Q2 2026 Sport Clubs Co SCJSC Earnings Call
Speaker #1: Okay.
Speaker #2: No, it's 3:32, Fahad.
Speaker #1: Good afternoon, everyone. This is Fahad Ikhwan from Sellside Research at Al Jazeera Capital. On behalf of Al Jazeera Capital, it is my pleasure to welcome you all to the Sport Clubs Company's earnings call for Q2 2026.
Speaker #1: I'm pleased to welcome our panelists on the call today, amongst our panelists we have Mr. Vahil Al-Marhabi, the CEO; Mr. Abdullah Al-Tahan, the finance director; Mr. Ahmed Saeed Abdul Maqsood, the IR head; and we will start the call with the management.
Speaker #1: Before opening the floor to participants for the Q&A session, I will start by handing over to the Head of Investor Relations, Mr. Ahmed. Mr. Ahmed, the mic is yours.
Speaker #3: Yes. Assalamu alaikum. Hello everyone. Welcome to the Sport Clubs Q2 earnings call. In the beginning of our call, we are welcoming you all, and we would like to pay your attention to read the disclaimer in the second page of this presentation which says in the short words that all financial and operational data included were driven from the company's published results and disclosures.
Speaker #3: And now, we will give the mic to the CEO, Mr. Vahil Al-Marhabi. Good afternoon, ladies and gentlemen. Welcome to our earnings call, where we will present and discuss our financial results for the second quarter and the first half of 2026.
Speaker #3: I will begin with a brief presentation highlighting the strong performance we delivered during the second quarter. Alhamdulillah, this reflects the continued momentum of our business and the successful execution of our strategy.
Speaker #3: So let's start with our operational highlights for the period. This section will cover key initiatives, execution milestones, and operational improvements that supported our positive performance during this quarter.
Speaker #3: So this quarter we continue to deliver strong and balanced growth across all our key financial metrics. Revenue reached 106 million reals representing a 26% year-on-year increase, while the first half revenue grew by 15.4% to 192.5 million reals.
Speaker #3: Importantly, while revenue grew by 26%, our profitability improved even more significantly with a gross profit margin expanding by 5.6 percentage points to 31.9% and net income margin by 4.8% sorry, 4.8 percentage points to 13%.
Speaker #3: In addition, our EBITDA margin improved as well by 0.5 percentage point, surpassing the 40% mark during this quarter. These results demonstrate that our gross is not only driven by higher revenues but also by improving operating efficiency, disciplined cost management, and the continued execution of our strategy.
Speaker #3: We are pleased, Alhamdulillah, to see this positive momentum continue into the first half of this year, and we believe it will provide a solid foundation for the remainder of 2026.
Speaker #3: Our financial performance continues to be supported by strong operational execution across the business. Over the past 12 months, we've expanded our network by adding eight new clubs.
Speaker #3: Bringing our total footprint to 63 locations across the Kingdom. At the same time, our member base grew by 22.5% to a new record of more than 168,000 members.
Speaker #3: Driving a 36.4% increase in club visits during the quarter to 3.7 million visits. We also continue to strengthen members' engagement beyond traditional memberships. With PT sessions increasing by more than 66% year-on-year, to 109,000 sessions during the quarter.
Speaker #3: Now, our retention rate was slightly lower than last year, but it remains a healthy 65%, despite the significant growth in new member acquisitions. Overall, these operational indicators give us confidence in the sustainability of our growth going forward.
Speaker #3: Our expansion strategy remains the key driver of our long-term growth, and we continue to execute it with discipline and consistency. So today we operate 63 clubs across all major regions of the kingdom, providing us with a well-diversified national footprint and access to a broad customer base.
Speaker #3: Looking ahead, we currently have 14 new clubs in the pipeline, of which 9 are under construction and 5 are in the design or licensing stage.
Speaker #3: So this pipeline, as you can see, is well balanced across different regions of the Kingdom and includes both our Body Masters and Body Motions brands.
Speaker #3: Which is allowing us to continue expanding in both demands and women's fitness segments. And we remain confident in our ability to execute this pipeline on schedule, inshallah, supporting our growth objectives for the coming years.
