Sats ASA (SATS) Earnings Call Transcript

[Presentation] So that was us in 1 minute. Good morning, everyone, both here at the SATS Colosseum and to our digital audience. Welcome to our first Capital Markets Day. My name is Sondre Gravir, and I'm the CEO of SATS. And this is the full management team in SATS, and most of them are present here today. Cecilie, CFO; Silje, heading product and retail; Marianne, heading marketing, communication and member care; Wenche, country manager, Norway; and Gaute, heading consumer insight and technology, will all present here today. In addition, in the management team of SATS, we have Linda-Li, country manager in Sweden; Jussi, country manager in Finland; and Kim, country manager in Denmark. And lastly, we also have Torodd who are -- present here today, who will join November 1, heading people and operations. This is a management team with extensive experience from the fitness industry, both SATS and other operators; and from other relevant industries like retail, consumer goods, telecom, travel and digital services. And I just have to say, of course I'm not objective, that these are fantastic personalities and a great team that I'm very proud and humble to be working together with. We have an exciting agenda ahead of us today, just about 2 hours presentation, including a club tour by Wenche; and [indiscernible], the club manager here at SATS Colosseum. And then we will have time for Q&A. And to our digital audience, please feel free to ask questions along the way through the streaming interface; or directly to investor relations, stine.klund@sats.no, and we will save them for the Q&A session. And then to those present here in the room, we are, after all, at a fantastic fitness club, so I really hope that you will join us for a HIIT class together after the Q&A. This is a great class also for those of you who have never been to a class before or have avoided visiting a gym over the last couple of years, so -- and then after the class, we will serve lunch and have some time for mingling. I will start by giving you a short update on where we stand, the Nordic fitness market in general and our priorities as a company going forward. SATS' vision is to make people healthier and happier. And this vision is truly lived out every day by our 10,000 inspiring colleagues across Norway, Sweden, Denmark and Finland. And going out of the third quarter this year, we are making 708,000 members healthier and happier in our 275 clubs. Since its inception and opening in 1995, SATS has been pioneering the Nordic fitness market by continuously expanding its offering and footprint. The journey started when SATS opened its first 8 clubs. Then 6 years later, ELIXIA was started, and in 2014, the 2 companies merged, forming what today is SATS. And the member base has been growing year after year, as you can see here, continuing to make more people in the Nordics physically active. During the third quarter this year, we made an important leap forward in terms of member growth. The net growth of 36,000 members is a proof point of our ability to recover the member base, first, back to 2019 levels with members per club; and then further on from there, as we will elaborate on today also in Cecilie's presentation. The run rate of the member base is important to us. And we have therefore done a strong marketing push after the summer both strategically long-term campaigning focusing on the SATS brand and the unique offering as a one-stop shop for training and then selected tactical campaigns in the different markets to boost sales. We are very pleased to report this strong member growth in the quarter despite a more challenging macroeconomic environment. And so far, as we lay out here on this slide, we see no signs of weaker consumer sentiment. The Nordic population is prioritizing to stay active even with a somewhat smaller wallet. And we follow several parameters on this topic, and as you can see here, in the third quarter, we have had a record-high sales. We see lower churn than in Q3 2019. We have not seen any signs of members trading down to cheaper memberships either with low-cost operators like Fresh Fitness or to a lower-priced SATS membership. And we have seen the average retail basket size increasing compared to Q3 2019. These trends, with strong sales, we have also seen continued now in October. We are also very happy to see that our members are more happy and more healthy than ever, proven by our NPS score and visit member data. Member satisfaction measured by NPS is at record-high levels. And visit per member is 5% higher than in 2019. And we know that, active members, they are in general very happy members and they stay with us much longer than our passive members. We believe that our vision of making people healthier and happier is more important than ever. And as the market leader in the industry, we have a unique position to contribute to making the world more sustainable. And we also want to make sure that we as a company is well prepared to excel in a world that reaches UN sustainability goals. Hand-in-hand with public health goes inclusion, jobs and empowerment; and energy management. And I will spend some time now to go through how we work within these 3 areas. First, on inactivity. Inactivity is a huge public health problem, probably bigger than people realize also in the Nordics. As an example, Folkehelseinstituttet in Norway reported recently that a majority of the Norwegian population are classified as overweighted or obese. This has major health implications for the individuals in that group and also a huge cost for the society. And this is the situation in the country with one of the most active populations in Europe despite all the well-known benefits of activity, but luckily, the good intentions are in place. Today, just about 20% of the Nordic populations are member in a fitness club, but 44% of the population actually say that they will be a member 1 year down the road, laying the foundation of a growing market. And by getting more people into our clubs, by helping them to succeed with their training and to get good training habits, which Gaute will talk more about in his presentation, we make a substantial contribution to the economy and to the UN Sustainable Development Goal #3, good health and well-being. And the World Health Organization published a report just a few days ago with quite a forceful key message that I want to read. Almost 500 million people will develop heart disease, obesity, diabetes or other noncommunicable diseases attributable to physical inactivity between 2020 and 2030, costing USD 27 billion annually, if government don't take urgent actions to encourage more physical activity among their population. This is a quite forceful message from the World Health Organization. And it gives us a strong indication of the importance of what we are doing in SATS every day, hence our vision of making people healthier and happier. And Oslo Economics has also calculated that the SATS socioeconomic welfare contribution amounts to around NOK 11 billion per year. The second area I want to focus on is inclusion, jobs and empowerment. This is also key for us in SATS. Our work to make people healthier and happier, of course, also applies to our employees. Employing around 10,000 people across the Nordic, of which many are young people having their first job ever, we have a significant responsibility as an employer. And we are working hard to contribute to a society where ambition and attitude let you shape your future regardless and fully independent of your background in any dimension. In SATS, you can make a lifelong career and become a role model and a leader without any formal education, and we believe this is very important in our society today. Our staff is well educated and member oriented and are trained to live according to our values of putting members first, being professional and accountable and extraordinary. And we have the necessary courses and education in SATS Academy supporting our employees in their development both professionally and personally. And we want to be professional along the full employee journey and contribute to the UN sustainability development goal #5, gender equality; and #8, decent work and economic growth. This makes sense for the society and for SATS as a company, enabling us to attracting the best people who put our members first every day; and for those leaving SATS, give them a strong starting point, helping them to succeed in their later professional life. Lastly, it's also important for us, even though it's big words, to contribute to a healthy planet. We are reporting full climate accounts, including scope 1 to 3, as we believe [ quantification ] is an important first step towards change. We have over the past year implemented measures to reduce our energy consumption and have stepped up these initiatives now as we stand in the middle of an energy crisis. A few examples are the implementation of systems to automatically control ventilation, optimizing air amounts based on the different demand and visits in our clubs, of course, during the day. Our healthy planet initiative contribute to UN Sustainable Development Goal #12, responsible consumption and production; and goal #13, climate action. Then moving on, looking into the overall Nordic fitness market. There are unfortunately no available market data for the total market size of the fitness market in the Nordics in '20 and '21, but looking at the years until 2019 gives us a good indication of the growth we expect to continue to see going forward. And there are several key drivers supporting this growth: a bounce back after the pandemic, as the focus on health and wellness is really put on the agenda in people's mind; growing demand for fitness among younger age groups, I will come back to this point; affordability of fitness memberships, with fitness membership prices in the Nordics being relatively low compared to the average in Europe; and market maturity [ of ] balance between low-cost operators and full-service operators, both growing in the market, which I will also comment on. And this slide has a quite powerful message coming back to the importance of younger generations driving the market growth. As you can see on the left-hand side of the slide, we see a significantly higher fitness penetration among the younger generation than the rest of the population. This goes across the Nordics. And the younger generation are keeping their good training habits as they get older, fueling the growth in the market. This is what we call the generation effect. And these segments are very important for SATS and we are currently seeing strong growth in this group. As an example, in Norway, visits from members between 16 and 25 years old was 47% higher in September 2022 compared to September 2019. And this, we believe, is quite impressive. Taking into account that younger people now more often are dropping out of organized sport as football, handball, et cetera, it is great for us to see that we can be an important contributor to help them stay active. And then on the market maturity, where we see that the European fitness markets are currently, at least in some markets, experiencing high growth by low-cost players, the low-cost player growth has flattened out in the Nordics after a very strong club growth in this segment some years ago, making the Nordic fitness market more balanced and with growth driven both by low-cost operators and full-service operators like SATS. And in this Nordic fitness market, SATS is the clear market leader. And we have a number of unique differentiators creating powerful competitive advantages to our members. We have the best, widest and most compelling product offering in the Nordic fitness market. We have the best location and facilities. We have leading support tools for our members like the SATS app. We have skilled, engaged and inspiring people. We have incomparable, strong club clusters in the bigger cities. And we have a leading digital product offering with SATS Mentra. And this is the foundation we build upon when looking ahead. To succeed with our vision, we focus on 4 strategic pillars: people, product, presence and promise. And we believe that, by developing these 4 pillars, we will further strengthen our competitive advantage and position and then support this development by applying a one company approach with one operating model across clubs and markets, which Wenche will talk about soon. We have a clear long-term strategy. And the fitness industry does not look fundamentally different now than before the pandemic. There is still strong demand, and increased focus on health and well-being is further driving the growth of the market. And we believe that the SATS position is stronger than ever, among others, proven by our strong member growth in the third quarter. And we are on a clear path to deliver a very strong financial potential in our current portfolio. However, we are now in a more challenging macroeconomic situation, which is affecting us in several areas. Inflation and especially the high energy prices is weakening our financial delivery short term. When it comes to the softer consumer purchasing power, we have, as I mentioned, not seen any negative effects, so far. And we believe that people will prioritize investing in their health and well-being, but of course, we cannot be certain. Given this unstable situation, we have 2 clear priorities going forward in the short term. We will keep full focus on increasing the number of members per club and demonstrate strong cost discipline and capitalize on the scalability of the business. And these 2 areas will support and improve our financial delivery going forward. Cecilie will come back to this in depth in her part of the presentation and also focus on what we see as the financial capacity in the current portfolio mid-term and on our longer-term financial ambition. And as a team, also being represented here today, we are committed on delivering on our vision, which goes hand in hand on delivering on our financial ambition. And now we will hear from Silje, our product and retail director, who will update you on the work within these areas. Thank you.

