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Thank you, and Good morning, everyone, and thanks for joining us today. My name is Carl-Johan Hederoth, CEO of Sleep Cycle. And joining me today is Per Andersson, CFO.
For today, I will start by providing an update on the second quarter. I will after that walk you through progress on our strategy. And then before leaving over to Per for financial performance, I will share some findings in our sleep data and talk about the opportunities that lies therein. Before kicking off, I just want to mention that we have now, as per in June, been more than a year as a public company, and I'm happy that we, during the quarter, have been delivering stable results driven by our investment in product development and marketing, and I'm very much looking forward to the time ahead. Next slide, please. Great. I want to start by saying it's been yet another good quarter for Sleep Cycle. We're continuing to see good growth in terms of revenue and increasing margins. Subscriber growth is at 8%, and we are at 921,000 subscribers.
As mentioned in the last quarter, we are now seeing a somewhat lower pace than normal in subs growth, and it's due to a combination of seasonality effects with a somewhat lower intake than normal and price adjustment testing, which we are coming back to in our Slide 2. Revenue is at SEK 52 million, growing 19% compared to last year, and we are still seeing margins in the high range up to almost 25%. This concludes 2 quarters in 2022 with good margins, and I'm happy as it shows our ability to scale up the business by accelerating product development, enhancing marketing performance and all this with sustained and improved margins. Next slide, please. An update on our strategic initiatives. Starting to the left, we're continuing investing in our product.
Most notably, we have been busier with our Sleep improvement platform. The platform is basically a more comprehensive way for us to deliver different types of content to our users that effectively often have the separate channels to deliver customer value. It will consist of short digestible programs developed by our Sleep experts, along with our content team, and we will cover a wide range of issues from following sleep faster, bedroom hygiene, snoring and so forth. And this will be a highly requested complement to the existing more data-oriented experience. We will start out with 2 or 3 programs, but eventually, we'll fill out with more. It will be offered to premium users only. And right now, we're conducting a scaled out AB testing on this Secondly, on product, we have during the quarter disclosed findings in how our data science team found a strong correlation between coughing frequencies and the spread of Omicron throughout the world. And I will talk more about that in the next slide.
And finally, on product worth noting is Mike Gradisar, a highly cited steep researcher, clinician and professor, joined us during the quarter and have been highly engaged in both these 2 initiatives. And he'll help us further to accelerate our investment into science, tech and product, and we are all very, very glad to have him on board. Moving to the middle, we have beefed up the partnership team and made good progress, especially around partnerships with leading corporate wellness platform. And at the same time, we are continuing to see high interest from big tech companies around tech integrations like the partnership that we're running with Samsung.
Hopefully, we will discuss this further as we move along. Moving to the right marketing, as discussed last quarter, we're pacing slightly less on paid acquisition in terms of spend post IDFA is tricky as prices are increasing on several platforms. But at the same time, we are getting more effective, which means that the actual numbers of new subscribers coming from pay channels are more or less in the same ballpark as last year. Regarding paid acquisition and price adjustments, we are on the right track. Higher price points provides room for scale up marketing, which will be deployed on a market-per-market basis during the last 2 quarters of 2022. Price setting that we mentioned last quarter has been conducted on a broader scale during May, June with good results.
So across different price points, we have seen a gross sales upside and new users with revenue per download growing double digits. This confirms our hypothesis that we are low price in general and that our customers are willing to pay more than $29 per year. Important to note here is that the higher price point is also driving decreased conversion rates, leading effectively to less new subscribers as is filtering out users with lower intent. However, the combined effect of higher revenue per installed and has more headroom for marketing makes us confident to continue the rollout of price adjustments during the rest of the year. Even if we -- as seen in 2019, initially, we'll see a lower subscriber growth. Once marketing offers in-app discounts, et cetera, has adopted, we will return to higher subs growth.
Next slide, please. So a few words around our discoveries around COVID. During the quarter, our data science team has made a deep dive into our data in regards to COVID. As you're all familiar with, Sleep Cycle is able to, in a highly accurate fashion detect coughing during the night. So while looking at population level patterns, analyzing coughing in hundreds of thousands of users, we discovered striking correlations with official COVID outbreaks. What we learned is that we are able to eat country-by-country follow the outbreaks. When they start, when they peak and when they are declining. Important is that compared to official sources, we can spot these trends roughly 2 to 3 weeks ahead of a traditional way of measuring it. That is because symptoms time to evolve, testing take time, data acquisition aggregation takes time.
