EchoStar Corporation Price & Performance (SATS)

And then combined with sales, good sales on top of that, you get strong financial performance in Q4 and also win 2024 overall with revenue growth of 7% in the quarter and EBITDA growth of 37% and EBIT growth of 87%. So it's a strong quarter financially. And with the high cash generation, we have continued to deleverage. We have paid down just about €100,000,000 on the debt. In the quarter, bringing leverage ratio down to 1.4% of net debt over EBITDA before IFRS And as you remember, we have guided on leverage ratio between 1.52. And that we want to be in the lower end of that ratio. So with now that ratio in Q4 on 1.4. We have then started what we also announced last quarter, our shareholder distribution program. Which is a combination then of our share buyback and dividend payments coming later this year. We announced yesterday evening that the first part of this share buyback program with the share buyback of SEK100 million until the General Assembly coming up in the spring. And then we have seen that the positive momentum from Q4 has carried into 2025 with the elevated activity levels into the first half of Q1.

With group training as an important driver of this. So this provides confidence that we are on the right track. And happy with the development both operationally and financially.

So that's the main messages from the Q4 presentation this morning. And with that, I think we just leave it up for questions.

I think you have stalled, please go ahead.

Yes. Hi, guys. Thanks for taking my questions and congrats on the very solid finish to the year. I got a couple. If we can start on the outlook and also on comments now, Sandre, you seem overall pretty bullish. Can you give kind of a sort of a decompose those positive messages particularly on the further strengthened financial results how we should think about that breakdown coming from the different geographies also kind of subsequent to that your thinking is around, okay, how close are we to some sort of ceiling in Norway margin wise before we need to materially invest in more clubs? How far behind is Sweden compared to Norway? You talk about these positive trends early in the year and replicating the GX success of Norway. Like, are we six months behind mine, twelve, eighteen? Just some thoughts there on yes, some more color on why, yes, so positive on '25?

Okay, Erik. There's a lot of things I don't know. The only thing I know for sure is that I will not answer all your questions to the detailed level that you want. Then you have to wait until the Capital Markets Day seven May to get that level of guidance into the future, I think. But I can comment a little bit. So I think we are just we are indicating here in this presentation that we have had a positive start on the New Year, which we also expected. So it's a positive momentum that we saw in Q4 that has come into the New Year as well. And it all starts in our business, it all starts with the members being active. As long as when we launch new products, when we add tens of thousands of additional GX classes, when we launch new concepts, etcetera. It's all about to see the member adoption of those concepts and to see that member are using those concepts. And that's what we see. We see we see growth and especially on group training. Which is a core differentiator for us, it's our key competitive advantage No one in the market has a similar product offering as we have on group trading across [indiscernible] And this drives engagement.

This drives [indiscernible] And it also drive up revenue per member because more members buy access to more products, bringing up the average membership price. And this goes across all geographies. And then we've seen this development for a while in Norway, and now we start to see the results in the other markets, as we are saying. And we have not reached the ceiling. We got that question also after Q3. Have we reached the ceiling on profitability and number of members in the Norwegian market? And the answer to that was one quarter ago clearly now. And it's still a clear no. We still have capacity in our existing clubs. We have guided on growth level of eight to 12 new clubs per year. We are now building up the pipeline to get to that level. But it's a balanced growth and a moderate growth. So the majority of growth going forward will come from the existing clubs. In addition to this new club openings, but the level of eight to 12 new clubs. So but when it comes to more countries, specific guidance, etcetera, we are not giving that. We will, of course, go more into detail on the capital presentation.

But you asked specifically on Sweden. And we expect also Sweden to have a positive throughout the year.

Perfect. That's very clear. Thanks for the color. And just a quick follow-up on on the club expansion comment. You've got [indiscernible] firm ones in the pipeline now for the next, let's call it, two years, one closure. You say you're building and kind of looking through the pipeline. How quickly can you move? Like, if you get access to, let's say, two, three, four, half a dozen really good locations, how swiftly can you move open those and move them out of the pipeline and into reality.

That varies a lot because it depends of is it the development area we're coming into? Is it an existing location ready for us to sort of just move in and build the club so we can it can take six months and it can take two years. So it really varies across the different areas what kind of location we get access to.