Thank you, Sondre. As Sondre said, my name is Silje Ree. I'm leading products and retail within SATS Nordics. Now I assume that all of you are SATS members, but still before we dive into the content, I want to give you some more flavor about what SATS really is and how the clubs look like. So when you enter a SATS club, the first thing that meets you is the reception and the retail area. And the reception is manned with skilled people welcoming you and helping you out if you need any help. And we also have a quite big retail shop with nutrition products, clothes, accessories, basically everything you need for your training, so if you have forgotten something or if you need some extra energy before your training or after your training or just some extra inspiration and motivation for your workouts, you can find it in the shop. Then we move into the fitness floor. We have the broadest equipment mix in the Nordics from top equipment suppliers. And here on the fitness floor, you also find our personal trainers, so if you lack motivation or if you have some specific goals that you want help to reach, for example, get -- a better runner or get stronger, the PTs are here to help you out. And then as you all know, life happens. I guess you all had a hurting back or a hurting neck from sitting still all day or a knee that doesn't work the way it should, which hinders you from getting the most out of your workout. Then our physiotherapists are here to help you out. We have physiotherapy at the biggest clubs in Norway and Sweden, more than 30 therapists that are here to help you if you have any pain. And they also work closely with the PTs to get you back on track again as soon and fast as possible. Then more than 50% of our members are group training members. And we have a broad selection of group training classes, more than 100 classes within several categories, both -- strength, cardio, yoga, et cetera, so I would say it's nearly impossible to not find something that fits you and your goals, whether it is to get stronger, faster or more flexible; or just to calm down after a stressful day in the office. Then on group training, we also offer more specialized concepts. And I guess that -- all of you that are sitting in this room here, the pumping music from below, that is our new HIIT concept that you will get to try later today. And I will talk more about this later, but we also have other specialized concepts. We have hot rooms where you can do hot yoga or Pilates, among other concepts, but we also do group training on the fitness floor. Indoor running is one of our biggest products, which we do out in the cardio park on the fitness floor. And our performance concept, [ also we'll ] come back to, where you do heavy strength training out on the fitness floor together with a personal trainer is another example. I have small kids, and I think the biggest hurdle for me to go to workout is my kids. Then it's great to know that I can bring them to training. They can have fun with other kids and be taken good care of by skilled people at SATS and with our childcare concept MiniSATS. So this is great for families that also want to work out and the kids can have fun at the same time. But then maybe the most important part. It's not only the physical products and facilities that do the magic at SATS. I think most of all it's our passionate and professional employees and our members that together create a strong community because working out in a completely empty club would not make the same feeling. I think it's the feeling of working out together with other people and with SATS employees guiding you that makes the whole difference. You get the energy and the feel of belonging to a group. Then I want to deep dive a bit into group training, our core product. Why is group training important for us? I think a lot of people find it quite difficult to motivate themselves to work out on their own. They want skilled and inspiring instructors to guide them through and push them through their workout, and they want to feel the energy and the support from other people working out together with them. And we know that, group training members, they are the most loyal members. They stay for 1.8x longer than other members. And also they are very happy with the offering. Our NPS now is at 72, which is extremely high. I think it's the highest ever in SATS on group training, which is really good. And to give all these members great training experiences, we offer more than 10,000 group training classes every single week in the Nordics. And we continuously work to optimize both our class portfolio and the class time schedules to match our members' preferences and make sure that we offer what our members want and need. So for example, at colosseum, where we are today, we have more than 150 classes every week. And our most popular class, which you heard the music from, is our newly launched HIIT concept. Last week, we had 37 HIIT classes with more than 1,200 participants. We launched this concept this spring. Colosseum was the first club out. And take a look at this. [Presentation]