So unlike official sources, we are basically following COVID outbreaks in real time. And to me, I mean, to be able in real time to follow these waves of Omicron outbreaks is amazing. And I want to underline that in order for an actor to do this, there are several pieces to the puzzle. You need the population level reach to actually have a lot of data to have significance in your analysis, i.e., you need to acquire an audio signal from all these users. And from that audio signal, you need to be able to, in an accurate way of being able to detect coughing. And to me, I cannot think of many other actors out there who have these building blocks and performing these kind of analysis other than Sleep Cycle. It's a truly fascinating discovery, and it really shows off the potential of what Sleep Cycle will be able to accomplish in the longer term. So by that, I will leave over to Per for financial performance.
Yes. Next slide, please. Thank you, Carl-Johan, and Good morning, everyone. I will start with a quick summary before I explain this financial development in more detail. First, revenues grew 19% as subscriptions grew 8%. In breed, there are 3 private [indiscernible] this development. One, seasonality effects impacted downloads and new installs; two, we pursued price tests. As anticipated, they had some impact on number of new subscriptions, but also led to a higher total sales value. three, ARPU improved very well. Looking at the ARPU isolated on new sales in this quarter, it was well above SEK 300, which is significantly higher levels than we have seen before.
Going into more detail behind this development. The second quarter is normally a slower period due to seasonality effects. That has impacted the number of installs as well as new subscriptions, something impact our peers as well. As anticipated, price adjustments impacted the number of new subscriptions acquired during the quarter. We saw the same impact when adjusted prices in 2018, and we expect it to take some time for the market to adjust to the new prices. On the positive side, we saw significantly higher ARPU from the price adjustments, which meant that the sales value for the quarter outperformed the loss due to a lower amount of subscriptions. We also continue to see good renewal rates and uplift in ARPU coming from subscription mix effect.
As Carl-Johan mentioned before, the price adjustment implemented in Q2 are now being evaluated, and we will start rolling that out in more markets. With a higher ARPU, we create new opportunities for campaigns, marketing and investments that we believe will support driving higher growth during the second part of this year. And just before we move on in the presentation, I just want to underline that when looking at the graph to the left on this side, it appears our net add was 1,000 new subscribers during the quarter. It's important to remember that since we have about 50% churn on an annual basis, about half the sales each quarter comes from new subscribers. Since we're taking new subscribers on the new price, we immediately see effects of higher ARPU.
So although the change in subscriber base between the quarters looks small, there is a big difference in sales per user that is being accrued over the subscription period. Next page, please. Our profit and loss developed as during the first quarter of this year. And again, we delivered a very strong EBIT margin of 24.4%. And starting with revenues, they grew 19% compared to last year. Except for the subscription growth are towards the main driver cover from both the price adjustments but also from subscription mix effects. ARPUs SEK 228 for the quarter compared to SEK 211 million last year. Platform fees developed in line with the revenues, but we continue to slightly improve platform share of revenues, which was down 1 percentage point from previous year.
Other external costs continue to be under control. Adjusted for the NRI in the last year, the difference between the years is mainly related to lower marketing spending and less use of consultants. Staff cost development reflects the growth in number of people that we've seen during the last year. And for the Q2 in '21, we also recognized NOIs of SEK 2.8 million, explain some of the difference. We delivered an EBIT margin of 24.4%, which is a result of growing revenues while costs have been under control. In other words, we scale the business very well. The EBIT was fully reflected in operating cash flow, and we had a bit more than SEK 200 million in cash by end of June. Next page, please. The story for the first half of 2022 is very similar to the second quarter.
We managed to grow revenues through new product launch driving print growth in combination with improved renewal rates. In addition to that, we have also seen an uplift in ARPU. As for the second quarter, costs were under control, which resulted in an EBIT margin for the 6-month period of around 25%. EBIT was SEK 25.5 million and operating cash flow of SEK 38.6 million, which is due to prepayment of the subscriptions. As said before, we keep costs under control and we constantly improve our operational efficiency. That has led to very good operating margin since we have been really able to leverage the revenue growth for the first 6 month period. Going forward, we see that we have room for more investments, and we will use that to drive further revenue growth.
Next slide, please. So a few words about the outlook for the rest of the year and our focus area. We have seen a very stable revenue growth during this first part of the year, but we are not fully satisfied with the growth in the subscription base. With the price adjustments we made, we will continue to invest in product development and marketing efforts to increase the revenue growth rate. We believe it will be difficult to reach a 30% revenue growth rate on a quarterly basis by end of this year. However, we believe we are very well positioned to meet that goal during 2023. As I said before, we have a stable growth. We have seen good uplift in ARPU and our profitability has improved during the year.
