Sondre Gravir: SATS Q3 2026 Presentation. My name is Sondre Gravir, and I am the CEO of SATS, and I am joined today by our CFO, Cecilie Elde. After the presentation, we will take your questions in Q&A on Teams from 10:00AM to 10:30AM. You will find the Teams link in this morning's stock exchange release. For anyone meeting SATS for the first time, here is a quick overview of the company. We have 268 clubs in the Nordics with 752,000 members and around 10,000 employees. Our clubs are concentrated in the four capital regions, Greater Oslo, Stockholm, Helsinki, and Copenhagen. Having many clubs together gives members more choice and gives us more efficient operations. Our members are very active. On average, we have around 119,000 workouts and 1,600 group training classes every day, and that is across a Q3, where much of the period is low season and summer holidays.
Sondre Gravir: That activity is what drives our results. Since 2023, EBITDA has grown by 19% and EBIT by 30% annually. Earnings per share increased from NOK 1.10 in 2023 to NOK 2.83 last 12 months, an annual growth rate of 41%. Now let us look at the Q3. In short, each member brought in more revenue and more of that revenue reached bottom line. Our members are also training more. Total workouts grew 2% and 6% more members took part in group training classes. Revenues increased 7% currency adjusted. Our aim is to grow total revenue by balancing volume and price, and this quarter, the growth came mainly from higher value per member. EBITDA before IFRS 16 increased by 22% to NOK 235 million, and the margin increased from 15% to 18%. Earnings per share increased by 43% to NOK 0.69. The higher earnings are turning into cash.
Sondre Gravir: Over the last 12 months, we generated NOK 609 million in free cash flow. Even while investing in our clubs and returning cash to shareholders, we kept leverage at 1.1 for four quarters in a row. That strong cash flow is what allows us to reward our shareholders. In the quarter, we returned NOK 193 million through a higher dividend of NOK 0.72 per share and NOK 54 million in share buybacks. We have talked about our reinforcing performance cycle earlier, and now in Q3, it is continuing to move in the right direction. It all starts with a constantly improved product. So far this year, we have upgraded 53 clubs. Better clubs get our members to train more often, and workouts per member are up 2% and more members are joining classes.
Sondre Gravir: Active members are the ones who stay, and those who take part in group training are the least likely to leave us. A member who stay longer and train more also bring in more revenue. ARPM is up 7% currency adjusted, and that makes our clubs more profitable. The EBITDA margin rose 2.9 percentage points to 18%. Higher profit gives us cash to reinvest. We generated NOK 132 million in free cash flow in the quarter, and that money goes back into the clubs, so the cycle starts again. In this quarter, all six steps in the cycle moved in the right direction, and I will go through some of them more in detail on the next slides. Let us start with activity, because this is a leading indicator.
Sondre Gravir: Members who train more tend to stay longer, so activity today tells us a lot about churn and revenue in the quarters ahead. Each member trained 2% more often than last year, and the number of members per club also rose by 2%. Group training is growing even faster. Group training workouts are up 4%, and the number of unique participants is up 6%. The chart on the right shows that this is not a one-quarter effect. It has been a steady trend over the past two years. Why does this matter? Because active members stay. Growth in group training is the best early signal we have that churn will be lower ahead. A better product is where the cycle starts, as I said, so we keep investing in the clubs we plan to keep.
Sondre Gravir: So far this year, we have upgraded 53 clubs with investments over NOK 500,000. In total, we invested NOK 131 million in upgrades and maintenance from January to September. More projects are planned for Q4, and we expect to end the year around 5% of revenues in line with our targets. Yes, it will be a very busy Q4. A typical upgrade includes replacing worn equipment, adding more equipment, improving the layout and the flow of the club, and bringing in our most popular group training concepts and, in general, refreshing the look and feel. The upgrades, they are working. Here are 4 of our larger projects that we have completed this year. These 4 examples say something about what an upgrade can do.
Sondre Gravir: When we get it right, visits and group training go up, and the member experience improve at the same time. We really increase club capacity when we do an upgrade, so we get more people training on the same square meters without the club feeling more crowded. Hence, we also see a positive NPS development even with increasing visits. That is why upgrading existing clubs remains such an important lever for us going forward. Then to the club portfolio, where we are now adding club growth on top of club optimizations. Every time a lease expires, we review the club. If it performs well, we renew the lease. If there are better premises nearby, we relocate and the members move with us, and if the margin is weak or the club is outside our main cluster, we close it.