So why did we launch this? As Sondre said, a great share of our members is actually below 30 years old, and this share is increasing. And we need to stay relevant and adjust our offering to this group both in terms of type of classes; the atmosphere; the instructor profiles; the music, which is extremely important; and the way we communicate. And we also wanted to meet the competition from the smaller and more specialized boutique gyms that we saw were gaining foothold in our largest cities. And I think we have succeeded with this concept because what we see is that the participants are younger than the regular group training members and we also see a strong cluster effect. We see that, people joining these classes, they travel longer distances. And we get more people from clubs outside colosseum. And also the number of participants and the load factor is among the highest in our product portfolio. And now we have this concept at 3 clubs, 2 in Norway, 1 in Sweden. We also made a light version, more cost-efficient version, at CC Vest here in Norway. And the next club out is in Bergen, at Lars Hilles Gate, which will open later this year. But -- one thing is the classes, but we also know that the atmosphere you work out in is extremely important for the total experience. And we have talked to the members. And they say that they prefer to work out in a darker environment, especially when doing group training classes, because they don't want to feel that they are on display when they are doing their Zumba classes or whatever it is. They want to focus on their training and do their thing. And we also want everyone to feel at home in our group training studios, so what we did was to change design from bright and light pink colors, a quite feminine look, I would say. And we also had big windows out to the fitness floor. We made the room darker, dark blue, black; more LED lights; and limited the in-sight from the fitness floor. So here you see an example of [ a new ] room. And those of you are -- that are here in colosseum will also get to see this new design on the club tour afterwards. But another trend that we are seeing is that more and more people want to work out on the fitness floor and do strength training. And to meet this trend, we have created classes where we actually merge group training and strength training on fitness floor. And this is also a way to better utilize the space that we have on the fitness floor for different purposes. And our performance concept is exactly this: We have 5 different classes that we conduct on fitness floor. Personal trainers are instructors. And these are tough classes. This is heavy strength training or cross-fit inspired workouts with tight follow-up and guiding from the PT, so I also recommend you all to try this class. It's very cool. And that brings me over to another big product that we have, our fitness floor. The biggest part of our clubs are used for fitness floor, and we have a big equipment park. Therefore, optimizing the spacing and the range of our equipment is extremely important to us both to secure an efficient utilization of the square meters that we have and to secure a best possible member experience. We are continuously monitoring our equipment usage with sensors in our biggest clubs, and we gather feedback from members regarding the range and availability of equipment. And based on this, we work on an updated standardized equipment list and a standard spacing of the fitness floor. And we also do a lot of work on continuously optimizing our clubs, improving the layout and the equipment mix. And just to give you an example of this. Quite a lot of our clubs in Oslo were perceived as full, with a quite high pressure on fitness floor and a lot of members during peak time, so to make sure that we've got more members in and to also improve their experience of working out in these clubs, we looked into the layouts and the equipment mix at these clubs. What we did was to take some equipment that we saw were not utilized as much out from the clubs. We added equipment that we knew, based on data, were highly utilized. And we also changed the overall spacing to get more equipment into the club. So for example, at SATS Storo, we increased the number of workstations with 15% without adding any more space; and the result was a higher number of visits and happier members. As Sondre mentioned, the cluster effects and the cluster strategy is also really important to us. We know that most of our members have access to more than 1 club in their membership and most members work out at 2 or 3 different clubs. And this enables us to give our members a broader and better product offering across the clubs in our clusters, with a slightly different offering in each club. An example of this is SATS Bislett and SATS Fagerborg, 2 clubs that are located only a few hundred meters from each other. Bislett is a strong group training club with a lot of GX members but also a lot of pressure on the fitness floor, while Fagerborg is a important fitness floor and strength training club. And what we did was to add more fitness floor capacity on Fagerborg, taking away some of the GX, group training. And then we took away a lot of the pressure on Bislett and improved the total offering in the cluster. And again, more visits and happier members. Then over to personal training. I think a lot of members, including myself, find it hard to motivate themselves to do their training; and need someone to coach them, to push them, to give them the best workouts to reach their goals and to follow up their progress. With the PT products, you can either work out alone with a PT, which is our biggest PT product, but you can also work together with another person, a PT duo or in a small group. And we also offer PT boot camps, where you train in a group over a 10 weeks period; for example, if you want to reach as specific goal as losing weight. And to make everyone that signs up at SATS familiar with the PT products, we also have [ PT starts ]. We give away one free PT session to all new members. PT is a big part of our business. It's driving quite a lot of added revenue and contributing with 15% of our total revenues and with very strong margins. Now we have more than 1,200 PTs in our system, all fully employed by SATS, but the main challenge right now is to get as many PTs that we want to serve all our members. That is limiting our growth [ somewhat on ] PT right now, but we see a small shift now. It is improving. And we are doing heavy efforts to both keep our PTs and to get new PTs into our system. 2 other important areas for driving additional revenue and 2 areas where we have seen strong growth over the last years is retail and treatments. We have a comprehensive retail offering. As I guess you have all seen that are here today also, we have a big shop outside, in the reception. And we continuously work to optimize and develop this offering further by expanding our SATS branded products portfolio within both accessories, nutrition. We have our own SATS Nutrition range and also the SATS clothes collection. We have improved sales and also margins. And in addition, on retail, we work with top-quality brands within both nutrition and apparel to give our members a great and inspiring retail offering. During the pandemic, we also increased and expanded our treatments offering, offering physiotherapy and sports massage to our members. Now we have more than 30 therapists in Norway and Sweden to make sure that our members stay active and don't fall out of their training when they get injured. And this is an offering we're also going to build and expand going forward. Now we have talked a lot about our physical product offering, but we also believe in the hybrid training model, that people want the flexibility to work out whenever they want and wherever they want, whether it is physical at a SATS club or at home if you don't have the time or opportunity to go to a club, so last year, we stepped up our digital training offering by launching SATS Mentra to take home training to a completely new level. SATS Mentra is both a great digital offering to all our SATS members but also a stand-alone product reaching a broader target group than only our SATS members and our current footprint. And now we have more than 800 different classes in the SATS Mentra app within 10 categories. We have teamed up with big profiles such as [indiscernible] and Martin Johnsrud Sundby. We have some of the best instructors also from outside the Nordics. We went to London and handpicked instructors from the biggest boutique gyms to create content for us. And you'll see it's easy functionality, easy to find the classes that you want to do. You can have challenges, training programs; follow your progress; et cetera, so it's a great app that I really encourage you all to take a look at and test. And we also do live classes actually in the app, which is very cool. And this product is not only appealing to the private market, but we also have a great share of corporate members. Now we have more than 10,000 active members at SATS Mentra. And the focus going forward on SATS Mentra will be on increasing the usage of the digital product and [ tightening ] it even closer to the SATS brand and our overall SATS product. So that was everything from me. Now I give the word to Gaute.

