member compensation models, like digital membership, gift cards, or no refund options.
And more than half of our members chose other options than to freeze their membership during this period. Still, the COVID-19 revenue impact is estimated to a loss of NOK 110 million, which results in total revenues of NOK 990 million in the first quarter, down 2% from last year, or 5% if you adjust for currency. This revenue also includes income from the fixed cost support package of NOK 8 million from the Danish government, which is recognized as other revenue. Worth mentioning, though, is that the average contractual membership price is not affected. We see a continued strong, positive underlying development following the ongoing yield initiatives that we initiated last year. Immediately following the closure of all of our clubs on March 12th, we started the dialogues with our landlords and major suppliers.
We temporarily laid off the majority of our employees in Norway, that's around 4,000 people, and a week later, we were able to start a similar process in Denmark. In addition, over the next days, we focused on reducing all other discretionary costs as quickly as possible, and terminated or postponed ongoing projects to further reduce costs. Some examples are marketing, which has been significantly reduced while the clubs are closed. Utilities, again, with the clubs closed, consumption is reduced. Similarly, cleaning and other building-related costs are also set to an absolute minimum during the closure period. The fixed cost support packages provided by the Norwegian and Danish government further contribute to reduce the cost and financial pressure.
But despite the mentioned cost savings, we still have an increase in operating costs of around 7% compared to last year, or 2% if you adjust for currency. The increase in cost compared to last year is partially driven by number of clubs. We have more clubs this year than last year, but also an extraordinary effect on cost of goods sold related to the gift cards that we gave to the members as an alternative compensation. Overall, we were able to reduce costs in March with around 20%, and going forward, we will have a reduction of 30%-40% on the group level, for the group as a whole, while the clubs in Norway and Denmark are closed.
Moving on to performance in profits, and as last quarter, our main commenting will be on adjusted EBITDA before IFRS 16 effects, which is more closely aligned with the way that both management and the board view the results. But we've added in reported EBITDA as well as reference. In the interim report, you can find the full reconciliations of these APMs to the new lease standard. Adjusted EBITDA of NOK 40 million is down 67% compared to last year, and again, significantly affected by the estimated COVID-19 effect of NOK 85 million. The March result does not include the estimated NOK 15 million that we expect to receive from the Norwegian government support package.
Looking at the segments, the picture looks pretty similar in all business units relative to size, but the cost reduction in Norway is significantly higher than in the other countries due to the layoffs of employees taking effect the last 10 days of March. We increased the investment level in our business throughout 2019, and continued in Q1 with a total CapEx of NOK 94 million. The increase in maintenance CapEx compared to last year is due to some front loading of spending prior to the COVID-19 outbreak, mainly related to several major upgrades, primarily in Sweden, as well as investments in the new commercial platform. Going forward, both expansion and maintenance CapEx are partially put on hold until the situation has stabilized. However, the clubs in Sweden and Finland are reopened.
We still consider it wise to keep the majority of the planned maintenance, and also take the opportunity to open the clubs in Norway and Denmark in really good shape. It is still important for us to invest in the sustainability of our future earnings through maintaining our great clubs, and innovate to provide members with differentiated and high-quality products. Further on, we will be open for acquisition opportunities arising in the wake of the crisis, and already signed greenfields and planned acquisition and relocations will be continued as planned. This means that we are temporarily withdrawing the previously communicated target of maintenance CapEx around 5% of revenues, as the maintenance level will not be reduced proportionately with the expected revenue decline.
When it comes to the cash flow development, the operating cash flow of NOK 140 million in the quarter is positively affected by the deferral effect on working capital, and this is related to our prepaid membership fees. As the freeze in memberships that are reflected in the revenues does not impact cash flow until the clubs are reopened and the members get prepaid membership days refunded through lower invoices. In addition, as mentioned, we've had positive dialogues with landlords and major suppliers, which have resulted in some cost reductions, but, more often, adjusted payment terms, postponing payment to Q2 or later in the year, or temporarily transitioning from quarterly payments to monthly prepayments, is causing a positive effect on working capital.
These effects, amounting to approximately NOK 150 million, will, for the most part, have the opposite effect in the next quarter. As a precautionary measure, we made an extraordinary drawdown on the RCF of NOK 575 million to secure liquidity, and after Q1, we have NOK 775 million available cash, and an additional NOK 550 million in reserve on the RCF. As described previously, we have been working on reducing the cost levels and corresponding cash burn in this period of uncertainty. The outcome of this work have been doing so far is a reduction of weekly cash burn of around 60% to an estimated NOK 15 million a week.