Sondre Gravir: As a result, we have 6 fewer clubs than a year ago and 2% less floor space. At the same time, visits per square meters are up 4%, and members per square meter are up 2%. In other words, we get more out of every square meter. Now we have also built a substantial growth pipeline. We have 18 committed openings through 2028, 15 new locations, and 3 relocations, mostly in Norway, but this will balance over time. New clubs do have a negative cash effect initially. As we showed at our Capital Markets Day, a greenfield requires, on average, NOK 7 to 8 million in expansion CapEx, and it runs at a loss until it reaches break even. On average, 8 to 12 months after opening at around one member per square meter.
Sondre Gravir: After that, it starts contributing, and the investment is, on average, paid back in around 3 years. Over time, we expect the new clubs to deliver EBITDA in line with the average of our current portfolio. As more of the pipeline opens, you will see some short-term drag on cash before the new clubs pay off. Over time, our target is still 8 to 12 new clubs a year, but quality will always come before quantity. At our Capital Markets Day in May 2025, we set out a number of ambitions, and this is a summary of where we stand today. EBITDA before IFRS 16 was NOK 988 million over the last 12 months, well on track toward our midterm ambition of NOK 1.1 billion. The EBIT margin was 13.7% in the quarter, up from 10.6% a year ago and 13.6% over the last 12 months.
Sondre Gravir: That is good progress toward our long-term ambition of 15% margin. Cash conversion is currently ahead of our ambition at 64% over the last 12 months against 55%. Part of this comes from low maintenance CapEx, but adjusted for that, we have delivered 57% the last 12 months. Maintenance CapEx was 3.9% of revenues over the last 12 months, mainly because of project timing, as I commented on, and we still expect around 5% for 2026 as a whole, with the higher spend now in Q4. On new clubs, we are still building pipeline. We are opening 3 clubs and closed 8 this year, and we have in total 18 openings committed from 2026 to 2028. Leverage is 1.1x below our current target rates, while distributions are well ahead of plan, 111% of net profit in 2025 and 151% in H1 2026.
Sondre Gravir: The last point is why we are updating our capital allocation framework, which I will come back to in a moment. To summarize it, overall, we are delivering on or ahead on all the ambitions we communicated in the Capital Market Day in May 2025. Let's look at what we have returned to shareholders. In each of the last 3 half years, we have returned significantly more than our target of at least 50% of net profit. In Q3, we paid NOK 139 million in dividends and bought back shares for NOK 54 million. We bought back 3.8% of shares in 2025 and 4.4% of shares so far in 2026. The dividend per share also keeps growing. The dividend for H1 2026 was NOK 0.72 compared with NOK 0.67 a year earlier.
Sondre Gravir: Fewer share means each remaining share gets a larger part of the earnings. That is why earnings per share is growing faster than net profit. That brings me to the update of our capital allocation framework. The range should reflect how we run the business. Our cash generation has been strong, and since the end of 2024, leverage has been below 1.5x, even though we have invested in our clubs and returned more than 100% of net profit. Hence, we are widening the leverage range to 1.0x to 2.0x net debt to EBITDA before IFRS 16. With leverage today well below the top of the range, we still have the flexibility to act if significant growth opportunities come along in the future. The distribution policy is unchanged. We will return at least 50% of annual net profit through dividends and share buybacks.
Sondre Gravir: The order of our priorities is also unchanged. First, we prioritize well-invested clubs with maintenance CapEx of around 5% of revenue. Second, we prioritize growth with 8 to 12 new clubs a year over time and selective acquisition. Third, we prioritize a solid balance sheet within the new range that I just mentioned. On the fourth and fifth priorities, we are making our approach clearer. Semiannual dividends with the aim of growing dividend per share over time, and regular share buyback programs to return surplus cash after expansion CapEx and dividends, which is what we have done over the last three H1s, as you saw on the previous slide. This is not a change of direction, but an update and a clarification of our capital allocation principles going forward.