Speaker #3: This slide this slide, sorry, demonstrates our how our new brand identity continues to strengthen the performance of our network. So while our expanding footprint has contributed has contributed to growing our member base, we are also seeing stronger performance at the club level.
Speaker #3: So the average member per club increased by 13% year-on-year from 2.3 to 2.6 thousand members per club. And this is reflecting the growing attractiveness of our brands and our ability to better utilize the capacity of our existing clubs.
Speaker #3: This larger and more engaged member base translated into a 36.4% increase in club visits during the quarter. While PT sessions grew significantly across all of our brands, this is demonstrating that members are increasingly engaging with our value-added services.
Speaker #3: Overall, these trends demonstrate that our growth is driven not only by opening new clubs, but also by increasing the productivity and engagement of our existing network.
Speaker #3: Now, this slide highlights one of the most encouraging trends in our business, which is the consistency of our membership growth. So over the past three quarters, we have delivered double-digit year-on-year growth in our average active member base every single quarter without exception.
Speaker #3: This demonstrates that our growth is not driven by one-off event or seasonality. But by the sustained strengths of our business model and the consistent execution of our strategy.
Speaker #3: In the second quarter, our average active members reached 164,000 members, representing a 28.5% increase compared to the same quarter last year, while our active member base at the end of the period reached a new record of 168,400 members.
Speaker #3: So this consistent trajectory gives us confidence that the demand for our brands remains strong and that we are well-positioned to continue delivering sustainable growth in the quarters ahead inshallah.
Speaker #3: This slide shows the evolution of our subscription mix compared to the second quarter of last year. As you can see, our subscription mix remained well balanced, with the vast majority of subscriptions continuing to come from our three-month and other shorter-duration plans.
Speaker #3: While the six months and one-year subscriptions continued to complement our overall offering. The slight changes in the mix from last year are well within our expectations.
Speaker #3: And do not change the fundamentals of our business or the quality of our membership base. I will leave you now with my colleague Abdullah to give you a brief about the financial performance.
Speaker #1: Thank you, Wahel, and welcome everyone. This slide highlights the continued strong improvement in the company's performance during the second quarter and the first half of 2026.
Speaker #1: In the second quarter, as we can see, revenue increased by 26% to 106.4 million, while gross profit grew by 53% to 34 million. Operating profit increased by 46% and net income, alhamdulillah, doubled to 13.8 million with earnings per share improving by 83%.
Speaker #1: For the first half, of the year, revenue reached 192.5 million, representing a gross of 15%, while gross profit increased by 42%, net income reached 18.2 million, up 77% compared to the same period last year.
Speaker #1: This slide shows the strength of companies' financial position as of June 2026. As we can see here, total assets increased by 4.8% to reach 990 million, while equity remained stable at approximately 29% of total assets.
Speaker #1: Return on equity improved to 21.2% on a TTM basis. Debt to equity increased slightly to 55.4%, mainly to support the company's expansion, but remains at a healthy level.
Speaker #1: This slide shows the key drivers behind the strong revenue and growth in gross profit in Q2 2026. Total revenue increased by 26% to. Million, mainly driven by a 31% increase in subscription revenue and a 78% increase in PT and other services.
Speaker #1: Body Masters, as we can see, Premium was the main gross contributor, with subscription revenue increasing by 36%, and PT and other services growing by 94%.
Speaker #1: As a result, gross profit increased by 53% to $34 million. This slide highlights the strong level of deferred revenue, which increased by 21% to $110.9 million as of June 2026.
Speaker #1: This balance provides good visibility over future revenue, with around 62% expected to be recognized in the third quarter of this year, 19% in the fourth quarter, and the remaining 19% during 2027 onward.
Speaker #1: This slide shows the company's strong cash generation during the first half of 2026. Cash generated from operating activities increased, alhamdulillah, to $78.4 million, compared to $50.7 million last year.
Speaker #1: Actually, this is supported higher investment spending of 71.7 million mainly related to the expansion and refurbishment plans. Cash used in financing activity remains stable, at 8.9 million compared to 12.9 million last year.
Speaker #1: Overall, the company recorded a limited net cash outflow of $2.1 million, while continuing to invest in future growth. Now, I will hand it over to Wahel to continue with the remaining slides.
