Earnings Report /
Saudi Arabia

Fitness Time: Q4 22 Result Analysis | Stronger growth in the revenue/subscriber

  • Fitness Time reported a strong set of Q4 22 results, with net profit increasing by 24.8% yoy (+57.5% qoq) to SAR107.2mn

  • Gross margins came in at 49.0% in Q4 22, higher than our estimates of 41.0%.

  • Membership revenue increased by 30.6% yoy (+27.0% qoq) to SAR298mn and was higher than our estimate of SAR236mn

Nauman Khan
Nauman Khan

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SNB Capital
13 March 2023
Published bySNB Capital

Fitness Time reported a strong set of Q4 22 results, with net profit increasing by 24.8% yoy (+57.5% qoq) to SAR107.2mn. This is higher than the SNB Capital and consensus estimates of SAR70mn and SAR77mn, respectively. The deviation was on account of stronger than expected revenue/subscriber, which lead to higher than expected topline and gross margins. Revenues increased by 29.0% yoy (+27.3% qoq) to SAR337mn and were higher than our estimates of SAR269mn. Gross margins came in at 49.0% in Q4 22, higher than our estimates of 41.0%.

  • Revenue increased by 29.0% yoy (+27.3% qoq) to SAR337mn, higher than our estimates of SAR269mn. We highlight these are the highest ever quarterly revenues on record. The growth was mainly driven by strong growth in the revenue/member to cSAR910 (+16.6% yoy), leading to higher than expected memberships revenues

  • Membership revenue increased by 30.6% yoy (+27.0% qoq) to SAR298mn and was higher than our estimate of SAR236mn. Personal trainer revenue increased by 15.1% yoy (+40.3% qoq) to SAR32mn. Rental & other income increased to SAR7mn in Q4 22 vs SAR5mn in Q4 21 (flat qoq).

  • The total number of gyms stood at 156 (including 25 Xpress gyms) by the end of Q4 22 vs 145 in Q4 21 (153 in Q3 22). Accordingly, LFL stood at c20% yoy. Total members reached 327,000 by the end of Q4 22 (up 13% yoy), but were lower than 367,000 reached in Q3 22.

  • Gross profit grew by 29.4% yoy (+54.1% qoq) to SAR165mn, and was higher than our estimates of SAR110mn. Gross margins stood at 49.0% and came higher than our estimates of 41.0% vs 48.9% and 40.5% in Q4 21 and Q3 22, respectively. Higher gross margins are due to cascading effect of higher revenue/subscriber.

  • Operating expenses increased by 46.7% yoy (+56.2% qoq) to SAR38.9mn and came higher than our estimates of SAR25.3mn. Opex-to-sales increased to 11.6% vs 10.6% in Q4 21 and our estimates of 9.4%. We believe the growth in opex is mainly due to sales growth as Leejam maintained SGA expense per centre in 2022 compared to 2021.

  • Non-operating expenses stood at SAR19.0mn, up 35.4% yoy (+33.9% qoq), and were higher than our estimate of SAR14.7mn. We believe the yoy increase was mainly driven by increase in finance costs due to higher interest rates.

Outlook

Based on our last published update in December 2022, we are Overweight on Fitness Time with a PT of SAR107.9. We see strong growth in the revenue/subscriber as the key positive of the result, while qoq decline in the member is a key concern. The stock is trading at a 2023f P/E and EV/EBITDA of 18.6x and 8.6x vs the peer group average of 19.8x and 13.2x, respectively.