Sleep Cycle AB (publ)

We have the formula to the greatest performance enhancer in the world. We'll make you stronger, faster, smarter and happier because we have the keys to healthy sleep. with a third of the population being sleep deprived, but a market potential of more than 130 billion US dollars in the US alone. We don't think sleep is a problem. We think sleep is an opportunity to reach your goals, to be a stronger, faster, smarter, and happier you, because we are the future of sleep health, and you are welcome to join us.

Hi, and welcome to this webcast of Sleep Cycle third quarter results for 2024. My name is Jesper, and I'm the moderator for this presentation. With me today, I have the CEO, Erik Givmark, and CFO and head of IR, Elisabeth Hedman. You can, through the presentation, send in questions, and you can send them through the chat that you can find below on the screen that you are watching on, and I will receive them on my iPad, and we will get to the Q&A session after the presentation. But with that, I hand the word over to Erik.

Please go ahead. Thank you very much. Hi, everyone, and welcome. Today, we are sharing the interim report for quarter three. My name is Erik Gilmark. I'm the CEO at SleepCycle. And with me today, I have Elisabeth Hedman, our CFO and Head of Investor Relations. So before we go into the results, I want to quickly share what we at SleepCycle are about. We are the market leader within our segment, and we have been the market leader for 15 years now. Our growth is fueled by the increasing awareness of the importance of sleep, and we have a very strong growth loop with 15,000 to 20,000 downloads a day, where 80% is organic traffic. The reason why we have such a great product market fit is our unique way of leveraging our patented AI technology and billions of nights of anonymous data. All of this, combined with our passion for sleep science, have created a product that consumers love. It's no coincidence that Harvard and Cambridge comes to us when they want to do research on sleep and how it impacts life and health. Our business model is straightforward. Personalized sleep solution as a subscription service. We have an extremely scalable solution with recurring revenues from our subscriber base that generates advanced payments, ensuring robust cash flow. Part of what's so great with our product is that all it takes is a smartphone. No additional hardware purchases. We're available on all common smartphones as well as wearables in 150 countries and 13 different languages. Every night, we have more than 1 million active users. And what we do for our users is quite remarkable. We help our users to fall asleep easily with coaching programs and a sound library. We help our users to wake up feeling rested thanks to our patented smart alarm. And we help our users to analyze and provide insights to their sleep habits. We remain committed to our new strategy that we launched in March this year and the three identified focus areas to further fuel our growth. The first one is user acquisition. We want to improve the upper funnel traffic. We want to be visible in more channels and expose sleep cycle to more potential users. In quarter three, we launched iOS 18 and we saw good effects on terms of increasing both the awareness and installs. We were also featured in publications like Forbes and Wall Street Journals. We have also launched successful campaigns converting free users to subscribers with the help of offers. This is all part of our revenue management initiative where we started to experiment with localized prices and offers. We will continue this in quarter four and also testing higher price points in some markets. The second one is user engagement. We will continue to invest in the product and work with conversion, increase engagement and thereby decrease churn. This includes win-back offers for churned users as well as improving our core technology when it comes to data and reliability. And finally, we will look to add a new layer of revenues, monetizing our data and technology. Towards the end of Q3, we've started to explore some of these initiatives in how to leverage the platform and the data as well. I will share more insight once we have something tangible. So the first and the second one is all about doubling down on the core product. We are the market leaders and we will remain so. Sleep is ours to own. The third one is an option that we don't know exactly yet how it will play out. Partnership is a key component for us to reach adjacent segments, but also to build local market relevance and presence. In Q3, we saw growth from our current partners, WellHub and Revolut, and we are also deepening our relationship with them, as well as signing new ones. I'm happy that we could, for example, show the market what we mean by our new partnership together with MyFitnessPal, where we will be leveraging a new feature called Continued Pricing. MyFitnessPal have around $300 million in revenue and 50,000 installs every day. In quarter four, we will offer a sleep cycle premium to their new users with a RevShare model. The estimated go-live date is in the end of November, and I'm looking forward to see how this will contribute even more to our growth. It's a very cost-efficient customer acquisition strategy. In conjunction with our new strategy, we shared our updated growth targets. We aim to double the revenue in mid-term three to four years of time, around 25% in EBIT on an annual basis. However, given our successful profitable growth, we are now looking at approximately 28% EBIT in 2024. The dividend policy is unchanged, 40 to 60% of net profit every year. We are combining profitable growth with an attractive yearly dividend.