Speaker #1: Thank you.
Speaker #2: Thank you, Abdullah. So in this section, as in every earnings call, I will walk you through the key slides that demonstrate how our new identity clubs are transforming the business across all financial and operational metrics.
Speaker #2: As you will see, the continued rollout of our new identity clubs remains the key driver of our transformation. And I believe the impact of this transformation has already become evident in our results quarter after quarter.
Speaker #2: So once again, this, in my view, is the most important slide in today's presentation, as it clearly demonstrates the huge impact of our rebranding strategy.
Speaker #2: So across every key performance indicator, you can see in the slide, whether we're talking about revenue, EBITDA, net income, or active members per club, our New Identity clubs continue to significantly outperform our Classic Identity clubs in both Body Masters and Body Motion sprints.
Speaker #2: What is particularly encouraging is that this superior performance is consistent across all metrics. Which is confirming that the new identity is not simply a new look, but a more effective operating model that delivers stronger financial returns and attracts greater member engagement.
Speaker #2: This gives us a great confidence that as more new clubs are opened with the new identity, we will continue to unlock additional growth and create further value for our shareholders inshallah.
Speaker #2: And let me remind you, and remind everyone, that as we've seen in one of the previous slides, we have today 14 clubs in the pipeline.
Speaker #2: All will be opened with the new identity. So all of these clubs are planned to open in H2 2026 and in 2027 inshallah. The positive impact in this last slide shows the how positive is the impact of our rebranding strategy, which is not limited to newly opened clubs.
Speaker #2: We are seeing the same encouraging results from existing clubs that have been refurbished and converted to the new identity. As illustrated by these two examples, active membership increased significantly after refurbishment and rebranding, with one club more than tripling its active member base and the other delivering strong double-digit growth.
Speaker #2: This gives us additional confidence as we continue executing our refurbishment program and progressively convert more clubs to the new identity in the coming quarters.
Speaker #2: In fact, we shall be presenting the result of a third club that was fully refurbished during Q2, and it already reopened on July 1.
Speaker #2: So, we will be presenting, inshallah, the gross results of that club during our next call. In addition, we will be presenting as well, in the earnings call related to Q4, the results of a fourth club that is now under refurbishment and which is planned to reopen at the beginning of Q4, inshallah.
Speaker #2: So this concludes our presentation. And we are now open for your questions.
Speaker #3: Thank you, panelists. Ladies and gentlemen, we will now commence with the Q&A session. You may raise your hand to speak with our panelists, by pressing the hand icon on your screen.
Speaker #3: Or alternatively, drop your question into the Q&A chat box. With that being said, we will, however, prioritize raised hands. Please limit your questions to two at a time so we may cater to all participants.
Speaker #3: You are more than welcome, however, to join the back of the queue if you have a follow-up. Without further ado, the Q&A session is now open.
Speaker #3: Our first question comes from the line of Mr. Khalid Al-Subehi. Mr. Khalid, unmute yourself locally and please go ahead with your question.
Speaker #4: Okay. Assalamu alaikum. I'm m a very good set of results. I have a question on the recent open center. We have opened three centers during the second quarter.
Speaker #4: And despite opening the new centers, we have seen expansions across margins. Can you shed some light on the recent capital allocations and how they're impacting our gross profits?
Speaker #2: So, the three clubs that we opened—actually, there were five clubs that we opened during Q2. And all of those clubs are of the new identity, okay?
Speaker #2: Anyway, any club now that we are opening is of the new identity. And as we've seen in the previous slide, the new identity is having way higher gross profit margin than the classic identity.
Speaker #2: So the more we are opening new clubs, okay, which are of the new identity, which are having a very or a higher gross profit margin, the whole gross profit margin of the company is getting improved.
Speaker #2: So, which makes us say that, in a way or another, quarter after quarter, as long as we are opening new clubs, as long as some of the old clubs are either shut down or refurbished, we will keep on seeing an improvement in the gross profit margin.
Speaker #4: So the recent opened centers are all profitable in the gross level?
Speaker #2: Of course. And the slide that we've showed, let me go back to the slide once again. You can see here, if we look at the gross profit margin, yes, here.
Speaker #2: You can see that all of those clubs that we opened, the five clubs, are included in the clubs in this slide, in the columns here.
