Strategy Note /
Saudi Arabia

Leejam: Earnings Call Summary

  • Revenue increased by 5.0% yoy to SAR233.0mn in Q2 22, mainly driven by healthy growth in all the segments

  • The company reduced overall debts by SAR136mn yoy, which stands at SAR310mn at the end of Q2 22

  • The overall average realized prices have come down due to the introduction of Xpress formats

SNB Capital
9 August 2022
Published bySNB Capital

Financial performance

Revenue and profitability

  • Revenue increased by 5.0% yoy to SAR233.0mn in Q2 22, mainly driven by healthy growth in all the segments.

  • Membership revenue grew by 2.2% yoy because of higher subscription income while PT revenue increased by 8.4% yoy due to higher sessions conducted in the quarter. Rental and other income increased significantly by 92.3% yoy driven by new real estate contracts and higher sales of other services.

  • Cost of revenue increased by 15.6% given higher employee costs, utilities and depreciation expenses associated with the addition of 18 new centers since Q3 21. The management highlighted that this centers are still under ramp-up. Also, decrease in rent concessions compared to Q2 21 resulted in increase in cost of revenue.

  • Despite an increase in overall cost of revenues, cost of revenue per center remained flat yoy at cSAR1.0mn in Q2 22.

  • Gross profits decreased 12.0% yoy to SAR78.1mn while gross margin stood at 33.5% in Q2 22 vs 40.0% in Q2 21. The decline in gross profits and margin was led by increase in overall costs due to aforementioned reasons.

  • Operating profits decreased by 22.4% yoy to SAR49.7mn and operating margins dropped to 21.3% in Q2 22 vs 28.9% of Q2 21. The decline in operating profit and margin is the result of increased general and administrative expenses despite a drop in selling and marketing expenses.

  • General and administrative expenses increased 12.6% yoy mainly due to higher employee costs and other expenses.

  • Selling and marketing expenses decreased by 24.5% yoy due to increased focus on low-cost digital marketing.

  • Despite a drop in loans, finance costs increased by 7.1% yoy to SAR12.8mn in Q2 22 mainly due to increase in SAIBOR.

  • Net income decreased significantly on yoy basis to reach SAR36.0mn, vs a net income of SAR50.9mn in Q2 21.

Financial position

  • Cash balance decreased by 46% yoy to SAR100.4mn in Q2 22 vs SAR186.2mn at the end of Q2 21, mainly due to repayment of debts and dividend payments.

  • The company reduced overall debts by SAR136mn yoy, which stands at SAR310mn at the end of Q2 22.

  • Weighted average cost of borrowing was c4.1% in Q2 22 vs c2.5% driven by increase in SIBOR.

  • Current assets decreased by 33% yoy to SAR176.6mn, while current liabilities decreased by 6% mainly due to settlement of supplier bills.

  • During H1 22, cash flow from operations increased 54% yoy to SAR181.8mn, mainly due to more operating days in this period compared with similar period of last year.

  • During H1 22, company incurred a capex of SAR85.7mn, a decline of 8% yoy, mainly due to lower construction costs spent on Xpress format gyms.


Operational performance

  • Total active memberships reached 274,000 in Q2 22 compared to 280,000 in Q2 21, representing a decrease of 2.1% yoy.

  • Male memberships increased by 1.1% yoy to 176,000 in Q2 22 from 174,000 in Q2 21 while female memberships decreased by 8.6% yoy to 53,000 in Q2 22 vs 58,000 in Q2 21.

  • Corporate memberships decreased by 6.3% yoy to 45,000 in Q2 22 vs 48,000 in Q2 21.

  • The total number of gym centers stood at 151 at the end of Q2 22 (139 in Q2 21) out of which 22 are Xpress gyms. Female only centers stood at 41 compared to 38 in Q2 21.

  • During Q2 22, the company opened one center of Fitness Time Men-Xpress.

  • Quarterly revenue per center reached SAR1.6mn in Q2 22 and was marginally lower than the SAR1.7mn in Q2 21 and the pre-covid levels of SAR1.7mn in Q2 19.

  • Male centers contributed c76% to the topline in H1 22 while remaining 24% came from female centers.

  • With the higher revenue contribution, male centers generated higher operating margins at c28% in H1 22 vs c9% of female centers.

  • During the H1 22, Central region accounted for 44% of total revenue and 45% of operating profits, followed by Western regions’ 38% contribution to total revenue and operating profits.



  • The management stated that it is witnessing a change in the member trends as they are leaning towards buying short term subscriptions due to rising inflation.

  • Short term subscriptions (under 3months) currently account for around 80% of total subscriptions.

  • The overall average realized prices have come down due to the introduction of Xpress formats. 

  • Employee costs increased due to increased head count in the new centers and increased number of days in Q2 22 compared to Q2 21.

  • The company recorded a healthy membership growth in July and expects the remaining months of summer to positively impact the membership growth.

  • The management stated that the declining female membership is the general trend in the Saudi and not specific to the company. However, it expects the female memberships to increase in the near term.



  • The company expects the H2 22 to be better than the H1 22 due to positive seasonal impact. However, it will not be as strong compared to H2 21 due to a shift in consumers’ spending behavior.

  • The management expects the growth will be driven by opening of new centers and expanding its PT and corporate business coupled with improvement in realized prices and cost control measures.

  • The company plans to open additional  6-13 new centers in the remainder of 2022, out of which 1-2 would be Xpress clubs and 6-10 would be Big Box centers.

  • The company expects to maintain the full year gross margins at par with the pre-covid levels.

  • The company reiterated its guidance to achieve 500 thousand memberships by 2025 out of which it plans to achieve 200 thousand by the end of 2022.

  • The company plans to achieve this target with the combination of plans such as center expansion in domestic market, geographical expansion outside KSA and increasing programs in the existing centers to attract and retain the members.

  • The company expects the newly opened Xpress clubs to achieve full ramp-up and cash breakeven by the end of this year.

  • Big box centers have the average capacity of over 2,500 members while Xpress clubs will have the capacity of 1,500 members.

  • Revenue per center will be improved in the near term as the company is planning to open a mix of Xpress, big box, and premium clubs.

  • The company doesn’t have any plans to convert the big box centers to Xpress clubs as it did in the last year. All the upcoming Xpress clubs will be in new locations.