Sats ASA (2S0.F) Earnings Call Transcript & Summary

Hi, everyone, and welcome to this Q&A following our Q2 presentation this morning. I am Stine Klund, Investor Relations, and I'm joined by CEO, Sondre Gravir; and CFO, Cecilie Elde. Sondre will go through a short recap of the main messages from the Q2 report before we will head over to the Q&A. So please raise your hand if you want to ask your question.

Thank you, Stine and good morning, everyone. Great to see so many of you on the call today. We have reported our Q2 figures for 2025 and we are following the same path as we have been following for the last couple of quarters. We delivered a good financial result driven by high activity levels in our clubs. We see that the momentum in club activity that we've seen from the first half of the first quarter 2025 has continued into the second quarter with visit growth overall, but also very good and positive development on group training workouts in all markets, not only in Norway, but really in all markets and total group visits increased with 9% in the quarter. And as we said before, the reason why we're focusing on this on visits and group visits is that we see that -- these members are really active and loyal member. They are extremely happy with the product offering we have, which is much better than any other competitor in the market. And we really see that they are driving them up the yield and also up the revenue. So revenues grew by 10% in the quarter, landed at NOK 1,393 million. And EBIT before IFRS 16 grew by 35% in the quarter to NOK 250 million. We have also communicated earlier that we would distribute a dividend based on the first half earnings. And so we are confirming today, we will distribute a dividend of 50% of first half earnings on top of the ongoing share buyback programs that will bring 2025 capital returns well above 50% as we have laid out as the minimum target. So total dividend payment will be NOK 0.63 per share, total amounting to NOK 127 million. And this is also an important quarter because it also marks the quarter where if you look at the last 12 months, have reached the target that we communicated back in the Capital Markets Day in 2022, where we said we're going to reach an EBITDA of NOK 800 million midterm. We reached that target just below 3 years down the road. So we are also then well on track to deliver on the target we communicated earlier this spring on the Capital Markets Day and the midterm target of NOK 1.1 billion in EBITDA. And we will keep a steady course going forward. We will invest in our products. We will make sure that we have the best group training offering in the market and we'll continue on the path we've laid out over the last couple of quarters. So with that, I open the floor for questions.

Hakon Fuglu, please go ahead.

Hakon Fuglu from SEB here. I just want to know a bit about sort of the impact from campaigning activity driving member growth in the quarter? And how should we sort of think about that for the remaining of 2025?

So we had -- I would say it's a normal quarter in terms of -- in Q2 in terms of campaigning activity. We have a very clear campaign strategy where we don't do long-term discounts on the membership price, meaning that you cannot buy a membership with a 40% discount, for example, over a long time. We do different types of campaigns where there is an incentive to become a new member. It might, for example, be the first month for free. But then the second month, you pay the full price based on the membership type. And I would say that Q2 has been a very normal quarter in terms of campaign activities in the different markets, both in terms of campaign mechanism and the marketing investments.

And I have a follow-up on that just around the sort of difference between Norway and Sweden. You're seeing rather high membership growth in Norway in the quarter, yet sort of a lower yield, but it seems like it's sort of the opposite in Sweden. Why is that?

Well, we've seen for a long time now that Norway has performed very well when it comes to volume and has also increased their yield during the last quarters. What we see in Sweden is that with the expansion of our product offering, especially within group training, we've been able to upsell to more premium memberships, which we now see in the yield as well. I would say that the development -- the volume development in Sweden has been very good, even though it's somewhat below Norway, but they are on a good trajectory and are showing the same path to improving results that we have seen in Norway over the last 18 months.

Over to [indiscernible].

Just on the mix of the costs, it seems like you have a good development in club OpEx when you adjust for ForEx exchange, but while the overhead is up something like 12.3% adjusted for FX, which is -- it's been increasing quite fast, but this is faster. Could you explain what's happening? It's not that many million kroners, but I was just wondering what's happening, 12% as much.

Yes. So you're right. We have a step-up in overhead costs this quarter if you compare it to last year. But it's really the comparison to last year, which is affected by a one-off in Q2 2024. And it's technical, it's related to implementation of a new ERP system where we did a reclassification from OpEx to CapEx. So if you adjust for that sort of one-off, the underlying increase, currency adjusted is 6% year-over-year and reflects the wages increases that we have had and just in general, improvement in sort of business activities to sort of cater for further growth. So underlying, I would say it's not that much higher than sort of the core operating cost where we really keep our focus on being [indiscernible].