Speaker #2: Some of them are not yet completed full 12 months of operation, we annualize based on the active members that they reach so far. And alhamdulillah, we can say, and that was the positive surprise for us, while in our future guidance, we mentioned that it takes us about eight months or 10 for body masters and 10 months for body motions to reach maturity in terms of number of active members.
Speaker #2: We saw that for those five clubs, although they have not completed three months of operation, some of them just only one month, we reached very high level of active members some of them they exceeded already the one that you can see here as an average of the new identity.
Speaker #4: Very clear.
Speaker #3: Thank you, Mr. Khalid. Thank you, management. Our next question comes from the line of Mr. Mohamed Musa. Mr. Musa, please unmute yourself locally and go ahead with your question.
Speaker #5: Hi, hello. Thank you very much for the opportunity and the detailed analysis. Just two questions. When you say new identity, can you elaborate more?
Speaker #5: What's the new identity? What does it mean? What changed? And then I'll follow up with my second question. Thank you.
Speaker #2: The new identity has lots of differences from the old classic identity. So here, we're not talking about only the look from outside and from inside, which is one important factor.
Speaker #2: But in addition to that, we're talking about larger size, okay? So the old body masses, for example, used to be around 2,200 square meters on average.
Speaker #2: Now we're talking about something like 3,300–3,200 square meters on average, plus or minus, which is giving us a better management of the capacity.
Speaker #2: Number three, the way the facilities or the club from inside is structured in a completely different manner, with large areas, with double height, okay, giving more comfort to the to our members.
Speaker #2: Number three, we're talking about a completely different selection of equipment. So now we're moving to big part or big portion of our equipment being from the high-end equipment, okay?
Speaker #2: And equipment which are being seen as premium equipment, especially in the strength area. Number four is the technology used. So now we are using more and more technology compared to our old classic identity clubs.
Speaker #2: Whether we're talking about the equipment itself, or talking about facilities that you can use the app with. Number five, we're talking about the selection of the club itself.
Speaker #2: And this is one of the most important factors. So, before, we were using some kind of classical or conventional or traditional way of selecting the location. Now, the selection is being made using—.
Speaker #2: A powerful software that is making us select our clubs using a scientific way. So any new club, we select we have to look at the density in the area, we have to look at the gender split, all the demographic factors.
Speaker #2: We look at the purchasing power, so all these factors we compare them with our successful clubs, and we make sure that we are opening in the right location.
Speaker #2: Sorry.
Speaker #5: No, thank you. Thank you so much for the very clear explanation. My second question, so that my colleagues and everyone on the call can ask, is about payment terms.
Speaker #5: Have you seen any change in behavior? Are people becoming more oriented towards shorter subscriptions or are they still looking for annual subscriptions? Just the trend, if you can elaborate.
Speaker #2: See, we are now living in an period where awareness about fitness is growing very fast, okay? And thanks to the government, actually, which is supporting this big time.
Speaker #2: Through all the initiatives and through Vision 2030. Now, as awareness is getting higher and higher and moving fast manner, there are lots of new members coming to our clubs.
Speaker #2: Because our new identity is becoming really the talk of the town, lots of new members are coming to try our new facilities. So and usually, it's a rule in this industry that somebody who is coming for the first time either to fitness, to the world of fitness, or to a certain brand, he prefers or he or she prefers to start with a shorter duration.
Speaker #2: Once now they like the facility, they like the brand, okay, they start to move and shift to a longer duration.
Speaker #5: Okay. Clear. Thank you so much for answering my questions.
Speaker #2: You're welcome.
Speaker #3: Thank you, Mr. Musa. Thank you, management. Our next question comes from the line of Mr. Tahir Safiuddin. Mr. Tahir, your line is unmuted. Please go ahead with your question.
Speaker #4: Yes, hi. Good afternoon, gents. It's Tahir from JP Morgan. Thank you very much for the opportunity and congrats on a solid set of results.
Speaker #4: Maybe two questions, if I may. The first one is just on the competitive landscape. I mean, clearly, your new identity clubs are performing maybe well above expectations, and we can see that in the numbers.
