Strategy Note /
Saudi Arabia

Leejam Earnings Call Summary - Q3 22

  • Revenue increased by 4.2% yoy to SAR264mn in Q3 22

  • Individual memberships contributed highest to the Q3 22 topline with 75% of total revenue (78% in Q3 21)

  • Current assets decreased by 9% yoy to SAR327mn

SNB Capital
16 November 2022
Published bySNB Capital

Financial performance

Revenue and profitability

  • Revenue increased by 4.2% yoy to SAR264mn in Q3 22, mainly driven by healthy growth in subscription revenue due to increased corporate and retail memberships.

  • Individual memberships contributed highest to the Q3 22 topline with 75% of total revenue (78% in Q3 21), followed by Corporate memberships- 12% (10% in Q3 21), Personal Training- 10%, Rental income- 5% and other services- 2%.

  • Cost of revenue increased by 25% yoy mainly due to increased employee costs, utilities and consumables associated with the addition of 15 new centers since Q3 21. Adjusting for the one-off rent concessions received during Q3 21, cost of revenue increased by 15% yoy.

  • Gross profits decreased 16.6% yoy to SAR107mn while gross margin fell to 40.5% in Q3 22 vs 50.6% in Q3 21. The decline in gross profits and margin was led by increase in overall costs of revenues due to aforementioned reasons.

  • Operating profits decreased by 7.4% yoy to SAR82.3mn and operating margins dropped to 31.1% in Q3 22 vs 35.3% of Q3 21. The decline in operating profit and margin is the result of increased cost of revenues general and administrative expenses.

  • General and administrative expenses decreased 4.9% yoy to SAR24.6mn, mainly due to decrease in government fees partially offset by bank commissions.

  • Despite the drop in loans, finance costs increased by 7.5% yoy to SAR12.5mn in Q3 22, mainly due to higher interest rates.

  • Net income decreased by 11.7% yoy basis to reach SAR68.1mn, vs a net income of SAR76.2mn in Q3 21. This was majorly led by lower gross profit, increase in finance costs and ECL provisions.

Financial position

  • Current assets decreased by 9% yoy to SAR327mn, mainly due to decline in cash. Current liabilities increased by 3% to SAR758mn, mainly due to increased deferred revenue.

  • Deferred Revenue increased by 12% yoy and reached SR 420.5 million at the end of September 2022, the highest in the company’s history. This is due to increased number of operational gyms and Saudi National Day campaign during the September 2022.

  • Cash balance decreased by 14% yoy to SAR233mn in Q3 22 vs SAR270mn at the end of Q3 21, mainly due to dividend payments.

  • The company reduced overall debts by 30% yoy to SAR283mn at the end of Q3 22.

  • Weighted average cost of borrowing was 5.7% in Q3 22 vs 2.2% driven by increase in SIBOR, partially offset by better negotiation of bank’s commissions.

  • During Q3 22, cash flow from operations increased 33% yoy to SAR464mn, mainly due to higher subscription sales. Cashflow to EBITDA stood at 3.3x vs 2.5x in Q3 21.

Operational performance

  • Total active memberships reached 367,000 in Q3 22 compared to 289,000 in Q3 21, representing an increase of 27.0% yoy.

  • Male memberships increased by 27.8% yoy to 225,000 in Q3 22 from 176,000 in Q3 21 while female memberships increased by 25.4% yoy to 74,000 in Q3 22 vs 59,000 in Q3 21.

  • Corporate memberships increased by 25.5% yoy to 69,000 in Q3 22 vs 55,000 in Q3 21.

  • The total number of gym centers stood at 153 at the end of Q3 22 out of which 25 are Xpress gyms. Male centers stood at 110 and Female only centers stood at 43.

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

  • Quarterly revenue per center increased by 14% yoy (+11% qoq) to reach SAR1.7mn in Q3 22 and was marginally lower than the pre-covid levels of SAR1.8mn in Q3 19.

  • Male centers contributed c76% to the topline in Q3 22 (75% in Q3 21) while remaining 24% (25% in Q3 21) came from female centers.

  • Quarterly net income per center decreased by 19% yoy (+84% qoq) to reach SAR0.4mn in Q3 22 and was in-line with the pre-covid levels of SAR0.4mn in Q3 19.



  • Second half is historically a peak season due to national day campaigns (in September) and return to gyms post the holiday season.

  • Winter season (particularly Q1) is historically a low season for the company. Hence the management believes the current level of membership growth is not sustainable in Q1 23.

  • The company is witnessing higher utilization rate due to increased memberships.

  • The new membership trends are leaning towards short term subscriptions. Majority of the new subscriptions are for 3months while it is also noticing a growth in 6month and 12month subscriptions.

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

  • The management stated that the company has not followed aggressive pricing strategy during the National Day campaigns. Discounts were in-line with the pre-covid levels.

  • The management believes the growth in subscriptions will help to improve the margins as it spreads the fixed costs. Depreciation constitutes the largest chunk of company’s fixed costs.

  • Revenue contribution form the express centers are increasing and the ramp up period of express centers is faster than the company’s initial expectations.

  • The big chunk of express gym subscribers are new joiners. The company is witnessing positive cannibalization from express centers as the express members are upgrading to big box memberships.



  • The management believes that corporate subscriptions and PT business will remain the key revenue growth drivers while cost control initiatives will help to improve the margins.

  • The company reiterated its 2022 guidance on new centers for express gyms, male big box centers. However, it said that it will not achieve the female big box center target of 42-44 operations gyms by the end of 2022.

  • The company believes the current level of EBITDA margins (excluding the rent concessions) will sustain in the coming periods.

  • The company is witnessing a higher growth in online sales. It expects 20-30% of its new subscriptions to come from online sales and will help to improve the margins.

  • The company expects 10-20% growth in memberships in the next year and plans to achieve 500 thousand active memberships by the end of 2025.

  • The company plans to increase its number of operational gyms to 250 by 2025.

  • The company expects the increase in new gyms and inflation in material costs will result in higher capex for 2023.