Thank you. My name is Gaute Sandal. And I'm leading what we could call an extended technology department called consumer, insight and technology. And we could argue that SATS has developed from being a, yes, brick-and-mortar company with physical clubs only. And don't get me wrong: The physical clubs are the core of the offering. That's where we have all the products and services that Silje talked through and that's where our members primarily work out, but the technology we put on top changes us from being only the physical clubs to something more. And that's what I wanted to talk about today, mostly about the technology side and the data side. And it's really twofold. So the development we do on technology is, of course, for our operations. We are a large operator gaining scale. And the synergies we get from that scale is both on the costs side, the classical cost side on IT costs, OpEx and CapEx, software, hardware, licenses, et cetera, but also for our operations. We have the ability and the ambition also to develop and deliver good self-service tools for our staff at the clubs so that they can focus on the members that are there and not spend time on administration and then doing internal administration work, but more importantly and where we spend the majority of our time is the technology development we do for our members. And as Sondre talked about earlier, I mean, it's not something we do for fun. It is fun as well, but technology and the way we use a significant amount of data that we have, the only focus we have is on increasing activity for our members because active members don't quit. Passive members do, and their ratio is 1 to 7. It is 7x higher probability for a passive member to churn than an active member, so that's really the key focus. And I will talk a bit through that now and what we do. And we think about it in 4 steps: So one, how can we use technology to inspire to work out? How can you use technology to plan your workout; to actually carry out the workout; and lastly and as important, to make that into a habit that continues over time? I will go through each of the 4 steps, what we currently are working on and our ambitions going forward. We have the best fitness app in the Nordics. It's on the top of every app store lists, high rated and the starting point for our members. We have on our web, closely developed together with our product team and our marketing team, a significant library of resources to get inspiration, to find inspiration for any kind of activity that you want to do. So that's for sure. And then on the right-hand side, there's a small example. In the member app, you connect with your friends that are also SATS members, so you can see what they do. And [ in their start ] screen, you can see what your friends have planned to work out in the near future and find inspiration from that and also join that class. And it has 2 effects. Of course, you can find new inspiration, but it also creates that commitment. And commitment is important when you're working out. To work out, your friends get notified that -- your friend that you joined, and also get notified [ if you cancel, say, a class ]. And so far this year, more than 70,000 members have used that functionality alone. And it's just displaying the data that we have with the consent from the members, so it's [ fairly ] easy. Going on to planning the workout. Our app is also important here, the classical book -- group training, which is a fairly standard functionality. You can see all 10,000 group training classes going on this week in the app independently or whether we have access to them or not, so we can get inspired from that. You see the available spots, which instructors that are there. And it adds to your calendar and again to get that commitment into your daily schedule, the same with PT booking. As Silje told, our PTs are fully employed, so their schedule is open and accessible in the app both if you have purchased PT clips or not yet. You can see the availability and try that out. When you booked a class, you can invite your friends and we work out together, very easily. And we also use our app to display how the club capacity is at the moment. Which clubs are close to me where I am right now? With the traffic light saying if it's full or not. And you can also, going into each club, see what is the prediction of the capacity at the club right now and going forward. And again this is just using the check-in data that we have in the system. And it's fairly easy to do, but this has a great value to our members, that they can see and plan their workouts. Some prefer to work out in a gym where there's much capacity. Other prefers to work out where there's crowded gyms to get the atmosphere and meet new friends. We have more than 320,000 weekly users of our app. That's a significant number. And as an example as well, on group training alone, over 225,000 bookings so far weekly, which is big. So planning the workout. Our app is the companion to do that, and when getting into the gym, our app is still important. Our member card is in the app. That's a QR code that you have to access the club, which again makes this into an app that you just don't have in the phone rarely used, but it's something that is active part of the membership and your relation to SATS. And you can find at your fingertips easily training programs in the app. The area where we spend most time is on the last part. How can we use technology to improve or keep your good habits? We've got some examples there. We mentioned group training earlier. We typically have a lot of waiting lists on our group training classes. It's popular, but at the same time, we don't have that many classes that are full, so there's often free capacity, so using algorithms from the visit data that we have, we can predict whether a class is going to be full or not. And we show that to the member, saying, "Well, it's a pretty good chance you can get a spot even though there's 30 people before you in the waiting list." And that small functionality, which is only a digital feature, actually gives 3,000 extra group training visits every month compared to before we launched it. Habits are important. This is going to be live in a few days, so when you have conducted a group training class, you get a reminder to book the same class again next week with a push from the app. Again, increasing those habits; getting into the calendar, maybe the family calendar as well, so that the time is booked for you and so -- to work out. We launched our loyalty program in August last year, SATS Rewards, where you increase in levels silver, gold, platinum based on either the duration of the membership and/or how often you work out. So you can extend the levels if you work out often. And a few perks on every level that you can redeem. What we see now a year after launching it is that the churn rate of those that are impacted by the program versus before we launched the program is significant. We see real significant lower churn among members now than before. In the back end and how we use the data that we have towards our members, some examples on the initiatives we have. We are building machine learning models, AI, for, for example, churn prediction, measuring more than 400 different features of visit behavior among our members to predict churn. [ So all you ] and every member in the company, we have a probability from 0 to 100 whether or not you are going to terminate your membership in 4 weeks because we probably know that better than you. Because of the data that we have from all existing members and all previous members, anonymized, we understand patterns of how people work out and what typically are the trigger points that could lead you into [ a quit impulse ]. And so that's one kind of model that we developed. And we -- more importantly maybe, the step before, how can we predict members turning into passive members, as Silje talked about? And on that note, we segment all our members every day on activity level from more active to less active. And when we use that [ to segment and trigger ] communication differently by segment, we see real results. We typically see 10% to 15% higher activity when we use those segments to tailor messages and tailor communication and push versus a control group. I would also like to mention a bit on our privacy policies, GDPR compliance when exiting as a member. We, of course, are fully GDPR compliant. When you quit in SATS and resign your membership, we keep your data for 6 months. And then we keep the data but anonymize it, so there's no more -- there's no person attached to it anymore, but we also have an opportunity for the member, when resigning, to keep his or her data and access to the app, which is great for the person. Many people use the app as a training diary as well so they can access their previous training. They can still see their friends and what they do and, hopefully, get inspired to come back, so it's good for them, but it's also, of course, good for us because we can continue to reach out to these people to try to get them back to SATS. And they often do. And then they can continue their membership as before with all the data that they had. And on the same note of resigning, I think we have the best holdback strategy implemented in our industry. When you wish to resign, it's easy to do that online, but coming out of the pandemic, we took a big leap forward on how that process works. So we get notified of your rewards level. Are you sure you want to quit? We have all these perks; and they will lose the gold label on the SATS app, "If you quit now and rejoin later." You are getting some incentives to stay. We can easily change those campaign from week to week. And as I mentioned, lastly, do you want to keep a training history or not? So you can, we can -- you can choose that. And if you still choose to quit, you are typically called by one of our telemarketing people in a few hours. What we see from this after launching it is that we are able to keep 20% of those that initially pushed the button, "I want to quit." Most of them just want a break for a month or so and then come back. And what we see is that they are active when they're coming back. So they're not just passive members, but they are active when they're coming back. Lastly, a bit on our organization and competence. We have a full in-house tech team, a full stack from front end, back end. We have designers; product managers, yes; and of course, our analytics team as well. It was outsourced before, but now it's inside our offices in [ Nydal ], good diversity, very good [ employer ] NPS ratings and very high retention. So there's a very competent team, a very enthusiastic team, and then circling back to where I started, to build that technology on top of the clubs that we have to be able to keep our members more active. That's the most important thing that we do. It, of course, has financial and commercial value. That's for sure but, most importantly maybe, fulfilling our mission to make people healthier and happier. Thank you. That's me. And then Wenche will talk a bit.

Thank you, Gaute. Now let me just -- good, okay. My name is Wenche Evertsen, and I'm the country manager for SATS in Norway -- and there it is. And we are not like any other fitness chain. When you enter one of our clubs, you will be greeted by a smile by one of our fantastic employees that we handpick, train and coach every day to inspire and serve our members. And every day, we strive to create a joyful and welcoming atmosphere where you feel motivated and inspired to work out, where you feel that you are part of a SATS community that you want to come back to again and again. And our hard labor is paying off, as you saw earlier, with an NPS score of 58, which is probably the best in the industry. Anyhow, it's considered excellent in any industry. And to achieve this, we work systematically through -- within a -- the framework of our common Nordic operating model to deliver on a constantly high level, as you can see in this picture, because operations is where strategy comes alive. And one company has been one of the fundaments of our strategy for years. How we operate our clubs is part of this platform. And we have one common Nordic operating model with one culture built on our values. And it has been continuously developed from -- based on best practice over the last 27 years and is based on proven set of staffing principles for creating great member experiences and great results. And at the core of our model is the principle that club management happens on the floor, not in an office, interacting with members and staff; and securing sales; and ensuring that the club is clean, maintained and tidy. To give you an example or a few examples. To secure sales and good service in the reception, all club managers schedule themselves in the reception, every week, in prime time to work alongside their employees, leading by example. And our model is comprehensive, covering all areas of operations, and where the devil is in the details, as within the other operating business. And for instance, to ensure a clean and tidy club for all the clubs across the countries, we have the exact same routines and checklists down to the smallest detail. And it's all the routines are completed at a set interval and is calibrated based on visits and also hour by hour every day. Furthermore, health and safety is crucial at a club. And therefore, every SATS club is equipped with a defibrillator. And all of our employees, they complete mandatory CPR training at a regular basis to secure this vital competence with every shift, on every shift, during the opening hours. And last but not least, as Gaute talked about, we are also dependent on great tool systems and processes from central functions that can help us so that we can free up time to work with sales and service, for instance, by digitizing task management, handbooks and club audits, to name a few, so that we can focus on what we are set to do and what we are best at doing, serving our members. And to sum up the SATS operating model. It enables scalability of our business through optimized staffing, tight cost and -- control and efficient implementations, but even more important, it enables a professional and accountable way of working in an inspiring and joyful environment that attracts both members and employees. And that's why we're not like any other fitness chain in the Nordics. And now, so that you can see for yourselves, I'd like to invite everyone here in the room for a club tour with club manager [indiscernible], here in the back, at SATS Colosseum. Thank you. [Break]