Speaker #4: But maybe just a few thoughts on the competitive landscape in the Saudi fitness market. Are you seeing a pickup and penetration? Are you seeing more competition from existing players?
Speaker #4: I mean, we know that the largest player is also expanding aggressively across the market, also some other listed players have ambitious plans. Are you seeing any new entrants?
Speaker #4: So maybe this will be the first part of the question. The second part is on maybe pricing. Where does your pricing today on the new identity compares with the market?
Speaker #4: If you can maybe share some more insights on discounts and so on. So that would be maybe the first question. And then I'll come to my second question.
Speaker #2: Regarding the competitive landscape, I can say that competition is growing on one side, but at the same time, the market is also being consolidated from another side.
Speaker #2: So from one side, yes, there are some big companies big brands in the market competing it's being the case since long. Lately, we saw some new brands whether we're talking about international brands, regional brands, or local brands.
Speaker #2: Recently came to the market. When I say recently, I'm not talking about a quarter or two, but I'm talking about the last two, three years.
Speaker #2: They got into the market. However, what I want to say here is that we are operating in a tier which is somehow let's say far from most of the competitors.
Speaker #2: Okay? So we have lots of new entrants in the low tier, okay, what we call the budget clubs. We do not compete with them.
Speaker #2: They do not compete with us. Directly. Another listed company has lots of clubs in the high tier, okay, in the high-end tier. Or in the highest part of the mid tier.
Speaker #2: Okay? As well, those they do not compete with us directly. Our field is the mid tier. Okay? And this is where we are competing and there are not lots of players in this tier.
Speaker #2: The market leader, they have some brands in this tier, but regarding the other players, as I said, most of them they either play in the low tier or in the highest tier of the market.
Speaker #4: And then when you talk about the mid tier, sorry, but when we talk about the medium tier, where you compete, what's your pricing differential versus other players?
Speaker #4: Are you the cheapest? Are you like how should we think about your pricing offering?
Speaker #2: Exactly. So this is yes, this is taking me to the second part of your first question.
Speaker #4: Oh, sorry. Okay.
Speaker #2: Go ahead. So here comes what we call the value proposition for body masses and body motion. So what is the value proposition which we believe is one of the factors that make us making us successful, Alhamdulillah?
Speaker #2: It is offering the best or very high quality for very good and affordable and reasonable prices. Okay? So that's why we believe that for the mid tier, we offer very high quality, if I don't want to say the best quality in the mid tier, but at the best price in the market.
Speaker #2: Okay? Now, this is regarding competition. Now, regarding the new identity versus the old identity. And I think this is part of your question. Yes, of course, the new identity is having a higher net price compared to the old identity.
Speaker #2: This is not because the rack rate is higher. This is not because the level of discount is lower, but because the old identity has a feature which is called the home price.
Speaker #2: Okay? So the old identity, because I didn't have the right quality to compete with in the market, I had to compete with the price.
Speaker #2: So we created something called home price, where the member can subscribe with a lower or discounted price okay, if he subscribe only in this selected particular branch.
Speaker #2: Okay? Without having the privilege of accessing all the network. However, with all our of our new identity clubs, this feature is not there. So the member is obliged to subscribe to the highest price, okay, which does not have the home price.
Speaker #2: And it takes him it gives him the privilege of accessing the whole network.
Speaker #4: Okay. All right. And maybe just quickly, my second question is just on the guidance. I remember maybe at the time of the IPO, you had some ambitious store expansion guidance and also a bit the margins.
Speaker #4: Maybe you can just maybe update us on how should we think about maybe the medium term?
Speaker #2: Yes. So we keep on regularly looking at our guidance to see if we need to make any changes or keep it as is. We found out that there is no major change to do.
Speaker #2: Regarding the expansion, I can say that we are not ahead of the expansion. We are a little bit behind the plan. And this is due to some out-of-control delays coming from obtaining the licenses, etc.
Speaker #2: However, I can say that this delay is not big, okay? We are catching up, inshallah. This is because we were saying, on average, 10 clubs per year.
Speaker #2: This year, for example, we are expecting to open eight clubs. However, we expect next year to open at least 13 clubs. Okay? So this it adjusts the what we it makes us catch up next year, Inshallah.