Okay. It's also worth to say that it takes some we get also some questions on does it take so long time to build up a pipeline when it's just eight to 12 new clubs? Per year? And the thing is that we are prudent on the locations we choose. We thorough analysis. To make sure that we know it's going to be a successful opening. So could we have more clubs in the pipeline for opening? Absolutely. But since we are pretty prudent on selecting the right location, it takes some time. And we are willing to wait until we get the perfect location. Instead of taking a suboptimal location in an area.

That's perfect. Thanks for taking my questions.

Yes. Thank you. So a follow-up question there on these investments that you're doing in your product. Obviously, that has given a very strong momentum in Norway throughout 2024. And you say that you are seeing some very positive development also in Sweden. Is this do you expect this to be driven by now that you can take a higher price? Is it that you are gaining market shares? Is it that you expect a stronger membership growth? Can you just shed some light on how you see this positive development throughout 2025 for Sweden? Thanks.

I think one of the most important indicators is the activity level for our members. We see that more members engaged in a broader part of our portfolio and product offering meaning that they also not only just buy membership with higher yield, but we know that higher activity level also creates lower we know that the activity level will build loyalty throughout the year. And that's really one of the most important positive signs that we see in Sweden.

Which we saw in Norway eighteen months ago.

Perfect.

Thank you.

Any other questions?

Yes.

Can I just say I just saw the numbers for Finland? I was just surprised. You have one club less in Finland. And still you have a thousand members more. And as far as I know, Finland is pretty much struggling with the economy of Sweden. Can you tell me, is there something special going on there?

No, really nothing out of the ordinary, just just building the base month by month So a small improvement in the member base So nothing sort of out of the ordinary in Finland.

It's the same operational, so to say, key drivers. As we see in the other markets. So the comments is still made for Sweden is highly relevant for Finland as well.

Finland is actually is one of the markets where we see that our classes and group training visits are increasing the most. At the moment, which is [indiscernible] Sorry, Patrick, go ahead. No, go ahead. You're first.

Okay. I'll jump on. Just a quick follow-up, sorry, Cecilia. You mentioned you see kind of the activity levels picking up in Sweden along the lines of what we saw in Norway eighteen months ago. Is that kind of a fair estimate on where Sweden is on the curve relative to Norway? And do you think it can maybe move quicker in Sweden because you've got kind of the know how from Norway over the last year or two?

I think it's too early to say anything around sort of the effect that we will actually get. So what we are happy with is the sort of see that the underlying operational KPIs are progressing the same way. And the outcome we don't know, and we will not guide on that.

That's fair. And maybe another final question, which is maybe CMD material, but I'll try anyway. How should we think about going to all in growth and margin potential in Finland and Denmark kind of given the scale, given the competitive landscape [indiscernible] of a different position there compared to Norway and Sweden. Any thoughts there would be good to understand how we should think yes, into this year and the years beyond as well.

I think overall, there are we should be able to improve the margins in both Finland and Denmark. I think the medicine in this is the same in all countries, and they are sort of they don't have as tight of a cluster of clubs. Like we see in Oslo and Stockholm as an example. So that will sort of be one of the ways that we can improve the margins. But I think in general, we will not see the same margins in those two markets at least not in the short term. But that the margins can improve For sure.

Perfect. Thank you. SATS it? To follow-up on that, because Is the structural position wrong there? I mean, you have a great position in Norway, a very good one in and the Ostros Stockholm. But then the other two capitals, market share is lower and then that's so low that you're not making any money. Does that mean that maybe you should actually just Particularly if that would be Finland is because it seems like what is needed here is very high market share in the specific [indiscernible] To get a really good profitability. [indiscernible] you're right on the the comment on market share that the stronger plus we have, the stronger profitability with see to deliver because we deliver a better product to members. Making the members staying longer. And the cluster is strong, but it could be strengthened both in Copenhagen and in Helsinki. And so we are doing and will do a part of some of the new club office will be also outside Oslo and Stockholm. But we are happy now with the current development and the trajectory we're having both for Denmark and Finland.

So So I don't know if you should say that you should sell I don't think my answer is that we will double down on both, but hopefully do the financial development for both. And one other one, final one.

In Stockholm and Sweden, you have about 10% fewer members per club than you had pre pandemic. Can you get maybe a feel for how much is that? We know Sweden is terrible for everybody in the consumer space. So how much is it the general market development? And how much is this that Nordic Wellness has taken the biggest share share of the market?