Okay. Then we start again. I hope you enjoyed your club tour. My name is Marianne Orderud. And I'm leading the member care, communication and marketing at SATS. 4.5 years ago, we initiated a huge turnaround of our brand across the 4 markets in the Nordics. We conducted research from over 4,500 respondents to find the true drivers in this industry for why people choose a gym. What we found in, from that survey was that [indiscernible] actually emotional. It's connected to feeling welcomed, a part of a community; an atmosphere; and about being inspired and experience joy. Secondly and importantly, we also found out that these drivers are similar across all 4 Nordic countries that we are present, meaning that SATS should have one brand strategy and one way of positioning our brand across all our markets. And as you can see, we have gone from a pretty messy tone of voice to a very distinguished and strong one. Internally, we also started to work with our new position [indiscernible] from the bottom, up in the organization, something that we also continuously work with. We wanted to challenge the industry and position SATS in a new and inspiring way based on insights. In this industry, the marketing we'll see from different players were more or less similar, focusing on well-trained people who just finished that workout wiping their sweat off and being happy. We also saw a typical tactical and rational driven marketing approach, with discounting the memberships as the main communication. And a new tactical campaigning is important also for SATS, but that alone will not build a price premium brand. We wanted to raise the bar and bring a refreshing, new and more emotional way of promoting [ fitness ] to the table, focusing more on how training affects your life also when you're not training. Some part of this industry is also influenced by a trend that is not really that healthy because it's not really about the physical appearance, right? To work out [ at a gym ] is for everyone at any age and with any background. And that we are offering -- and what we are offering basically helps you with any challenge you may have. We have the tools to make it work for our members because, to work out on a regular basis, let's be honest, it's hard for most of us, but the truth is, with regular activity, your body will work better and your brain will function better. So when talking like this, fitness becomes a little less scary, more likable. And SATS become more attractive to more people in the market. I also want to use some time talking about social media. 4 years ago, on Instagram Norway, we had 3,000 followers on that channel; and it didn't really give us much. Today, on that same channel, we have 40,000 followers. And in total, we have 450,000 followers across all platforms. And we are present at Facebook, Instagram, TikTok, LinkedIn and YouTube. As one example: We reached almost 7 million people in organic nonpaid, that means reach, in September now, so social media is very powerful. And it's a very important channel because here we can create awareness, engage with our audience, be more personal, sharing both member stories and the expertise of our staff and showing our clubs. The channel is also a very efficient sales machine. And actually, today, we have 45% more digital sales than we had 4 years ago. As you can see on this charge -- chart, we do well not only compared to other brands in the industry, but also we are also way above benchmark levels across any global brand categories. Brand-tracking tools allow companies to measure important metrics and helps us understand the efficiency both on individual campaigns and the overall brand presence. And every month, we ask the Nordic population several questions about SATS and our main competitors. We have very high brand awareness, and that is important, but we also need people to -- that know about us to choose us when we ask what gym they consider to join. And these numbers show increased consideration levels in all capital cities first 6 months of 2022 compared to same period last year. And why is all of this important? Why use resources, a common tone of voice, a strong brand foundation and fancy posters? Why can't we just do tactical campaigns? Well, because as you have heard several times today, SATS is not a regular gym and we want to do better. Having a strong brand is all about having a consistent and recognizable company expression to offer not only product and services but also meaning. And when doing that, we will create awareness, interest, consideration; and we will get more members. And it's all about working smart and efficient across all parts of the sales funnel. And the job is not done when we convert a new member. Then the actual work starts. As Gaute was showing you on our digital services and app, Silje showed you on the product part and Wenche also talked of the operational part, an active member that uses our products will be a happy and loyal member that stays with us. And we work continuously across all parts of the member life cycle to communicate, nudge and activate the members. And this, of course, happens physically at our gyms with our staffs, products and services but also to a bigger and bigger extent digitally and one-to-one communication. Because if you're a member of SATS, we know a lot about you and your habits. And we want to use that [ sides ] to personalize your experience and be relevant to you and motivate you. It's actually all about getting the right message in the right channel to the right member at the right time. And with 700,000 members and our unique and broad product offering, the SATS experience can be very different from one member to another. And we have systems and the capabilities. And we are working with several automated digital journeys towards our member base, meaning that how the member acts and what they do when triggers what kind of information they get from us. We simply become more relevant. Before I end my part of this presentation, I would like to show you 2 examples of our communication concepts at SATS. We call it "included," where we in a more emotional way are showing the range of our product offering. And we have 10 of these movies. We will look at them all today -- no. I'm just kidding. We will look at 2 of them today, and it's 2 of my favorites. [Presentation]

So thank you very much. I'm looking forward to seeing the afterglow of this group after we will work out together. And now we're like hyping up and music and pumping and young people, but I just want to say that don't be afraid to join the class because it's for everyone. So -- and if you haven't done group training before, this will be the perfect chance to do it because we have -- we will take care of you and have fun. And so I just -- I don't want to scare you with like pumping music and young people and yes, I mean, because -- yes. So with that, I leave the word over to our CFO, Cecilie.