Speaker #2: This is from one this is from one side. But also another thing which is important is that in terms of numbers, okay, for those new identity clubs, we are making higher numbers than the future guidance.
Speaker #2: So this is offsetting the delay. Now, in terms of EBITDA, margin, I believe that because here we are showing 43% to 45% by end of 2026, I would say that we are on track.
Speaker #2: And we hope, Inshallah, to be very close to those numbers, if we do not beat this number. We should be very close by the end of this year, Inshallah.
Speaker #4: Okay. All right. Very clear. Thank you very much.
Speaker #1: Thank you, management. And thank you, Mr. Tahir. I'll take a few questions from the chat box. Mr. Abdulaziz, also very asks how do you calculate the retention rate and what is the reason behind the drop?
Speaker #1: Do you see this rate significant as management given that your strategy is based on short-term subscription mix?
Speaker #2: Okay. So the first part of the question, how do we calculate? Let me say that in Europe, in the US, in markets where the subscriptions are sold on a monthly basis and renewed on a monthly basis, it's very simple and straightforward to calculate the retention.
Speaker #2: Okay? Which is on monthly basis. For us, because we have a completely different structure, we have three months, six months, and 12 months, it's not easy to calculate the retention on a monthly basis.
Speaker #2: So what we did is that we came out with a formula that calculate the retention on a TTM basis for one full year. Okay?
Speaker #2: That keeps on moving forward. And we did this in order to avoid two things. Number one, the difference between the three, six, and 12 months.
Speaker #2: And the second thing is the seasonality. As you know, in this industry, like in any other industry, there is a big seasonality difference between a quarter and another quarter.
Speaker #2: So that's why we do the calculation based on a 12-month formula. Now, why the drop? The drop, I believe, is because, as I said, the number of three-month and shorter durations was higher, as you've seen in the previous slide, compared to previous periods.
Speaker #2: And usually, usually, when we have a shorter period, okay, three months or a four-month subscription, this is normal that the retention rate will be lower when you compare it to six months or 12 months.
Speaker #2: Because when you compare with 12 months, for example, okay, then the retention will be 100%. If you compare with six months, the retention will be lower.
Speaker #2: But the more you go shorter in the duration, the more there are people who will not be renewing. Okay? So as our shorter duration took more part of the subscription mix, it is normal that the retention is going down.
Speaker #2: However, the most important thing to mention here is that we are at 65%. Okay? If we want our retention rate to keep moving positively, then one day we'll reach 100%, which is impossible.
Speaker #2: In this industry, usually, anything in the 60s is considered to be a healthy retention rate, we are today at 65, which we believe is a healthy retention rate.
Speaker #2: And we expect that this will keep on going up and down around this number. As long as it is in the 60s, in the 6%, we believe that this is a healthy retention.
Speaker #1: Thank you, management. The next question is from Husa Al-Sakran. How many branches are remaining to be renewed?
Speaker #2: Okay, this is a very good question. Because for me, a club that is refurbished and is bringing these great results is even more profitable for us than a new club.
Speaker #2: Because it is giving the same great numbers with less CapEx. So, when we saw that the refurbishment was really very successful, we increased the number of clubs to be refurbished.
Speaker #2: So but at the same time, we don't want to refurbish a big number of clubs at the same time because we don't want to affect the cash sales and the revenues in a certain quarter.
Speaker #2: So we decided that we go with club by one club at a time. Which is taking usually one full quarter to be refurbished. So like this, we decided to refurbish about four clubs per year.
Speaker #2: Sometimes there are some clubs where that needs slight refurbishment without being shut down. We can add them to the four clubs to be fully refurbished every year.
Speaker #2: Now, to answer your question about how many clubs still to be refurbished, I would say that we will have we have not less than another at least 10 clubs to be refurbished in the plan.
Speaker #1: Thank you, management. The next question is from Salma Afifi. What is the typical ramp-up period for new clubs to reach mature club levels in terms of utilization and profitability?
Speaker #1: And does the management intend to open new clubs in areas where sports clubs already have an existing presence? If so, how do you assess potential cannibalization risk?
Speaker #2: Thanks. For the first part of the question, the maturity the ramp-up period to reach maturity, it's shown in the guidance in front of you.
