Sats Asa · OSL:SATS
Sats Asa — Q4 2020 Earnings Presentation
46 slides from Sats Asa's earnings presentation, February 2021
Slide 1: Q4 2020 Interim Report
Q4 2020 INTERIM REPORT OCTOBER —- DECEMBER 2020
Slide 2: Status Update
STATUS UPDATE KY-TAY
Slide 3: Market positions in Oslo, Helsinki, Stockholm, Copenhagen
#1 position1 with 109 clubs and 280 000 members (-6%2) #1 position1 with 84 clubs and 216 000 members (-6%2) 2 #1 position1 with 30 clubs and 60 000 members (-3%2) #2 position1 with 30 clubs and 72 000 members (-26%2) 4 1 3 1 4 10 22 64 Greater Oslo 10 3 Greater Helsinki 5 67 6 4 Greater Stockholm 1
Slide 4: Open clubs and imposed closures
Open clubs Open clubs with restrictions Imposed club closure 4
Slide 5: Governmental restrictions by country
• Regional imposed lock-downs in certain municipalities, • All clubs still closed mainly in the greater Oslo area • Governmental imposed lock-down of all fitness clubs from • A total of 71 clubs closed for an average of 45 days during 9 Dec Q4 • Current restrictions prolonged throughout Feb • 60 of
Slide 6: Estimated negative revenue and EBITDA effect of 2020
• Comparing 2020 to 2019 indicates a negative revenue effect north of NOK • Comparing 2020 to 2019 indicates a negative EBITDA effect of just above 800 million NOK 600 million • However, the effect is larger when taking into account the high growth pace • As for revenues, the effect is larger when t
Slide 7: Survey on public health effects
Key insights from the survey: >60% The two most important reasons for exercising are of the respondents state that exercising is The results are worrying for staying in shape and mental wellbeing important for the mental health both the physical and mental public health. >60% More people train less
Slide 8: Infection control measures in clubs
• Access control • Improved hygiene protocols • Capacity reduced and access restrictions implemented • Deviation reporting of: • Extra cleaning (tasks and frequency) • Infection cases • Great feedback from members on • Employees in quarantine • Shortened classes to allow for cleaning handling of inf
Slide 9: Gradual reopening and dialogue with government
• SATS is gradually opening clubs according to governmental restrictions • Close and pro-active dialogue with both national and local government and politicians • Introducing additional actions to increase infection control and limit mobility • Strong operational routines and technology platform ena
Slide 10: Other businesses allowed open without access control
… as other businesses with no access control and registration and significant people gatherings are allowed to be open 10
Slide 11: Members eager to return
• Members eager to get back, both after the first or the second closure • Visits handled in a controlled manner with strict infection control measures 11
Slide 12: Member base development and recovery
High growth pace Drop-off almost in line with last year, but Quick recovery Falling member base Expect the same lacking sales during club closure due to club closures quick recovery as and increased focus on after the first restricting social reopening mobility 12
Slide 13: Accelerated underlying growth trend, with SATS well positioned
ACCELERATED UNDERLYING GROWTH TREND, WITH SATS WELL POSITIONED < i Sats ' “e KY-TAY
Slide 14: Nordic fitness market and health & wellness growth
Global health & wellness sectors growing 2x 2 global GDP Nordic fitness market1: Spa and wellness Nutrition travel Broad political support for increased health awareness and need for ~2.5% physical activity Digital home Nordic Healthcare member exercise fitness club & rehab CAGR 2017-2019 market1 Ag
Slide 15: Strategic priorities: activation, physical and digital presence
Improving member activation, operational routines 1 and cost control 2 Increasing our physical presence 3 Increasing our digital presence 15
Slide 16: Active member base and SATS scale
An active member base is important … …and SATS is the player with scale and abilities to achieve it (selected examples) 1 In-app challenges Onboarding «Kickstart» Strategically Passive members are overrepresented among churners; active members do not quit 2 Financially Motivate frequent training, ad
