Sats ASA (SATS) Earnings Call Transcript & Summary

Yes. It was around a year ago actually when we had a lot of these new speculations as you're referring to, where there was certainly some new guidance on very expansive plans, et cetera. I think it's fair to say that we have not seen any major shifts in the Swedish competitive situation. As you know, we have Friskis&Svettis, and you have STC and you have Nordic Wellness that are all in the market. Especially STC and Nordic Wellness have been aggressive on expansion historically and continues to be so. But there is nothing -- there's no major shift that has happened in the last 12 months compared to what we have seen in the last, I would say, 36 months. So it's a rough and hard competitive situation in Sweden as it has been constantly, I would say, since 2019. So with the pause in the pandemic. So yes, the competitors are expanding, but I wouldn't say that there's any major shifts lately.

Okay. And then my question on Denmark and the VAT changes and how that impacts the financials. Should we look at the Q2 ARPM as representative of what to expect going forward? And also Cecilie, if you can make some comments on the cost side if Q2 is what we should expect on the cost level, given that the VAT changes have some effect there as well.

It's hard to compare to last year, but the second quarter is relevant when it comes to ARPM and cost growth. I think for the totality, it doesn't sort of move the needle significantly. But of course, it's important for Denmark isolated. If you look at the underlying result for Denmark, it's up 20% on EBITDA. So even though we have lower revenues, we also get some more reductions on the cost side, which sort of evens out the full effect of VAT. So it's a strong underlying development in Denmark, slightly hit by VAT, but not significantly when you look at the net profit for Denmark. So all in all, the second quarter is relevant to look at when it comes to the revenue cost side.

Okay. And then the last one for me on the OpEx. Last 12 months, 5% cost inflation currency adjusted. Is that the level you see going forward as well? Or should we expect that to ease? Also, you can make some comments on your investments in group training, I guess you are meeting comparables where you had already quite a high level of investments in group training.

Yes. I think the 5% is fully in line with what we have communicated. That also includes direct costs, which is variable. So if you take out variable costs, we have a 4% increase in cost over the last year. That's around the wage increase. That's including the additional investments that we do in group training. And we have continued to increase group training schedules in the second quarter. So costs related to that is already included in the numbers that we see right now. We will continue to sort of monitor the load factor for group training, and we will continue to increase investments where that makes sense. So I think this is fully in line with what we have guided historically, and it's also in line with what we see in the coming period. It's costs improving or increasing with inflation, wages is, of course, a big part of our cost base. It's 1/3 of our cost base, and that will increase with the general wage increases. And other than that, we feel that we have a very disciplined approach to the cost development in general. So I think it's fairly stable.

I can take another question if there is no other hands up there, just on the membership base. It was down somewhat unseasonably this quarter and in line with your expectations. But should we expect normal seasonality in the coming quarters? Or if you can make some comments on your campaign activity and how that is relative to last year?

I think in general, I think it's good to look at the longer period than just the quarters because as you said, we can have different type of campaign and intensity in our campaigning affecting the member intake. This quarter was according to our expectations and what we flagged last quarter. So there's nothing underlying happening with churn other than the campaign effect from last year. When it comes to the second half of this year, we expect it to be fairly normal, but it's too early to say anything about this quarter in general.

Over to Petter Nystrom.

So one follow-up question from Ole Martin there on prices and churn. 1% growth in Q2. How do you see the potential to drive further ARPM growth through pricing and upselling without impacting the churn? Just a follow-up on that. I understand there are some differences also across the markets you operate. So some insight on that would also be great.

I think we need to mute.

Yes, did you catch that question? Or should I repeat it?

I think I got most of it. I think in general, we see that pricing is improving according to, of course, the price adjustments that we do, but just the churn of the member base, meaning that our members are coming in at a higher level than the base in general. That has a positive effect on ARPM. We also see that members choose group training to a larger extent now than previously. That also expands the pricing. Going forward, this is something we monitor, of course, when we look at our price adjustments, making sure that we have a balanced approach to how this affects churn over time. But we see that we have been able to increase prices without affecting churn more at least than what we expect when we do this kind of price adjustments. So we believe that there's still room for improvement, both in volume but also in our pricing going forward.

And is it possible to say something about the different markets that you operate in? I assume there are some, call it, regional differences between the markets.

Yes, there are regional differences. I think we see that we have expanded -- we increased the prices more in the Norwegian market. But we see a positive lift also in Denmark, where our pricing is the lowest, and we're focusing significantly on sort of getting the product offering and broadening the product offering to sort of defend the price increases that we do there. Of course, there is, as Sondre mentioned around the Swedish market, the competition is intense. So we are monitoring this on a market-by-market level and trying to sort of optimize what we think is possible to take out in the different markets.

Thank you, Petter. Any other questions? No? Then I think we will round off. Thank you for joining this Q&A. Have a nice day.

Thank you.

Have a great day. Bye-bye. Thank you.