Thank you, Marianne. Yes, my name is Cecilie Elde. I am CFO of SATS, leading the finance and business development team. We came out of 2019 with a solid financial platform, showing steady improvement in profitability, continuing the positive trend from recent years with a robust top line growth and a solid 15% annual improvement in profitability. And the growth in profitability was done through multiple levers and a scalable business model. The member base grew with 4% annually from 2016 to 2019. And that was on a relatively stable club portfolio, improving number of members per club. And we had a 6% annual growth in revenues, where yield improvements further strengthened volume revenue growth both in terms of raised membership prices but also a significant increase in other revenues like personal training and retail. And on top of that, improved cost efficiency by standardizing and improving the operating model further enhanced the results and margins. And focus has been to improve profitability by fully utilizing the operating leverage in our business model, increasing number of members per club without adding costs to drive margin expansion. And with a well-invested portfolio of clubs and a low-rollout pace of new clubs in the period, we have historically shown a strong cash-generating capability and stable cash conversion; resulted in a solid deleveraging profile, which also has given room for investing in further growth. And our long-term strategy has remained relatively unchanged during the past years, but meeting different phases and challenges, we have recognized the need to adapt to our environment and respond quickly. And in the years before the pandemic, as said, we had a solid track record of improving top line and profit. And we went through a complete brand turnaround and became a listed company in October 2019, and then came COVID. And we needed to change focus, handle the crisis and ensure that we were well positioned for accelerated growth once we were able to operate as usual again. So not only by limiting the adverse effects of -- by reducing cash burn and doing fast cost reductions but executing a complete turnaround, but equally important, we wanted to make sure that we sought -- took advantage of the rising opportunities to get ahead. And post COVID, the focus has been on member recovery and growth. And we, as everyone else, are facing new challenges forcing yet another adjustment in our short-term plans because, as everyone else, financially we are hit hard by the macroeconomic conditions that we've seen throughout this year with soaring inflation and energy prices. And unfortunately, our starting point is still weakened by the severe setback COVID-19 had on our business. The member base is recovered but with lower members per club due to 36 new clubs adding costs. We've seen a positive yield development and growth in other revenues, but fewer PTs limit further expansion at the moment. And we are now more efficient in staffing our clubs, but wages are expected to increase. And inflation hits all of our [ input ] factors, especially rent costs, which is 1/3 of our cost base; and not to mention, energy prices, which potentially have a significant impact on our bottom line, but still the fundamentals of our business model and financial characteristics remain. Training habits are relatively unchanged. And we have historically shown an excellent performance track record with well-proven pillars for further financial performance. We have a strong market position and a subscription-based model giving high visibility on revenues; continued volume growth across the portfolio and significant yield improvement; efficient club operations with high drop-through of growing in existing clubs and other revenue; and under normal conditions, a -- strong cash-generating capabilities which give us flexibility to reinvest in future growth. And with several defensive features enabled by our scale, we have a strong competitive position. We have a strong network of clubs unmatched by any competitor in our key city clusters, which is a position that will be hard to copy. And given that we've been around for more than 27 years, we have secured top locations. And with our strong position, we are the most credible and preferred partner for real estate owners. Our clubs are well invested in top-quality equipment, leveraging our size to negotiate favorable prices compared to stand-alone clubs. And we can distribute our product offering in a cost-efficient way through complementary class scheduling on clubs within a cluster. And we develop branding content and marketing materials for all countries centrally. And we have centralized supporting functions like IT, finance and HR, which gives further scale advantages. And we are a very well-known brand in our markets and an attractive employer, so we also get talent fairly easy. And our cash generation profile has enabled us to invest in CRM, digital market capabilities and other drivers of growth, but as mentioned in the beginning, the last couple of years have been challenging. And while our long-term strategy has remained fairly unchanged, we have recognized the need to adapt to our environment. And during the COVID crisis, we consciously decided to invest heavily in growth, opening many new clubs and starting a new business venture in SATS Mentra. We were betting on the underlying premise that our external environment and people habits would quickly revert to normal, leaving us well positioned for accelerated growth. And market recovery has been somewhat slower than expected after COVID. A bigger part of the Nordic population is passive now than before COVID. And in this environment, we have been aggressive in sales and marketing and we have recovered well, but knowing what we know today about the slower market recovery, capacity development in our industry and the macroeconomic development, we would probably have been somewhat less aggressive on growth and not adding too much new capacity to the market. But long term, we believe our growth agenda has been right, but it challenges our financial delivery in the short and medium term. And as a consequence, we have divided our value creation agenda into 2 phases: short-term actions to regain profitability, focusing on growing members and revenue per club and taking forceful steps to take down costs. And long term, we will continue to expand both in terms of club footprint in existing and new markets and taking -- and tapping into new revenue streams close to the core. And in the following, I will take you through a trading update, more concretely on levers we are working on to improve profitability and what we believe is the EBITDA capacity in the existing portfolio. We have accelerated club rollout over the last couple of years and have since the beginning of 2020 opened 36 new clubs. We have further signed 13 new clubs opening over the next year, which gives us a sufficiently strong pipeline for growth in the medium term, limiting the need for adding capacity. And over the last year, growth in the member base of 8% comes from both acquired and maturing clubs but more importantly a strong recovery in like-for-like clubs. And compared to the last quarter, the deviation in members per club has reduced from lacking 200 members to 80. And actually as we've talked about before, the member base of 708,000 members is an all-time high in our SATS history. And it's a result of positive development in both sales and churn, especially over the recent months, but strong sales come at a cost. And we have invested more than usual both in promotions and campaigns, which temporarily affects our yield negatively, but knowing that the market is not entirely back as the Nordic people is not yet fully back to an as active lifestyle as they had before the -- before COVID, our priority has been to sacrifice short-term profitability to ensure that we gain market share in terms of members to secure a solid run rate out of 2022. And looking at a by-country development. The picture is pretty much the same. Norway, Finland and Denmark are recovering well, now showing equal or more members per like-for-like club than in 2019. In Stockholm, being the main part of the Swedish operations, the market capacity in terms of number of clubs has increased by 69% since 2015; and that is causing some delay in recovery compared to the other countries. Fresh Fitness, our low-cost brand operating in Norway is lagging somewhat compared to SATS but has strong -- has shown steady improvement over the last quarters. And growth has not come at the cost of lower prices despite heavy campaigning throughout the last couple of years. We have been able to increase the underlying membership yield through our pricing strategy, and going forward, price optimization is critical for counteracting inflation. And our annual price optimization process to increase membership yield has historically proven very successful. And we are constantly working on optimizing price levels in the member base to ensure fairness and that all members pay the same price for the same membership and access rights. And there are 3 main levers utilized -- that we utilize to increase prices. We do an annual inflation adjustment for existing members. We do price adjustments for new members coming in, applying price depreciation to allow for lower prices at clubs with much capacity and higher prices at fuller clubs. And in addition, we proactively lift prices for members that for some historic reason have a membership price far below the current list price. And over several years, we have experienced that there is significant resilience to such price adjustments. And concretely, we see that the annual adjustment that we did in January and the additional price increase we did in July reconfirmed the expectation of very low incremental churn. And on top of that, the positive benefit of lifting prices in the membership -- is the membership mix effect, as new members are coming in at higher prices than average, which further drives price progression. And constantly raising the prices has resulted in a 7% increase over the last 3 years. So to support our focus on increasing members per club, we, as all other operators in our industry, have invested significantly more than usual in special offers to drive membership sales. Giving away free months at the beginning of the period impacts reported yield, as can be seen on the left, but as memberships are mainly sold with 12 months binding period following the campaign period, the contractual price and the long-term profitability remains intact. And adjusting for campaign effect and somewhat inflated freeze remaining after COVID, the yield shows an increase of 7% which corresponds to the increase in the contractual price members are signing up for, as can be seen on the right-hand-side graph. So our pricing strategy has resulted in a solid development in contractual membership price pre and post COVID, but due to restrictions on group training and club capacity during the pandemic, we saw a flat development during this period. And over the last 12 months, membership prices have increased by 2.7% after price adjustments on new and existing members and will be increased further on January 1 in line with relevant inflation levels. And the yield improvements can be seen in revenues in the third quarter, contributing to NOK 50 million in the third quarter compared to 2019. And the member base is now surpassing 2019 level, which improves revenues by an additional NOK 25 million. As mentioned, we see some negative impact due to the campaign and from just -- from previous quarters and current quarter, and that will continue to impact revenue slightly also going forward, but more importantly, the annual run rate improvement in revenues of growing 36,000 members in this quarter has a run rate effect of NOK 200 million. And that is due to our operating leverage because our subscription-based model offers good visibility of revenues, profits and cash flow. And strong operating leverage and drop-through of incremental revenues means that our EBITDA grows faster than revenue. Around 85% of the cost base required to operate our current club portfolio is more or less fixed, meaning that incremental revenues have a 90% drop-through to EBITDA for the existing clubs because, as long as there is free capacity in the clubs, members can be added without adding costs. And there is still excess capacity in most of our clubs. And I will get back to, later, more on how we have several levers to increase capacity both in product offering, scheduling and club layout. And even other revenues like personal training and retail have a margin of around 35%, which gives high drop-through to EBITDA as well. Increase in staffing costs, club salaries over the last couple of years is primarily driven by additional clubs because, like-for-like, we've had a modest increase of 1.1% annually. Our club operating model is efficient and flexible with clear routines and optimized staffing fully linked to visits. And as can be seen on the right, cost per visit has remained stable over the last 5 years as improved efficiency has counteracted increased -- increases in wages. And club staffing is typically 20% lower in July than in January, and there is up to 80% variations between the different club sizes in terms of visits. And there is still efficiency -- still potential to improve efficiently -- efficiency further by fine-tuning the staffing model, optimizing group training scheduling and implementing self-service tools for staff and members. The increase in overhead costs over the past years is driven by a step-up in digital ambition and launch of SATS Mentra. And in addition, the organization has been scaled to reflect our strong ambition for both member and club expansion. And despite being on track for recovery, macroeconomic conditions add pressure to our margins, and as a consequence, we will take forceful steps to improve profitability to utilize scale. And overhead costs will be taken down to reflect the current member base and short-term focus. Cost reductions in several areas will be implemented, aiming for overhead cost as a percent of revenues returning to 2019 level in the medium term. And we have seen a significant increase in energy costs over the last couple of months. And even though outlook for prices has come somewhat down, we do expect and are preparing for significantly higher costs. Over the years, we've run several projects to identify the source of energy efficiencies and remedy these. And despite adding many new clubs, consumption has been relatively stable compared to 2019. And several actions are taken to reduce consumption at the clubs, which we expect to yield a reduction of 10% to 20% in the short term. And this includes temporary shutdown of saunas in most of our clubs, which alone reduces consumption by 10%. Ventilation is one of the highest energy consumers at SATS. Therefore, reducing the energy consumption has been ongoing work for many years; and new clubs are built with demand-controlled ventilation. And now we're working on making further adjustments to reduce both air flow and temperature, and smarter consumption during nighttime. Rent makes ups -- makes up around 1/3 of our cost base and is mainly fixed, and the annual rent increases are based on consumer price indexes. Increase in property costs over the last couple of years has primarily been driven by additional clubs, and like-for-like, we have an increase of 2.2% annually. The current inflationary environment result in a substantial increase in rent costs for 2023, as increases are based on October CPIs currently expected at around 6% to 10%, although varying across the different markets. Negotiations with the landlords have started, with the aim of partially counteracting the historically high CPI adjustment for next year. And with rent being one of the most significant cost components, maximizing revenue per square meter is key to overall profitability. And our club portfolio ranges from smaller clubs at 1,500 members per square meter -- so 1,500 square meters to large clubs up to 5,000 square meters. And for our smallest clubs, the unique selling point is club quality and premium location, while our largest clubs often have destination products that members are willing to travel to get. And new clubs are often small and space efficient, both as a result of our experience with club optimization as well as being very few available premises in central areas with space to fit a large club. And on the right are some example of our top-performing clubs within each size category. While the width of our product offering differs, members are willing to pay a premium to work out at SATS club of different sizes due to our quality on all parameters: equipment, layout, look and feel and product offering. And in the following, I will take you through how we work continuously to improve club economics to increase profitability per square meter because, looking at our like-for-like portfolio, the member per club is recovering nicely towards the pre-pandemic level of 2,008 (sic) [ 2,800 ] to 2,900 members, but we do see further upside. We see potential in growing beyond that. And our clubs have capacity to accommodate for even more members than they had before the pandemic. And there are several routes to increasing number of members per club both through tuning product offering to make them more attractive to members as well as optimizing the club to utilize space as efficiently as possible. And giving -- given our operating leverage, adding more members to existing clubs with light investments has a significant impact on our overall cash generation. On average, our clubs have 1.4 members per square meter, which compared to our top-performing clubs at 2.4 to 3.2, from the previous page, gives comfort that we are able to fill our clubs, yielding substantial EBITDA improvement. And as Silje talked about, we continuously work with our clusters on product offering to make it more attractive for members to choose us. Strong clusters are important for yield, as members with regional access and group training included pay NOK 100 to NOK 200 more per month. And additionally, members with access to group training are more loyal and -- than those without, adding to the financial impact of having a broad and attractive offer within our clusters. And it enables us also to operate more efficiently, as we can coordinate group training scheduling within clusters to optimize space utilization and optimize the offering available to members. For clubs that are old and outdated or acquired clubs not built in line with our concept, we do minor or major upgrades to improve club quality and offering. We also work strategically to identify relocation opportunities for clubs to have the right -- that have the right location but unsuited premises. And having the right club quality and product offering is essential in differentiating us from the low-cost players and being able to realize a higher yield. And in terms of major upgrades, we often see that relocating a club into brand-new premises, rather than doing a full refurbishment of an old club, might be less CapEx intensive, with even better results. And there is a large spread in how crowded our clubs are, which we track by measuring fitness floor visits per square meter in peak time per club. So very detailed measuring. And for our fullest clubs, strength and cardio equipment is a hurdle for further growth. And through the optimization framework Silje explained earlier, we can facilitate more visits in peaks, which means we can accommodate even more members at these clubs. And as an example, the optimization project performed in 2019 resulted in freeing up 7,000 square meters, equivalent to a fitness floor at 8 clubs, so being able to add even more members to our more popular clubs is financially essential, as we can do it with low risk and very low investment. For most of our clubs, the member potential in the area where the club is located is sufficient to fill the available capacity, but a handful of our clubs, there is too much space relative to the member potential. Or the space available is challenging to utilize for training purposes. Downsizing these clubs either by removing space or relocating to more efficient premises is key to profitability per square meter. And we've done this with 5 clubs, with fantastic results. While removing 35% of the space, we managed to increase the member base by 30%; and that is a significant improvement in club economics. And going forward, we will continue to do downsize projects. Some are already planned, while others are in the pipeline. So to summarize, looking at our like-for-like portfolio. Visits in August were on a level with visits of August 2019, but for the upgraded, optimized, downsized and relocated the clubs, there is a significant increase in visits. So working strategically with the portfolio to identify the clubs and clusters where the different optimization measures have the [ higher ] expected effect will be key priority both in the short and the long term to continuously improve club economics and thus overall profitability and cash generation. In the normal situation, it takes a new club around 24 to 36 months to reach a mature member base, depending on the club's size. And the clubs that we opened before and in the middle of the pandemic got a slow start, and they will take longer for those club to reach mature member base. We see that they are developing according to the initial business cases but with some delay due to several closedowns during the pandemic. And in the period 2020 to 2022, we've opened 18 greenfields. And during the last 12 months, these clubs have contributed to a drag on EBITDA of NOK 20 million, but when fully mature, these clubs are expected to contribute with a total club EBITDA of NOK 85 million, with another NOK 65 million in mature contribution from the 13 clubs currently in the pipeline for opening over the next year. And due to the uncertainty of the macroeconomic situation, further club expansion beyond that, both greenfield rollout and M&A, has been paused, but we still believe that there is a long-term potential both in our home markets and on the European continent. And in the home markets, there are still white spots within major cities as well as a few large clusters for potential entry. And the European market, on the other hand, is highly fragmented especially in the full-service segment, with significant consolidation potential, but in the medium term, further growth beyond already signed greenfields will be limited and purely opportunistic. Our clubs are well invested and with significant club maintenance and upgrade investments levels in the recent years. Maintenance CapEx was lower during the pandemic due to a focus on cash preservation and less wear and tear on the equipment but will return to historical levels of CapEx maintenance in 2023 and onwards at around 5% of revenue. Maintaining a stronghold in the Nordic capital cities, continuously upgrading our existing clubs and expanding the portfolio through filling white spots in increasing micro-cluster capacity is still important. And we have prioritized to invest for the long term both in technology team, systems and infrastructure; as well as club expansion. So a few points on the working capital. SATS benefits from structurally negative capital -- working capital, driven by membership prepayments. And it's following the seasonality of our business. And year-to-date in 2022, net working capital is negatively affected by COVID-related deferrals from previous years, in total amounting to NOK 180 million. And these are member deferrals from periods with closed clubs and high levels of freeze, postponed payment of taxes and social fees, less prepaid memberships and revenue due to heavy campaigning in peak months. And in addition, investing in SATS Mentra, the hardware, negatively impacts working capital, but now that the extraordinary COVID impact is cleared, net working capital is expected to normalize to around 15% of revenues. So this affects cash, so cash development year-to-date is affected by the NOK 180 million COVID effect on net working capital. So for 2022 overall, with adjusted EBITDA per club recovering to pre-COVID levels and with significant growth in number of clubs through greenfields and acquisitions, free cash flow will be negative, but overall liquidity, including the undrawn liquidity under the RCF, is sufficient to handle the current operations even in a more challenging macroeconomic environment that we are currently experiencing. And historically, we have shown strong cash generation capabilities and stable cash conversion, resulting in a solid deleveraging profile. And the COVID-19 period resulted in significant losses financed by an increase in debt. In the short term, investments in club expansion will be limited, prioritizing to reduce debt to responsible levels. An addendum to the rolling credit facility was signed earlier this year, extending the facility by 1 year until September 2025, and included adjusted temporary covenants which will apply until the end of 2023. And the adjusted covenants set out is quarterly minimum levels for liquidity and adjusted EBITDA, which will come into force from the first quarter of next year. And note that 2022 results will not constitute any part of the measured adjusted EBITDA covenant. So moving to financial outlook and more specifically our capital allocation principles. They are divided into 2 periods, short term and long term, where we in the short term will pause further expansion and prioritize to reduce debt. We will still continue to invest in our existing club portfolio and digital platform in line with the historical average of revenues at around 5%. In the longer term, we expect to pick up the expansion pace to around 8 to 12 clubs per year, depending on the attractiveness of acquisition targets and greenfield locations. And as is the case for many industries, the current macroeconomic environment creates uncertainty, and several external factors will impact the pace of our profitability and recovery going forward. We are confident that we will -- that we have the ability to regain our profitability to pre-COVID levels, but the time to reach recovery is highly dependent on inflationary pressure and energy prices as well as the potential effect consumer sentiment has on member development and ARPM growth. And the financial outlooks assume that inflation and energy prices over time will normalize at lower levels than in the last quarter because, based on these assumptions, the current club portfolio has an adjusted EBITDA capacity of around NOK 800 million by bringing members per club back to 2019 level both for like-for-like clubs and new clubs currently open and signed. So this is before adding new capacity or assuming higher utilization in existing clubs. And note I said that, after the strong delivery of member growth in the third quarter, we have already NOK 200 million of the improvement in the books, so reaching NOK 800 million also assume that we can increase prices in line with inflation, enough to compensate for the increased rent costs and wages. Energy cost is another factor of uncertainty that will affect time or how many members we need to reach EBITDA capacity. And to accelerate the improved profitability, cost reductions in the near term will be important to mitigate the inflationary pressure, but as I've shown, we still have ample room for member growth beyond pre-COVID levels in terms of members per square meter. And this is further enhanced by our club optimization initiatives. And remember our top-performing clubs have 2.8 members per square meter, which is twice the average in the portfolio. And as a rule of thumb, an increase of 100 members per club across our 275 portfolio yields a run rate improvement of NOK 150 million. On top of that, we still believe there are attractive M&A opportunities and white spots for greenfield in existing and new markets. And we will pursue opportunities for new revenue streams in adjacent products and services. And as the portfolio matures, delivering on our long-term strategy should take us to a significantly improved margin, targeting 20% in adjusted EBITDA margin, so our key focus in the short term is regaining the member base as we had before the pandemic and offset the inflationary pressure with price increases and cost discipline. And delivering on the already commenced road to profitability will unleash adjusted EBITDA capacity in the current club portfolio. And once back to the pre-pandemic levels for members per club, the journey towards even higher utilization start, as there were unexploited capacity in the clubs also before the pandemic hit. And on top of that, there are interesting club growth and new revenue streams opportunities to capture, so we will steadily lay brick by brick towards an adjusted EBITDA margin of 20%. And with that, I will leave the word back to Sondre for closing words.