In total, I believe we have a very strong base to build from in order to increase the revenue growth rate going forward. On profitability, we delivered almost 25% operating margin in the first half year. That margin creates flexibility to scale up investments to drive further growth through the second half of the year. And for the full year, we expect an operating margin EBIT about 20%. Recruitments have progressed according to plan, and we have a few new colleagues starting at the summer. By end of 2022, we expect to be approximately 50 people in line with our plan. And we continue to see lots of opportunities for potential partnerships and M&A. On the partnership side, we have several ongoing discussions that should probably be materialized during the last quarter of this year. Further, we have gained some traction after presenting the study on coughing and COVID outbreaks, and we expect to increase investments in this area for the remaining part of this year. Now over to Carl-Johan to sum up.
Thank you, Per. So I want to close by stating that we are yet again delivering stable results. We can sustain healthy margins even with heavy investments in product and with changing marketing conditions. We are seeing positive data points from the large-scale price tests that we're conducting and you will see that being rolled out market by market during the rest of the year. This will be followed by an increased growth rate in ARPU, as Per mentioned. We continue to be a profitable and growing business with world-class talent as we have seen. We are using our reach data and tech in intelligent ways to generate insights that very, very few actors are able to do. And I want to address that I'm stunned by our teams and very, very enthusiastic about the coming year. With that said, I think it's time to leave over to some questions.
[Operator Instructions] The first question we've received is from Mark Siöstedt, Redeye.
All right. Thank you very much. Good morning, Carl-Johan and Per. You mentioned that you were happy with the quality of the subscriber intake last quarter, as many had joined thanks to new product initiatives and thus produce quality cohorts. Hs this trend continued into Q2 and the beginning of Q3 as well?
Yes, for sure. I mean, we can see that the features we deploy continue to drive new conversions, and we're very happy with that development going forward. The last quarter was more tack-quarter with more feature releases than this quarter. This quarter, we have been more focused on the price testing and also the content delivery platform that's powering the sleep improvement programs. That has not been rolled out on a large scale yet. So that's the most -- that's the difference between last quarter and this quarter in terms of product release.
Okay. And could you please update us on the pricing optimization, -- like how are these implementation going in different markets? And could you talk a bit about the feedback and reactions? And do you feel some kind of resistance or is it mainly going according to plan?
I think on a broad level, I mean, we have been trying and testing this on the biggest market that we had. And from the data points that we have seen from there, of course, it's lowering our conversion a bit. But the combination of a higher ARPU and a higher revenue per install, which is an important KPI when it comes to price testing, we have seen that it's a positive to the revenue. And I mean, this will differ market by market. I mean the same pricing logic doesn't apply -- the same pricing logic does not apply in U.S. That's in Japan. So this will be optimized on a market-by-market level. And also in combination with marketing efforts that also differs from, for example, Japan and U.S. So this is very market-specific.
And it appears that most of the implementation so far have been increased prices. Have you looked into lowering prices in large markets such as India, for example?
Yes. I mean that's why we're calling it, not the price increase project. This is a price adjustment. So for sure, I mean, in some markets, we're for sure, highly priced. And I mean, it will -- the price setting in this market will show if we will lower or higher the price. We're optimizing towards, I mean, revenue and also subscriber growth in this market. And that will differ in India compared to U.S., for sure.
Yes. I think in general, we are a bit reluctant to decreasing prices. Instead, we prefer to work with subscription linked rates or discounts and those types of mechanisms.
And also worth noting is that our biggest market is in U.S., U.K., Australia and so forth. And I mean these markets have shown very positive results from price increases. So the big bulk of markets and the big bulk of our users will have a price increase.
All right. Understood. And your financial position is very strong, especially with your SEK 200 million on the balance sheet. So how active are you in the M&A area? And how would your dream acquisition look like?
No. I mean, we're active. As we mentioned in the quarterly report, the condition has changed a bit since we started engaging in these kind of processes. I mean, acquiring a smaller company that has a lot of venture capital and valuations that are very high has drastically changed the last couple of months, which gives us a larger opportunities for merger and acquisitions. And I mean, we're -- if we're looking at what kind of companies we're looking at, we're a product company. We're a tech company. We're looking for companies that are able to accelerate our strategy, basically, our product strategy. We're not looking for buying companies that, to a large extent, diversify our offering or buying users in that kind of way. We're very true to our vision improving sleep and healthy general. So that is the main focus.
All right. And one last question before I pass on to someone on here. The new platform for sleep training. Could you talk a little bit about what you expect from this in the second half and next year? And how do rollout is going and the testing?