Just a followup on that question. I noticed on one of your slides, you write that you have -- your forward cost outlook is affected by price changes on key input factors and wage adjustments. But I believe previously, we were sort of highlighting inflation as a cost driver. Is there any change in your cost guidance as such? Or is this just wording?

It's not really a change in the guiding at all. So it's mainly wording, but it's just to sort of that some of our input factors might increase more than sort of the pure inflation. It's always sort of a weighted average. So I think the key message is that we aim for being very disciplined in our cost base, but we will do strategic investments where we think that's necessary. Group training is something that we have listed for several quarters, which is important for us to drive growth and drive going forward. And that will be above inflation going forward.

It's a good observation, Ole Martin. But there is basically, as Cecilie said, it's no changing in the guiding, but we just want to be specific on giving examples of the input factors. And I think to your question, Peter how much is on overhead cost, seeing that overhead cost is increasing with 6%, lowering the type of educational level, et cetera, we have on our office people. It's just a reflection that salary increase in the market, for example, developers have been higher than inflation. So the salary has been increased with 5%, 6% as overhead cost is increasing with 6%. So there's not a major step-up in either license cost or fees or anything. It's just reflecting that some of the input factors have a somewhat higher increase than inflation. 1/3 of the cost is salary, 1/3 of the cost is rental cost, 1/3 of the cost is other costs linked to marketing licenses, et cetera. And typically, over the last couple of quarters, we have seen -- or years, we have seen that salaries increasing a little bit more than inflation, as you know. Going forward, we think that will be more similar.

And just to follow up on that, Sondre. Can you remind me what is your hedging positions on energy now or electricity?

So for now until end of '26, we have hedged around 50% of the consumption and then 25% for the coming period in '27, which will be a rolling hedge going forward. So keeping predictability and keeping flexibilities over for the long term.

And that is equal across all countries and throughout all quarters -- or is just the winter? Or how is this?

It's throughout all quarters, but not across all countries. So the hedge is for the full 50% of the whole transaction was only in Norway and Sweden.

Thank you, Barbara Smit.

Yes. I have three questions initially mostly about the presentation and the emphasis on the virtuous circle created by investments in group exercise. I was wondering what the upside of this is for countries outside of Norway as you're ramping up this same model in those countries. And so could you give me an idea of what is the percentage of your members in Norway that participate in group exercise and how that compares with the other markets?

Yes. It's a good question. If we just take a short step back, when we, so to say, reopened operation after COVID, we took a very deliberate decision to invest a lot in our group training offering, even though we saw that the visits didn't return that early to our classes, we really wanted to invest in this, and that's what we've been doing constantly since COVID. But given the financial situation we had back then, we basically didn't have enough liquidity to invest in parallel in all markets. So we really doubled down in Norway. And we saw that the product offering in Norway was really strengthened, and we saw that was followed by a strong visit increase. Then based on that and as our liquidity position improved, we've established the same type of investments and done the same and basically copied the formula from Norway in the other markets. And we're really starting to see the effects now across all markets. And as we showed in the presentation this morning, now we see a positive development in all markets, not only driven by Norway. And actually, we see a higher percentage increase in visits in some of the other markets than we do in Norway. So we are really seeing that the formula is working. We see that for the quarter, as we reported this morning, we see that number of visits on group training increased more than we increased classes. So number of visits increased with 9%, but we increased class volume with 7%, meaning that when we add the class, we actually get more demand and we're really bringing new people into group training because this would not -- it would be nice and it's great for member loyalty if it was only those members who already trained in classes that's just training more when we add capacity. So what we really follow is the development in unique visitors really seeing that we bring in new categories and new target groups into our classes. And we see that across all markets. So that's the reason why we will continue on this path. We will launch new products, but really make sure that we roll out more of the concepts that we see a big demand for. And that's the background for the 16% increase in classes for the fall that we also communicated in the presentation. And then the second part, Barbara, it's not a big difference across markets in terms of the share of members using return.

But so what is it in Norway?

We don't communicate the exact share.