Thank you, Cecilie. So thanks to all the colleagues of mine who have been representing. I thought I would summarize the key messages we have heard today. As Cecilie was pointing out, we had a strong financial development before the pandemic. And we believe, as we laid out in the first section today describing the Nordic fitness market, that the market will continue to grow and that the fundamentals of the fitness market has not changed today compared to the situation before the pandemic. However, as Cecilie has also laid out, the macroeconomic situation adds temporary pressure to our margins due to especially inflation on rent and energy prices. So far, we've seen no signs of weakened consumer sentiment. The member base is growing on the back of strong sales and decreasing churn, but the time to full financial recovery is dependent on the inflationary development and the development in energy prices as well as a potential effect on the consumer sentiment going forward, so our short-term focus will be fully on growing the number of members per club back to the pre-pandemic level and then continue the growth after that, counteracting inflation with increased average revenue per member, strong cost discipline and operational leverage unleashing the EBITDA potential in the current portfolio. And long term, we will further grow the member base beyond the pre-pandemic level and then reaccelerate club growth and pursue opportunities for new revenue streams, but again that's for the long term. For the short term, further club expansion is paused. And I hope that you've also seen that we have a strong and committed management team representing a full organization that are eager to deliver on these priorities and ambitions. So with those words, looking at the clock -- I promised you a Q&A session, in the beginning, around 10 past 11. Now it's 7, 8 minutes past 11, so I think we are on time. With those words, I thank you for coming to the Capital Market Day and for listening, both here in the room and then also to all of you on the web stream; and looking forward, as we've said, to working out together afterwards, but we will open for Q&A both to Cecilie and myself. And of course, we also have the management team represented, who can answer. So we'll start with questions in the room and also take questions that has come in, Stine, from the audience on the webcast. Any questions in the room? Let's start. We have a microphone so webcast can listen in as well.