This is under the assumption that the situation continues as is, where the clubs in Norway and Denmark are still closed, but it also includes a moderate level of maintenance CapEx and upholding already committed investments. Based on the scenarios and the estimates that we are currently following, 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 of the end of 2019, the leverage was spot on our long-term target of 2x adjusted EBITDA, with net debt just above NOK 1.1 billion. However, the unexpected, the COVID-19 closure increased net debt to almost NOK 1.2 billion, and leverage to 2.4. It will clearly increase further than this level as we utilize our cash reserves to fund the cash burning during the closure.
In addition, I would like to highlight again that we have got approximately NOK 150 million of liability building on the balance sheet as we are deferring working capital and other items into Q2 and the other half of 2020. When it comes to our leverage covenants, we are in close dialogue with the banks, and we expect full flexibility going forward. I will leave the word over to Sondre again to give you some insights into the outlook.
Thank you, Cecilie. Then, moving, as Cecilie said, over to the outlook. Firstly, with the extraordinary uncertainty, we have decided to withdraw the previously communicated financial targets. It is clear that the pandemic will affect SATS in the short to mid-term, and the same, of course, goes for the industry as a whole. Both government measures, change made in behavior, and the economic situation affects the industry. However, we are confident on the positive outlook for SATS and our industry in the longer term. We believe that the focus on having a healthy lifestyle has increased during this period, and the Nordic population is more than ever focused on the positive effects of training and staying healthy.
SATS is also very well positioned for a potential consolidation in our industry, and we are very well positioned for the new reality with our scale in operations, our strong cluster and product offering, and our strong digital product capabilities going forward. Our number one priority going forward, as Cecilie was mentioning also, is to get members back to our clubs in a safe way, delivering excellent member experiences, both physically and digitally. We will now turn over to the Q&A session, and Cecilie and I will do this together. And, Stine, do we have any questions already posted on the webcast?
Yes, we have,
That's great.
The first one from Barbara Smith: "Why is traffic about 75% in Sweden if there are no constraints on capacity?
So we have several constraints on capacity, of course. As I mentioned, we have many, many measures in place in order to secure, among others, a safe environment and social distancing in our clubs. Just as an example, we run our group training classes with, most, in most of the classes, around 20 participants, when the normal capacity, for example, in some of our GX rooms, is more like 60-80 participants. So we have very strong measures in place in order to ensure safe club environments, and that's why we also see that the visit levels are around 75%-80%.
It's more due to our actions more than the demand from our members, which is very strong because they feel that it's safe to work out in our clubs, as we have seen in the member surveys.
Then over to Knut Erik Løvstad from Kepler. "You mentioned M&A. What specifically are you looking for in terms of M&A opportunities, in terms of which cities, and so on?
I don't think it's natural to go into details, commenting on our, on our M&A processes. We have done, we have done several, transactions over the last, period, latest now including, two new clubs in Stockholm, in the cluster in Stockholm, and we will continue, with the same M&A approach we have had historically, also going forward. But of course, we believe that the, the situation in our industry will change, and we believe that the industry will consolidate going forward, and we are well positioned to be leading in that consolidation.
Then a question from Eirik Rafdal from Carnegie: "Have you or will you be reducing prices when you reduce the offering for the time being?
So we have not concluded on the commercial campaigns. We are continuing doing commercial approaches, of course, now in Sweden and Finland after opening, and we will, of course, also make sure that we get our members back, the ones who have been leaving us in a good way when we open in Norway and Denmark. But it's also, of course, important for us to show our existing members that we really appreciate that they have stayed with us. So we will have a overall commercial push, of course, when we open the clubs.
Then a question from Øyvind Mossige from SpareBank 1 Markets: "Does the estimated cost reductions of 30%-40% include compensation from the Norwegian government? What is the estimated compensation per month for Q2?
Yes, in the 30%-40% cost reduction, the governmental packages for both Norway and Denmark are included. And when it comes to Q2, it's a bit early to state because it's dependent on the revenues in the quarter, so we cannot guide on that right now.
Thank you. I think we'll round it off there.
Okay, that's it for today. Thank you for listening. Join the SATS digital live class later today if you have the chance. It's great fun. And then I hope to see you soon in one of our clubs, and until then, stay healthy and happy and safe. Thank you.