Slide 17: Operational routines and cost control
• Responsibilities and expectations to management roles • Cost reductions driven by temporary cost reducing measures during club closures • Overview of tasks executed in clubs • Operating with infection in the society entails certain additional cost-driving measures, but this is compensated for thro
Slide 18: New club openings
• Ursvik Entré (Q1) • Tapiola (Q1) • Lyngby – Kanalvej (Q3) • Iso Omena (Q3) • Häggvik (Q4) • Arninge (Q4) • Mölnvik (Q1) • Hamnen (Q1) • Ås (Q4) • Kalbakken (Q4) • Sinsen (Q4) • Romsås (Q4) • Haugerud (Q4) • Lier (Q4) • Skanssi (Q4) • Skøyen to Hoff (Q3) • St. Olav to Herbarium (Q3) 18
Slide 19: New club openings (continued)
• Lindeberg (Q2) • Aker Brygge (Q2) • Kolbotn Torg (Q2) • Slemmestad (Q3) • Gamlestaden (Q3) • Limhamn (Q3) • Bromma Blocks (Q4) • Circus (Q4) • Kaleva (Q3) • Onkiniemi (Q4) 19
Slide 20: Existing and new clubs map
Existing clubs New clubs 2020 New clubs 2021 v vv v 20
Slide 21: Padel as adjacent service
• Example of an adjacent service with high potential • Sport with high growth in the Nordics • SATS well positioned both with regards to brand position and relationship with relevant landlords • Broadening our offer to existing members and attracting non- members who otherwise do not train at the gy
Slide 22: Increasing our digital presence
INCREASING OUR DIGITAL PRESENCE DEVELOPED DIGITAL UNIVERSE OVER TIME Tren hjemme med Online Training Fre Lor Son Man Tir Ons Tor Fre Lor Son ‘Jeg vil folges opp av en PT Online ‘BOOK DIN PT ONLINE 115 Zumba Mix Online 1215 Mini-Band Strength #1 Online ONLINE TRAINING, LIVE TRAINING, DIGITAL TRAINING
Slide 23: Digital development team and app usage
• Internal development team increased from 10 to 23 employees during 2020 • App usage increase of 35% in October, when all clubs were open • ~500 000 unique app users and ~3 million unique web users during a normal quarter ‘000 of sessions started per week 23
Slide 24: ~80% of Nordic population not a member
~80% of the population in the Nordics are not a member of a fitness club but many are still active3 (1) McKinsey survey 200 users in Sweden & Norway 2020 (2) European health barometer, 28 031 respondents, across 28 countries within the report some analysis have 19 982 respondents (3) Statista, Healt
Slide 25: Growing into digital fitness
The fitness market is growing into digital The competition within digital fitness is growing but the Nordic We have a strong membership base and brand market has yet to be won by one player Our significant membership base and strong brand will allow us to build a solid position amongst fitness enthu
Slide 26: Summary of status update
Significant negative operational and financial effects of governmental restrictions Worried about the negative public health effects of not being able to offer training at clubs, both mentally and physically Time spent well during club closures, strengthening the operational routines and laying the
Slide 27: Financial Review
FINANCIAL REVIEW KY-TAY
Slide 28: Member development
• Normally flat member development in the fourth quarter • Proven ability to regain member base – expect quick recovery once reopening the full club portfolio 28
Slide 29: Yield and ARPM development
• Reported yield highly affected by inflated freeze during the quarter, but underlying yield continues • Underlying price increasing, driven by price adjustments to increase during the past year • Tactical sales campaigns from June to September will affect reported ARPM the coming quarters, as the t
Slide 30: Revenues hit by frozen memberships
• Revenues significantly hit by frozen memberships, driven by: • All memberships belonging to closed clubs frozen by default • Increase in infection rates and governmental recommendations to reduce social mobility have led to increased freeze rates also at open clubs • The loss in revenues are partl
Slide 31: EBITDA development