So Markus Heiberg from Kepler Cheuvreux. So my first question here is definitely on the inflation that we are seeing. And a crucial part to reaching that run rate EBITDA is actually increasing prices with inflation. And talking about 6% to 10% increase in rents, which is the CPI level -- and then we see Fresh Fitness, which is these low-cost, maybe some price-cautious customers. What's your strategy to actually implement 10% price increases without losing customers? That's, I think, first one.

Sure. So we can start. So we have been working with yield optimization over the last few years, both looking into existing member base, looking into the list price for new members and then, of course, doing inflation adjustments. We did the last adjustment already now in August, so it's not that long ago. And we also did adjustment in January. And we have quite strong analytical tools following these adjustments and also understanding the price elasticity of new members and existing members, so we are pretty confident that -- given what we see around us now, that we will be able to increase yield also with the levels of inflation we see around us, but again, predicting the consumer sentiment for the future with what we see now on reduced household spending, et cetera, I don't think we should be too certain on anything. We just have to base it on the facts that we see in the market, what we see on demand and also the analytical tools we use, but we are guiding pretty clear here. And we will do inflationary adjustment in our member base in January 2023 and, of course, adapt that to the price elasticity we see.

Okay. So just my final question is on Fresh Fitness and the low cost trend that we're seeing in Europe. And [ Fresh Fitness' ] are not evolving as strong. Is it that due to competition, increased competition, especially in -- say in Norway, in that segment? Or is it more that these customers actually are more cautious about spending? Or what's your take on that?

No, we don't see any significant change of development in Fresh Fitness now over the last couple of months compared to the market in general. As we saw on the slide, the recovery of members per club compared to pre-pandemic level was somewhat lower in Fresh compared to SATS in Norway, which is due to a somewhat slower start on recovery just after reopening. And the reason why we see in general -- and this is not only for Fresh. We see in general. As I said in the beginning, we see a slower, so to say, club growth of low-cost operators in the Nordics now than we saw quite some years ago and also compared to what you see in many European countries, but that is due basically that, so to say, the low cost trend came into the Nordics back in 2014, 2015. And the shift from, so to say, high-end to low cost that we saw in the Nordics several years ago is what is happening now in European cities which don't have low-cost operators from before. So we believe that the Nordic fitness market is just ahead of the curve, and the balance we see in the Nordic fitness market now is a pretty sound balance. It was like that also. We saw these clear signs back in 2018, 2019 already that the market balanced; and we believe it's the right balance going forward. We believe that fitness penetration will increase, but it will be driven both by low-cost growth and full-service growth. And these will be quite balanced in the growth going forward, so we don't see any, so to say, major shifts, as the market basically is more mature. And fitness penetration levels in the Europe -- in average in EU is around 13%, 14% compared to 20%-plus in the Nordics, so it is a more mature market.

Petter Nyström from ABG. One question from me, and that goes on the overhead costs. You highlighted that you now have roughly NOK 550 million. And your target to cut that as a percentage of sales, if I understood correctly. Could you shed some light on what that level will be? I mean, is it correct that it was around 5% to 6% in 2019?

Well, the level of overhead in terms of revenue was around 10% in 2019, so we will look throughout the full cost base and do reductions. We won't go into detail on the different parts of it, but we feel confident that we will be able to reduce to 2019 level in the medium term.

One question from [ Alexander Fredriksson ]. "Brief question on your strategy and footprint in mid-sized cities and the competition of Swedish actors claiming this space in the Swedish market. In the Swedish market, you have a few outlier clubs that are located in club -- in areas not connected to any bigger cluster. Can you say something about your ambition in these clubs going forward?" A bit shortened version.

Sure. So if you look at the 4 different markets where we are present, we have a somewhat different footprint. Norway is the market where we have most clusters, so to say, and most clubs also outside the capital city. In Denmark we are fully concentrated in the greater Copenhagen area. And in Finland we have -- we also have a very strong position of Helsinki and another cluster outside. When it comes to the Swedish market, we are mainly concentrated in Stockholm. And then we have also a strong cluster in Gothenburg and Malmö and we have some outstanding clubs as well. So basically we have a quite prudent approach to these clubs. As long as they are either serving, so to say, a strategic value to the key cluster, we will keep the clubs. And of course, when we have stand-alone clubs, like we also have in Norway, if the clubs are profitable and we are able to run the club in a good way going forward, we will keep the clubs, but as we said in this presentation, short term, we are now pausing club expansion. We have some new signed greenfields coming up. We will continue to deliver and open those because those are very strong locations, but we will not add new clubs to the greenfield pipeline in the short term, meaning that we will not expand heavily in mid-sized Nordic cities in the short term. But we do see some very interesting opportunities. We are being approached on potential acquisition opportunities, so longer term, we will reaccelerate this growth, but that is saved for the long term.