Sondre Gravir: With that, I will hand it over to Cecilie, who will take you through the financials more in detail.
Cecilie Elde: Thank you, Sondre, and good morning, everyone. Let me start with a brief overview of the financial picture. We delivered another quarter of solid progress, with revenues growing faster than costs and continued improvement in profitability. Cash generation remained strong and leverage was stable. One note before we start, reported figures are held back by a stronger Norwegian krone, so I will refer to currency-adjusted growth where relevant. Let me take you to the drivers, starting with the member base. We ended the quarter with 752,000 members, 4,000 fewer than a year ago, and the bridge on this slide show the main reason for that development. Club openings and closures account for a net reduction of 6,000 members after allowing for members who moved to other SATS clubs. We now operate six fewer clubs than a year ago.
Cecilie Elde: In Denmark, the price increases following the VAT change at the beginning of the year continued to weigh on volumes. The member base was down around 4% year on year. But after separating out the portfolio effects, Norway, Sweden, and Finland added 6,000 members or 0.9%. Worth mentioning is within Norway, the SATS brand continued to grow while Fresh Fitness faced stronger competition in the local segment. Looking specifically at the quarter, the member growth was 8,000. That is broadly in line with Q3 in 2024, but below the 18,000 we added in Q3 last year. We followed the same approach to the autumn campaign, but with higher price increases, it generates lower volume. That is consistent with the communication we had in February. Higher price increases this year were expected to result in lower net growth than last year's exceptionally strong development.
Cecilie Elde: We continue to balance price and volume to maximize total revenues. This year, we have prioritized price. At the same time, members per square meter increased by 1.9%, and we are making better use of smaller club footprints, which supports both margins and return on capital. Overall, member development is in line with what we planned for, taking the portfolio changes, the Denmark development, and our pricing decisions into account. That balance between price and volume is reflected in our revenue development. Total revenue was just above NOK 1.3 billion, up 2% reported and 7% currency adjusted. The difference reflects stronger Norwegian krone in local currency. All four countries grew. ARPM increased 7% currency adjusted, supported by three main factors. First, the annual price adjustments were higher than last year. Second, new members are choosing broader, higher priced memberships, including group training.
Cecilie Elde: Third, the comparison is somewhat affected by last year's autumn campaign, which temporarily reduced yield in Q3 last year. Membership revenues increased by 7% currency adjusted. Other revenues, including personal training, retail, and other services also grew by 7% on the same basis, reaching NOK 193 million. Overall, revenue growth is mainly coming from higher prices and an improved membership mix rather than growth in the total member base. Alongside this revenue growth, we continue to keep costs well controlled. Total costs were down 1% in reported terms and up 3.5% currency adjusted, well below the revenue growth of 7%. Club operating costs and overhead increased by 2.6% currency adjusted, as direct costs grew faster at 11%. This is largely a variable cost, mainly reflecting personal training payroll, cost of goods sold, and other direct costs.
Cecilie Elde: There are a few effects to keep in mind when you are looking at the cost development. Operating fewer clubs reduces costs, and the VAT change in Denmark gives us higher deductions on the cost side. Working in the other direction, our continued expansion of group training and higher electricity costs. Our electricity costs alone increased by 22% currency adjusted in the quarter. If you exclude these four effects, the underlying cost growth was around 4% currency adjusted. The investment in group training is deliberate. More classes and instructor capacity support member activity and engagement. Year to date, costs are also up 4% currency adjusted. As individual quarters will vary with the timing of projects and activities, we continue to focus on the cost development over time. The important part is that we are growing revenues faster than costs while continuing to invest in the product.
Cecilie Elde: With revenue growth outpacing cost growth, we continue to see a clear improvement in profitability. EBITDA before IFRS 16 reached 25% currency adjusted to NOK 235 million. The EBITDA margin reached 18%, an improvement of almost three percentage points. Depreciation was broadly flat currency adjusted, so EBIT grew faster than EBITDA, and EBIT before IFRS 16 increased by 35% currency adjusted to NOK 182 million. The EBIT margin was around 14%. Net profit increased by 37% to NOK 133 million. Earnings per share grew even faster, up 43%. This reflects both the higher profit and the effect of share buybacks, which reduce the weighted average number of shares by around 4.5%. Over the last 12 months, EBITDA before IFRS 16 reached NOK 988 million, approaching our midterm ambition of NOK 1.1 billion. This shows the operating leverage in our model.