• Revenue hit significantly affecting EBITDA, partly compensated by temporary lay-offs at closed clubs • Operating under the new normal does result in some additional cost-driving measures, especially within cleaning and sanitation products, but we have compensated for this cost increase through cos
Slide 32: Capital expenditures
• Maintenance capex1 of NOK 185 million (5.2% of revenues), following regular maintenance in the club portfolio • Continued investments in club footprint and digital offering (1) Maintenance capex consists of IT capex and club portfolio capex 32
Slide 33: Cash flow and liquidity
• Positive deferral effects on working capital increases operating cash flow • Prepaid membership fees lifts working capital temporarily – effect will revert the quarter clubs open • Sufficient liquidity at year-end, with cash balance of NOK 456 million and undrawn revolving credit facility (RCF) am
Slide 34: Net debt and leverage
• Historically shown strong deleveraging profile both through cash generation and growth in EBITDA • Expect net debt to increase slightly in the short term, but once we are through the COVID-19 closure impact, we will return to responsible deleveraging again (1) Net debt divided by last twelve month
Slide 35: Outlook
OUTLOOK KY-TAY
Slide 36: Outlook
Club closures obviously financially challenging in the short term Will expand both in the physical and digital fitness space going forward Proven ability to regain members and momentum when reopening after club closure Expect rapid and positive reopening and quick recovery with strong member growth
Slide 37: Disclaimer
• This report includes forward-looking statements which are based on our current expectations and projections about future events. Statements herein, other than statements of historical facts, regarding future events or prospects, are forward-looking statements. All such statements are subject to in
Slide 38: Appendix
APPENDIX KY-TAY
Slide 39: Norway
NORWAY " ADJUSTED COUNTRY EBITDA OUTGOING MEMBER BASE (000) ARPM AND YIELD (NOK/MONTH) TOTAL REVENUES (MNOK) BEFORE IMPACT OF IFRS 16 (MINOK) Wl veto I MEMBERSHIP REVENUES [OTHER YIELD Il OTHER REVENUES 299 301 292 C51) 280 280 95%) 473 25% 7 2% 6% 04 2019 Q12020 Q2 2020 Q3 2020 @4 2020 04 2019 @4 2
Slide 40: Sweden EBITDA note
Please note: The main reason why the EBITDA fall is higher than the revenue fall is the weakening of NOK against SEK in Q4 compared to last year 40
Slide 41: Finland
FINLAND " ADJUSTED COUNTRY EBITDA OUTGOING MEMBER BASE (000) ARPM AND YIELD (NOK/MONTH) TOTAL REVENUES (MNOK) BEFORE IMPACT OF IFRS 16 (MINOK) Wl veto [OTHER YIELD 485 a 394 Q4 2019 QI 2020 Q2 2020 Q3 2020 Q4 2020 Q4 2019 I MEMBERSHIP REVENUES I OTHER REVENUES 493 130 +1% 4% CURR. ADJ). 90 a 364 Q4
Slide 42: Denmark
DENMARK " ADJUSTED COUNTRY EBITDA OUTGOING MEMBER BASE (000) ARPM AND YIELD (NOK/MONTH) TOTAL REVENUES (MNOK) BEFORE IMPACT OF IFRS 16 (MINOK) 9 SOLD CLUBS WB veto Hl MEMBERSHIP REVENUES [OTHER YIELD Il OTHER REVENUES 44%, 129 131 12t 171% 32 32 CI65% CURR ADL oD 9% 82 72 87 97? oo al ~34% -30 Q4 20
Slide 43: Definitions of alternative performance measures
Adjusted country EBITDA before Adjusted EBITDA before impact of IFRS 16 less allocation of Group Profit/(loss) before net financial items, income tax expense, depreciation EBITDA impact of IFRS 16 overhead and cost allocations and amortization Adjusted country EBITDA before Adjusted country EBITDA b
Slide 44: Key figures and APM reconciliation
Amounts in NOK million Q 4 2020 Q 4 2019 Number of clubs, EOP 253 248 Outgoing member base ('000s) 628 687 Average number of members per club 2 482 2 772 ARPM (NOK) 437 502 Yield (NOK) 312 394 Reported EBITDA (MNOK) 216 381 Adjusted EBITDA before impact of IFRS 16 (MNOK) (32) 155 Adjusted EBITDA bef
Slide 45: IFRS 16 impact on balance sheet and P&L
Reported Change Excl. I FRS 16 Amounts in NOK million Q 4 2020 I FRS 16 Q 4 2020 Balance sheet items - I FRS 16 Property, plant and equipment 758 0 758 Right-of use assets 4 568 4 568 0 Deferred tax assets 166 76 90 Prepaid expenses and accrued income 274 -66 340 Total assets 9 091 4 577 4 513 Equit
Slide 46: SATS
SATS