Speaker #2: Which is between 8 to 10 months for the Bunny Masters and 10 to 12 months for Bunny Motions. However, Alhamdulillah, I can say that with our new identity clubs, we saw that we are having much shorter period to reach maturity.
Speaker #2: So, the ramp-up period is not taking that long. It's taking way less than this period. And in terms of the second part of the question, which is—can you remind me of the second part of the question?
Speaker #2: The cannibalization, yes. The cannibalization. So the cannibalization as I previously mentioned that one of the main important factors of differentiation between the new identity clubs and the old classic clubs is the use of a powerful software that is selecting the location on a scientific basis.
Speaker #2: Not only this software is telling us that we have to select this sorry, this location in that area because of the demographic metrics okay, that makes it a successful club.
Speaker #2: But also, it shows us the whether there is any cannibalization with another club which is operating. Club of ours. So when we put when we assess a new location, we make sure that there is no cannibalization with any of our existing clubs.
Speaker #2: Now, as an exception, sometimes we accept a level of cannibalization of 10 to 15 percent. If we believe that the new location is really making or will make a big let's say a very high revenues a big number of active members, then in such case, we can allow a level of cannibalization between 10 to 15 percent.
Speaker #2: However, if we see that this level will reach more than that, we prefer to drop it and look for another location.
Speaker #1: Thank you, management. Next question comes from Mr. Rohan Ahmed. Has the company made any pricing adjustments in August, such as increasing three-month subscription prices while reducing six and 12-month subscription prices?
Speaker #1: Could you explain the rationale behind these changes? Also, was the increase in the three-month subscription price larger at Bunny Motion?
Speaker #2: Thanks. So the first part of the question, the prices are the same. We didn't change anything in the rack rate of the price. The only thing that happens usually is that we change the offer okay.
Speaker #2: So whether people will go to three months or six months or 12 months, depends on two factors. Number one is, as I said, earlier, people the new members, the new members usually tend to go for shorter duration.
Speaker #2: But at the same time, there is another factor, which is the company itself. We can manage this as well by the offer that we are making.
Speaker #2: So if we go, for example, more aggressive on the three months than rather than compared to the six and 12 months, then definitely people will go to the three months.
Speaker #2: If we go more aggressive on an offer in an offer on the six and 12 months, also definitely lots of people will move to the longer durations.
Speaker #2: So for us, we didn't really change a lot from last year okay. So we were making the same aggressiveness on the three-month, six-month, and 12-month compared to last year.
Speaker #2: But as I said, lots of new members are coming, which explains the slight increase in the three months. In terms of price, no price change on the six and the three months, just to answer your question.
Speaker #2: The second question, can you just repeat it, please, for Bunny Motions? I didn't get it.
Speaker #1: Oh, the question was that was the increase in price in three months subscription larger at Bunny Motions? Was the price increase for Bunny Motion larger than?
Speaker #2: As I said as I said again, in Bunny Motions, I may say that we went a little bit more aggressive than last year in the three months because we found out that the clubs in Bunny Motions they still have big capacity.
Speaker #2: That we can use. So we decided to slightly increase the discount on Bunny Motions in order to gain more members. Something that we are not doing with Bunny Masters because we believe that we are managing well our capacity today.
Speaker #2: So in terms of rack rate and price, the price is the same. However, we went slightly higher in terms of discounts for Bunny Motions during the previous period.
Speaker #1: Thank you, management. So there is a question that already was presented. However else, still put it in front of you. How many clubs under the new identity by end of Q2 26?
Speaker #1: And how many clubs are you targeting to open in second half 26?
Speaker #2: Okay. So the total number of new clubs so far for as of now for the new identity are 27 clubs for both Bunny Masters and Bunny Motions out of 63 clubs in total.
Speaker #2: In H2 of this year, we are expecting to open another three clubs. Two three in real all of them in real.
Speaker #1: And the next question is, what is the expected gross margin in a steady state for new identity clubs?
Speaker #2: If we go back to the—yes, if we go to the guidance, the gross profit margin, you can see here that it is, for Bunny Masters, between 40 to 45%.
Speaker #2: For Bunny Motions, it is between 35% and 40%. This is for the period ending 2026. However, we expect, starting from 2027, that this goes up even higher—between 42% and 47% for Bunny Masters, and between 40% and 45% for Bunny Motions.
