Sleep Cycle interim report April-June 2023: Increased focus on core business to drive growth

Revenues increased by 11 % in the second quarter and 1 % excluding foreign exchange effects. The growth was driven by price increases of up to 30% for new users in selected markets implemented during 2023, improving blended ARPU by 6 %, offset by a reduction in the number of subscribers of 5 % compared to last year. The number of new subscribers increased in the second quarter compared to last year, which is a reversal of the trend of the prior three quarters that all saw a decline in new subscribers. During the second quarter, an optimisation program was launched to refocus resources to drive growth in the core product, while also reducing the cost base by an expected 25 Mkr on a yearly basis, in turn increasing the adjusted EBIT margin to 30 %.

The second quarter in summary (April-June 2023)

• Net sales increased by 10.9% (19.0%) and totaled tSEK 58,233 (52,503). Currency-adjusted net sales growth totaled 1.0% (16.1%).
• Operating profit totaled tSEK 12,734 (12,793) and the operating margin was 21.9% (24.4%).
• Adjusted operating profit totaled tSEK 17,267 (12,793) and adjusted operating margin was 29.7% (24.4%). In the second quarter, non-recurring items of in total tSEK 4 533 related to the optimisation program to reach savings of about SEK 25m on full-year basis affecting comparability have been expensed.
• The total number of paying subscribers at the end of the period was 877,000 (921,000), a decrease of 4.8% compared with the previous year.
• Average Revenue per User (ARPU) for the quarter totaled SEK 264 (228), a growth of 15.8% (8.1%).
• Earnings per share before dilution for the quarter totaled SEK 0.51 (0.52). Results per share after dilution totaled SEK 0.51 (0.51).

First half year in summary (January-June 2023)

• Net sales increased by 11.8% (19.1%) and totaled tSEK 114,680 (102,593). Currency-adjusted net sales growth totaled 12.0% (18.6%).
• Operating profit totaled tSEK 23,824 (25,536) and the operating margin was 20.8% (24.9%).
• Adjusted operating profit totaled tSEK 28,655 (25,536) and adjusted operating margin was 25.0% (24.9%). The first half year, non-recurring items of in total tSEK 4 533 related to the optimization program to reach savings of about SEK 25m on full-year basis and tSEK 298 related to the public cash offer from Velvet Cichlid during 2022 affecting comparability have been expensed.
• The total number of paying subscribers at the end of the period was 877,000 (921,000), a decrease of 4.8% compared with the previous year.
• Average Revenue per User (ARPU) for the period totaled SEK 257 (225), a growth of 14.2% (7.1%).
• Earnings per share before dilution for the period totaled SEK 0.96 (1.04). Results per share after dilution totaled SEK 0.96 (1.01).

Important events during the reporting period

• In mid-May, Sleep Cycle initiated an optimisation programme to save around MSEK 25 annually, while focusing the operations on product-driven growth. MSEK 4.5 in non-recurring items related to the optimisation programme was incurred  during the second quarter.
• Several new features were launched in the second quarter, incl. Bedroom Noise and Ambient Sound. These features lend an additional dimension to Sleep Cycle’s sleep analysis and help users understand and improve their sleep.
• At the end of the quarter a new partnership with Revolut was launched, a supplier of payment solutions for private individuals. With the partnership, Revolut’s most loyal customers will get access to Sleep Cycle as part of their membership.
• At the annual general meeting on 8 May, the audit firm Öhrlings PricewaterhouseCoopers was elected as new auditor in Sleep Cycle. The meeting elected Mathias Høyer as new board member, while Lars Berg and Ödgärd Andersson declined being re-elected and were thanked for their service. Anne Broeng was elected new chairperson.

Important events after the period end

• During an extraordinary general meeting on 26 July, it was decided to add an additional member to the board and to elect Sleep Cycle’s founder and principal owner Maciej Drejak as new board member.

Commenting on the quarter, CEO Carl Johan Hederoth says:

“During the second quarter we launched an optimization program to refocus on our core business, improve profitability and sustain long-term growth. As a result, we delivered an adjusted EBIT-margin of 30% in the second quarter. With continued focus on product development and cost-efficient user acquisition, we have a solid base for strong growth and high profitability”.

“The total amount of users declined to 877k compared to the previous year, but I am very happy to see an increase in the inflow of new subscribers, a reversed trend from previous quarters which were negatively affected by price increases implemented in 2022. This development is very satisfying, and with continued investments in innovative conversion driving features, I am optimistic that we will see good impact on sales and user growth going forward”.

This information offered is such that Sleep Cycle AB is obliged to publish in accordance with the EU Market Abuse Regulation. The information was submitted, through the care of the below contact person, for publication on 27 July 2023 at 8:30 CET.

The full interim report is available on https://investors.sleepcycle.com  

CEO Carl Johan Hederoth and CFO Per Andersson will hold a presentation on Thursday 27 July at 9:30 CET. The presentation can be followed on https://ir.financialhearings.com/sleep-cycle-q2-2023

For more information please contact:

Carl Johan Hederoth
CEO
cj@sleepcycle.com

Per Andersson
CFO and Head of Investor Relations
per.andersson@sleepcycle.com
+46 70 939 5327

About Sleep Cycle
With millions of daily active users and over two billion nights analyzed in more than 150 countries, Sleep Cycle is the leading sleep tracking application and one of the most widely used solutions worldwide to improve sleep health. Sleep Cycle’s mission is to improve global health by empowering people to sleep better. Since its launch in 2009, Sleep Cycle has helped millions of people understand their sleep habits and improve their sleep.  The mobile application helps users fall asleep more easily, tracks and analyses sleep during the night, wakes the user in a light sleep phase and provides insight into how sleep quality is best improved. Sleep Cycle is one of the world’s most comprehensive sources for statistics on sleep and contributes to research and reporting on sleep worldwide. Sleep Cycle is listed on Nasdaq Stockholm under the ticker SLEEP. The head office is located in Gothenburg, Sweden.