Cecilie Elde: On a currency adjusted basis, revenue growth of 7% translated into an EBITDA growth of 25%. Let me now turn to investments in the existing portfolio and our expansion plans. Total CapEx in the quarter was NOK 55 million, where NOK 44 million are upgrades and maintenance and NOK 11 million in expansion. Over the last 12 months, upgrades and maintenance CapEx was NOK 222 million or 3.9% of revenues. That is below our target of 5%, reflecting project timing rather than a lower investment ambition. We expect to be around 5% for the full year, which means that a substantially higher level of investments will hit the Q4. It is also worth repeating that upgrades and maintenance CapEx is not only about maintaining what we have, it also includes investments that increase capacity and improve the product offering within existing clubs, as Sondre showed earlier.
Cecilie Elde: We continue to prioritize these investments based on club quality, competition, and cluster strategy. On expansion, CapEx of NOK 20 million over the last 12 months reflects the limited number of openings. The opening pipeline for 2026 to 2028 now includes 18 openings, supporting our target of 8 to 12 new clubs over time. Our earnings continue to convert well into cash. Free cash flow was NOK 132 million in the quarter, up 6%, and NOK 609 million over the last 12 months. EBITDA converted to operating cash flow at 64% in the quarter. Cash conversion, defined as free cash flow before expansion CapEx relative to EBITDA, was 64% over the last 12 months against our long-term target of 55%. The low maintenance CapEx has helped, but at 5% of revenue, conversion would have been around 57%, still above the target.
Cecilie Elde: Our cash flow also benefits from members paying in advance, resulting in working capital in our business model being structurally negative at around 13% of annual revenue. Working capital is the least negative at the end of the Q3, after holiday pay is paid out in the summer, and it is most negative at year-end. The Q1 is normally our strongest working capital quarter. This is why we look at cash generation over 12 months as well as individual quarters. Over time, the business generates cash to support both expansion and shareholder distributions. That brings me to the balance sheet and shareholder distributions. We returned NOK 193 million to shareholders in the quarter, NOK 139 million in dividend, NOK 0.72 per share, and NOK 54 million in buybacks.
Cecilie Elde: We ended the quarter with total available liquidity of NOK 1.3 billion, comprising of NOK 275 million in cash and just over NOK 1 billion in undrawn credit facilities. Liquidity was slightly higher than at the end of the Q2, despite the distributions. In addition to the free cash flow at NOK 132 million, the liquidity bridge includes a positive currency translation effect of NOK 73 million, mainly related to the available credit capacity. This is a translation effect and not cash generated by operations. Net debt was at NOK 1.1 billion, and leverage remained at 1.1x for the fourth consecutive quarter. That is within the updated leverage range of 1x to 2x that Sondre presented earlier. The updated range reflects how we have been running our business, investing in the clubs and returning capital to shareholders while maintaining low leverage.
Cecilie Elde: We have financial flexibility to continue upgrading the existing portfolio, fund new openings, and return excess capital to shareholders. With that, I will leave the word back to Sondre.
Sondre Gravir: Thank you, Cecilie. Before we round off this presentation, I would like to say a few words about the road ahead. Our business model is very predictable. We improve a little every quarter, and over time, those small steps add up to strong and consistent results. That gives us confidence in further strong operational and financial development and in our midterm EBITDA ambition of NOK 1.1 billion. Our focus remains on the core business. We will keep investing in a better product for our members and keep getting more out of our clubs and our people as we grow. We stay disciplined on both operating costs and investments. We keep costs under control, but we still invest where it drives growth. Over time, we aim to open 8 to 12 new clubs a year. As I said before, always putting quality before quantity.
Sondre Gravir: With the updated capital allocation framework, we can do both fund new clubs and return at least half of our net profit to shareholders, keeping the leverage between 1.0x and 2.0x. Thank you for listening. We look forward to your questions in the Teams meeting or in Teams Q&A at 10:00 AM today. We wish you all a great day.
