Sats Asa · OSL:SATS
Sats Asa — Q4 2022 Earnings Presentation
32 slides from Sats Asa's earnings presentation, February 2023
Slide 1: Q4 2022 Interim Report October-December 2022
Q4 2022 INTERIM REPORT OCTOBER-DECEMBER 2022 CEO SONDRE GRAVIR CFO CECILIE ELDE INVESTOR RELATIONS: STINE.KLUND@SATS,NO, +47 98 69 9259 a & < me
Slide 2: Q4 2022 characterized by strong operational development despite macroeconomic challenges
Q4 2022 CHARACTERIZED BY STRONG OPERATIONAL DEVELOPMENT DESPITE MACROECONOMIC CHALLENGES KY-TAY
Slide 3: Clubs and members by Nordic region
122 clubs and 325 000 members (8%2) 92 clubs and 244 000 members (7%2) 2 32 clubs and 70 000 members (9%2) 29 clubs and 82 000 members (11%2) 4 3 1 5 12 24 66 Greater Oslo 11 Greater Helsinki 10 5 72 11 Greater Stockholm 11 2 1 6 29 Greater Copenhagen 1) Measured by 2021 revenues based on figures fr
Slide 4: Significantly higher member growth than a typical fourth quarter
• Significantly higher member growth than a typical flat fourth quarter • Drop-off roughly in line with historical levels, but sales have continued at the high pace from the third quarter 1) Excl. clubs in the Jylland/Fyn cluster sold in Q2 2020 4 4
Slide 5: Active members and health contribution
• Active members are loyal members, and # of workouts is thus an important KPI both financially and in terms of public health • SATS works every day to make people healthier and happier • Contributing to the UN sustainability goal #3: Good Health and Well-being • When only taking into account the me
Slide 6: Another quarter of high membership sales
• Another quarter of high membership sales • Members per club increased by 3 p.p. • Improved development in the membership • No significant increase in churn level more in SATS than in Fresh Fitness during mix, driven by demand for extended Q4 2022 geographical access 6 6
Slide 7: Club portfolio relocations and closures
Relocation of clubs to achieve better • SATS Oasen terms, investment grants and/or micro • ELIXIA Fabianinkatu location Close clubs with unsatisfying cash • SATS Vasagatan generation and no relocation alternatives • SATS Hyllie (Q1 2023) • SATS Hønefoss • SATS Skedsmokorset (Q1 2023) • SATS Hyllie C
Slide 8: Profitability improvement program
• Optimize the club portfolio, including selected closures, downsizes, and relocations • Renegotiate contracts with landlords to reduce rent • Reduce number of overhead FTEs • Improve operational efficiency and optimize staffing in clubs • Review and renegotiate agreements and licenses • Step up in
Slide 9: Weakening consumer sentiment and cost inflation risks
The weakening consumer sentiment will affect the People seem to continue prioritizing their health, as fitness center industry and slow down membership sales proven by strong January sales and visits Price increases made for both new and existing We will not be able to compensate for the cost inflat
Slide 10: Financial Review
FINANCIAL REVIEW RYT AY
Slide 11: Significant member growth over the past 12 months
• Significant member growth the past 12 months as like-for-like clubs have returned to pre-covid levels, and maturing clubs also show healthy development • Currently no signs of change in member behaviour or willingness to invest in their own health 11 11 11 1) Excl. clubs in the Jylland/Fyn cluster
Slide 12: Price adjustments on memberships and personal training
• List prices for memberships and personal training adjusted 1 December 2022 • Average increase of 8% across the product portfolio, equivalent to NOK 45 per month • Inflation adjustment of memberships in accordance with the October 2022 CPIs (7.5-10.9%) will take effect starting January 2023 • ∼50%
Slide 13: Membership yield development
• Reported membership yield Membership yield adjusted for freeze and campaigns • Investments in marketing and promotional offers to drive membership sales have proven successful for volume, but giving away free months at the beginning of the membership period impacts reported yield temporarily • Con
Slide 14: Continued progression in revenues
• Continued progression in revenues driven by membership revenue, both from volume and price • Slower personal training business, mainly driven by fewer personal trainers both in SATS and in the industry overall • Retail sales in line with Q4 2019, but distributed across more visits 1) Excl. revenue
Slide 15: Operating expenses and energy costs
Total operating expenses incl. Like-for-like club expenses • Historically, OPEX has increased with inflation but has COGS and overhead been partially offset by cost-saving efforts • Adding 27 clubs compared to 2019 is the main driver for the increase in the cost base, as well as an increase in overh
Slide 16: Adjusted EBITDA and extraordinary costs