I think first of all, it's related to the growth that we've had in the Stockholm area. Since or during the pandemic and the years after. And And so number of clubs is more than we had and we haven't been able to fully fill those clubs. To the same extent that we had in 2019. Of course, the competition in Sweden is fierce. And we have grown our number of clubs and so has the competitors. But it's nothing different related to sort of the market situation. I think the same health trends as important in Sweden. And looking at the macro, CTV [indiscernible] any change for us related to that. So we don't really expect that the new macro environment will sort of help us. I think in general, we just have to be better, deliver higher quality in our product offering. As we are doing right now and expect to see results to improve as a consequence of that.

David Longo.

Yes.

Hello. One question maybe related to the maintenance CapEx I saw that there was a big raise in maintenance CapEx in 2024 related to 2023. What is this related to? And can we take the maintenance CapEx level we saw this year as normative for the next Yes, we have four for several years actually guided that we will keep maintenance CapEx at 5% of revenues. And this is sort of the first quarter where we have actually achieved to come back to that level. Throughout this year, we have been or last couple of years, we have been prudent and but we have SATS the same time worked hard on ramping up the level of maintenance CapEx It has taken longer time than we anticipated because we work very close with our landlords making sure that they also invest in our clubs alongside us. So the negotiations with some of the landlords has taken longer time than we had But we guided throughout this year, we have guided that we expect to come back to 5% of revenues in 2024, which we also did, and SATS also the level that you can expect going forward. [indiscernible] Hi, congratulations with the with a very strong quarter and a strong year.

One question, you see countercyclical in Q4 SATS much higher or higher activity leads to more membership growth. Which is up 5,000 in the quarter and it's actually growing in each country except Denmark. And you see you are progressing well into Q1. How How do you see that developing in Q1? And also the response to your campaign with half price three months, how that has been?

Thank you for the question Joakim. I don't think we will comment anything more on the start the new year in terms of membership growth or volume than what we have done in the report. So we are as we said there, we saw that the positive momentum has carried into the first quarter and we are happy with the start over there. But we don't guide anymore on the detailed level of membership growth in January or the recipient of the campaigns. We will have to wait until Q1 presentation. [indiscernible] Just short on the lifetime of your fitness equipment, You extended those in Q3 from five to nine years. To seven to twelve years. And I see that you beat the consensus a lot on EBIT and net profit this quarter. I just wonder why did you can you just explain why you increased the lifetime? And also [indiscernible] how how can we think about this going forward for your equipment?

Yes, we as you said, we did that prolongation in the last quarter. And we have worked very actively with how we maintain [indiscernible] in general, we we make the equipment last longer than what we currently have accounted for. So it's really just reflecting the actual usage of the equipment that we have. And that resulted in a a one off adjustment in the third quarter which also will generate lower depreciation going forward. And that's what you see in this quarter. That amounts to around €5,000,000 compared to last year. At the same time, we're now ramping up our investments so that will, of course, increase depreciation overall. But in general, if you compare to a normal level, we will have somewhat lower depreciation levels as a result of extending the lifetime and the value of the assets.

Thanks. But will that mean that your CapEx would be lower? [indiscernible] Because you're, you know, when you We're not changing the guidance on the 5% maintenance CapEx. But in theory, you could say that we could lower like for like the CapEx but but we will not change that guiding for now at least. Because for us it's important to sort of have high quality in the portfolio that we have.

Yeah. Okay. But [indiscernible] Okay.

Any more questions before we round off? [indiscernible] Last one maybe. Just to understand better, if you could split the CapEx investment you made this year in order to understand what were the main CapEx expenditure. As I understand, there was there is normative level of 5% CapEx spending. Maintenance CapEx. So maintenance CapEx is related to renewal of your equipment or is it related also to other kind of CapEx like if I use you could split the €290,000,000 what are you investing in and what will you be investing in in the next years?

So we have a strategic approach to how and where we invest. We look at the different clusters, the quality of the clubs, And about for 2024, about a third of the maintenance CapEx is related to major upgrades where we do a significant investment in our cloud. And the remaining part is more sort of maintenance, pure maintenance, where we replace equipment or do you sort of smaller upgrades? So we have throughout this year, we have touched a lot of huge part of the portfolio with some kind of upgrade. It also varies from year to year what the sort of necessary in terms of major upgrades versus just replacing equipment or adding equipment, which we do to increase capacity. But for 2024, around the third is related to sort of major upgrades. Which is both equipment and improving the leasehold in general.

Great.

Thank you. And thanks for participating in the Q and A. Thank you all. Wish you a great Wednesday.

Thank you.

Bye.