The rollout is going fine, but it's way too early to guide on anything on conversion rates and so forth and subscriber growth. But it's highly requested. And as I mentioned, I mean, we have a lot of new -- we're first touch by too many users when it comes to sleep. And our current experience is great, but it's very, very data-driven. And this is a way for us to get people more engaged and more motivating in actually changing their behavior, improving their sleep. And to the end, I mean, we're targeting engagement in this. We want people to understand why it's important to sleep because that leads to more active, more engaged user, and that leads to higher trial to conversion rate that leads to higher renewal rates and so forth. But we are not able to guide on anything what we are expecting from this in terms of subscribers or revenue at this point.
The next question is from [indiscernible].
Carl-Johan and Per, could you start with providing some more detailed comments on these quarters gross subscription value? At what growth level is total sales value compared to last year? And perhaps if you could add some comments around the trends during the quarter month by month.
Yes. So as I said previously, during the quarter, we were impacted by some seasonality effects, which we believe is dollar at this time of the year. On top of that, obviously, there was some impact from the price adjustments implemented in some markets. But overall, I would say that, as I said, we have seen a very good uplift in ARPU, both for these markets in particular, where we include the price change, but also on the blended ARPU. But I would say that from the beginning of the quarter, we saw a steep or not decline, but we saw more impact on the new subscription sales, while we -- during the last part of the quarter, we saw an uplift in the new subscription acquisition.
And in total, I would say that we had sales value that were in line with our long-term target, so to say, in terms of growth compared to last year. What's important to understand now is that when we say that we evaluate the price test, what we do is that we both evaluate how the conversion rate develops, meaning our subscribers, how they accept these price increases, but also most important, how we can work with other tools to really support the growth. And by that, I mean, marketing investments, for instance, how we can work with the app and increase conversions. And I think with higher ARPU, we will create more headroom to existing invest in marketing, new campaigns, discounts and so on. And then that is what we will really try to implement now going forward. And I think what we're seeing now with a quite flat subscriber development. Hopefully, that will change now when we can really use all the tools to drive subscription growth going forward.
Perfect. Very sharp, Per. And then on marketing spend was only slightly above Q1 levels despite you're seeing positive trends on the efficiency side. Are you satisfied with the current level? If not, why haven't you invested more? Is it due to focus on other parts? And then finally, how should we think about marketing investments going forward? I mean you flagged previously that they're supposed to increase, but perhaps if you could add some more color on the magnitude that we expect to increase it.
Yes, for sure. Yes. I mean we have stable marketing trends right now. And as I mentioned, it's a tricky world out there post IDFA with the channels and tracking and so forth. But in general, I mean, we're -- we want to spend more money on marketing. And the way to -- we are addressing this is creating more headroom in the ARPU to be able to actually adding more channels, spending more, reaching different types of users. So in general, I think over the last 2 quarters of the year, you will see a higher investment in marketing.
All right. Perfect. And then you also -- I mean you mentioned the positive aspect after your current cost levels and stable profitability during these uncertain times. But how do you think about the sort of the resilience on the subscriber side from macro headwinds?
Yes. I think we're in a good level right now. Of course, as Per mentioned that we're seeing the seasonal effect is somewhat stronger this year as we have seen among other apps and competitors and colleagues in the business this quarter as well. I don't think we're seeing a weaker consumer at this point. We haven't seen any effects of that as of now. But it's important to keep an eye on that. But I think the active users we have are using the app. I mean, 4, 5, 6x a week and it's an important part of their daily routine. So I mean, the active subscriber base, we have are gaining a lot of value and seeing a lot of value from the experience that we provide. And if you're comparing that to having 8 or 10 subscribers on screening for example, it seems like we have a good resilience in going forward in this new [indiscernible].
Yes. And we haven't seen any impact on our renewal rate. So nothing suggests that our users cancel the Sleep Cycle subscription.
Perfect. And just on the renewal rate, I mean, is it pretty much at 60% on average on the entire subscription base or where is average at?
Yes, about that.
All right. Perfect. That was all for me.
There are no further questions at this time. I hand back to you.
Yes. We have actually received one question from Johan Bostrom by email. Two questions. I'll start with the first one, which are the 3 biggest geographic markets for Sleep Cycle?
Yes, for sure. I mean, roughly 40% is in U.S. and the rest is devised by roughly 30% -- 30% to 35% in Europe, with U.K. and Germany being strong markets, and the rest, 25% to 30% is Asia and driven by Japan, Australia, it's becoming a strong market and also China.
Yes. And the second question is after a strong margin in first half year of 25%. Can we still expect the margin about 20% for the second half of the year? Or should the margin to be seen for the full year?
We have an EBIT margin of 20% on the full year. And we've now delivered 25%. What we see now is that we will try to increase investment in both marketing as well as in product vessel development. So I foresee on a quarterly basis, we will be closer to 20% margin for the 2 coming quarters. But for full year, we expect to be a bit above 20%. Thank you.
Thank you.