Speaker #1: Thank you, management. I will take this opportunity to put a few questions from my end as well.
Speaker #2: Yes.
Speaker #1: If you go on the slide where you are showing the number of members, the increase in Q2, the year-on-year increase, is I think around 28 percent.
Speaker #1: For total members.
Speaker #2: You mean you mean wait just a minute. You mean this slide?
Speaker #1: This this slide. And even on a Q1, Q basis, the number of members have increased from 137.7 to 164, roughly around 28,000. Whereas last year, it was around 10,000 or 9,000.
Speaker #1: On a Q1, Q basis, there is a big increase in the total number of members, which is also reflected in the year-on-year increase. So can you put some light on it on this Q1, Q increase?
Speaker #2: Yes. And I believe as well that the next quarters will witness even higher numbers because simply simply, the more we are opening new clubs, the more the number of active members is growing up.
Speaker #2: So before, we opened last year five new clubs only okay. So the increase was lower than the increase when we opened eight clubs. And now, as we are going to open in 2027, 13 clubs between now and 2027 not less than 13 clubs, then I believe that this number will grow even higher.
Speaker #1: So, in Q2, the total number of clubs.
Speaker #2: And by the way, sorry sorry if I had interrupting you. Also, it's important to mention, by the way, that our like-for-like growth was positive and double-digit.
Speaker #2: During the first half of the year. So not only the number of active members is coming from the new open newly opened clubs, but as well coming from our existing operational clubs.
Speaker #2: So we witnessed during the first half a positive double-digit growth in like-for-like in terms of members. And what is contributing as well as I said is the refurbishment refurbished clubs, which are contributing significantly in the increase of active members.
Speaker #1: So this is exactly why I had put forward this question because the like-for-like for some other players, of existing clubs, performance has not been that great.
Speaker #1: However, I see that in Bunny Master's case, this is quite significant. My second question would be, yeah.
Speaker #2: Since one of. Why?
Speaker #1: So my.
Speaker #2: We had a good like-for-like growth. I would say as well which is a very important factor is that we are avoiding any type of cannibalization because the cannibalization is one of the factors that impede the like-for-like growth.
Speaker #2: So we make sure that we don't have any cannibalization. A last important factor also is the services, the PT and the other services which witness a very high growth.
Speaker #2: And this is as well explaining why we have higher like-for-like growth because members in the same club okay. Are now more members are using our other services like PT and other services which is even increasing the like-for-like growth in terms of revenues per club.
Speaker #1: Pretty much was my next question on I think the presentation showed a 66 percent increase. In revenues from PT. Which was sizable. Again, another deviation from industry peers where we have seen a slowdown in PT revenues.
Speaker #2: Yeah. Actually, the growth in PT, as I said, anyone who witnessed or was there in the earnings call of Q3 2025, I mentioned that we launched at the beginning of the year a completely new program of PT.
Speaker #2: And at the very beginning of the year, it showed some weak numbers. And I explained at that time, I said this is a completely new program.
Speaker #2: At the very beginning, it will not be encouraging in terms of numbers because it's normal that there will be kind of resistance for any program that the trainers are used to.
Speaker #2: But then all the trainers, they got convinced that this program is better for both the company and for them. The reason I'm talking about the trainers is because the trainers are our partners in this PT program, as you know, in this industry.
Speaker #2: So when they got convinced with it, they saw the real numbers coming from this new program. We started to see a big growth in the PT and other services coming from the new program.
Speaker #1: Thank you, management. I believe we have responded to all the questions from both raised hands and the chat. So we can conclude the Q&A session.
Speaker #1: And if anyone has any unresolved queries, you are more than welcome to reach sports clubs IR team via their email. On behalf of Al Jazeera Capital, I'd like to extend my sincere thanks to the management of sports clubs company and all the participants for taking their time for the call.
Speaker #1: I will now hand back to the management for closing remarks.
Speaker #2: Thank you, Fahad. Thank you again, everyone, for your time, for your questions, and for your continued confidence in Sports Clubs Company. We look forward to updating you on our continued progress in the coming quarters, inshallah.