• Adj. EBITDA of NOK 12 million in the quarter was affected by a lag in revenue growth, despite solid member growth, as costs have increased faster than our prices • Cost base addressed through profitability program, resulting in extraordinary costs in the quarter of NOK 68 million, of which NOK 46
Slide 17: Capital expenditures
• Maintenance capex was lower than usual during the pandemic due to a focus on cash preservation and less wear and tear on equipment, but will return to historical levels of maintenance capex at approximately 5% of revenue • Upgrades and maintenance capex in the quarter driven by several major club
Slide 18: Cash flow and liquidity
• Back to being cash generative with operating cash flow of NOK 50 million in the quarter • Satisfactory liquidity position to handle current • Strong improvement in working capital in the quarter following regular seasonal pattern, operations and communicated expansion strategy except for ∼NOK 50 m
Slide 19: Leverage and deleveraging profile
• Historically, we have shown strong cash generation capabilities and stable cash conversion, resulting in a strong deleveraging profile • The covid-19 period resulted in significant losses financed by increased debt • In the short term, investments in club expansion will be limited, prioritizing re
Slide 20: Outlook
OUTLOOK RYT AY
Slide 21: Outlook for 2023
Strong start of the year with positive sales momentum in January and the first half of February Promising early results from price adjustments, in line with expectations given repeated price adjustments recently As highlighted on the CMD, further additions to the club expansion pipeline are temporar
Slide 22: Appendix
APPENDIX RYT AY
Slide 23: Reconciliation of extraordinary items Q4 2022
RECONCILIATION OF EXTRAORDINARY ITEMS Q4 2022 274 12 a 175 ADJ. EBITDA EXTRAORDINARY EBITDABEFORE IFRSI6EFFECTS REPORTEDEBITDA DEPR.ANDAMORT. WNETFINANCIAL EXTRAORDINARY REPORTED PROFIT BEFORE ITEMS IMPACT OF IFRS 16 ITEMS ITEMS BEFORE TAX IMPACT OF IFRS 16 23 SATS
Slide 24: Health effect calculation assumptions
• Calculated health effect of all SATS members who meet WHO’s recommendation of minimum 75-100 minutes of vigorous-intensity aerobic physical activity per week at SATS alone (World Health Organization, 2022) • Midpoint of 87.5 minutes applied • Assuming an average of 60 minutes per SATS workout • Me
Slide 25: Norway
NORWAY " A OUNTRY EBITDA BEFORE OUTGOING MEMBER BASE (000) ARPM AND YIELD (NOK/MONTH) TOTAL REVENUES (MNOK) IMPACT OF IFRS 16 (MNOK) I MEMBERSHIP YIELD I MEMBERSHIP REVENUES [OTHER YIELD Il OTHER REVENUES 522.525 516 528 515 108 395 420 Q4 2021 QI 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2021 Q4 2022 Q4 2021
Slide 26: Sweden
SWEDEN " ADJ. COUNTRY EBITDA BEFORE OUTGOING MEMBER BASE (000) ARPM AND YIELD (NOK/MONTH) TOTAL REVENUES (MNOK) IMPACT OF IFRS 16 (MNOK) I MEMBERSHIP YIELD I MEMBERSHIP REVENUES [OTHER YIELD Il OTHER REVENUES 120 109 595 391 Q4 2021 QI 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2021 Q4 2022 Q4 2021 Q4 2022 Q4
Slide 27: Finland
FINLAND " ADJ. COUNTRY EBITDA BEFORE OUTGOING MEMBER BASE (000) ARPM AND YIELD (NOK/MONTH) TOTAL REVENUES (MNOK) IMPACT OF IFRS 16 (MNOK) I MEMBERSHIP YIELD Hi MEMBERSHIP REVENUES [OTHER YIELD Il OTHER REVENUES —__»—*, 502 ao @ a 64 64 65 67 95 88 18 32 402 83 5% 335 ®) 63 4% 4% 4 4 =—.LhLhLlrlcC Gt
Slide 28: Denmark
DENMARK " ADJ. COUNTRY EBITDA BEFORE OUTGOING MEMBER BASE (000) ARPM AND YIELD (NOK/MONTH) TOTAL REVENUES (MNOK) IMPACT OF IFRS 16 (MNOK) I MEMBERSHIP YIELD I MEMBERSHIP REVENUES [OTHER YIELD Il OTHER REVENUES 80 78 cu 82 435 440 107 73 D 72 96 18 7 556 568 90 78 4 “12 -10% —————__l% Q4 2021 Q1 2022
Slide 29: Key figures Q4 2022 vs Q4 2021
Amounts in NOK million Q 4 2022 Q 4 2021 Number of clubs, EOP 275 262 Outgoing member base ('000s) 721 669 Average number of members per club 2 621 2 553 ARPM (NOK) 505 505 Yield (NOK) 402 385 Reported EBITDA (MNOK) 230 273 Adjusted EBITDA before impact of IFRS 16 (MNOK) 12 26 Adjusted EBITDA before
Slide 30: IFRS 16 impact on balance sheet and profit and loss
Re por te d C ha nge Exc l. I FRS 16 Amounts in NOK million Q 4 2022 I FRS 16 Q 4 2022 Ba la nc e she e t ite ms - I FRS 16 Property, plant and equipment 723 0 723 Right-of use assets 4 161 4 161 0 Deferred tax assets 239 -75 314 Prepaid expenses and accrued income 287 -79 366 Tota l a sse ts 8 675
Slide 31: Definitions
Adjusted country EBITDA before Adjusted EBITDA before impact of IFRS 16 less allocation of Group Consists of group services such as commercial functions, IT, finance and Group overhead impact of IFRS 16 overhead and cost allocations administration Adjusted EBITDA before impact of EBITDA adjusted for
Slide 32: SATS
SATS