Welcome to the Sleep Cycle audiocast with teleconference Q1 2022. For the first part of this call, all participants will be in listen-only mode, and afterwards there'll be a question- and- answer session. Today, I am pleased to present CEO Carl Johan Hederoth and CFO Per Andersson. Speakers, please begin.
Hi, everyone, and thanks for joining us today. My name is Carl Johan Hederoth. I'm CEO of Sleep Cycle, and with me here today I have Per Andersson, CFO. For today, I will quickly touch upon the quarterly trends and outlook before taking a brief look at our initiatives. After that, I will talk about the core product business and how we are driving value by investing in our product. Per will after that provide further details around our financial results, and I will end up with a summary before turning over to Q&A. Just wanna start by saying that it's been a good quarter for Sleep Cycle.
We're seeing positive trends in current sales, which primarily is driven by two things, increased number of subscribers and a higher overall ARPU. First, looking at the subscriber base, there are two comments that I want to make. We're seeing an increased number of new subscribers coming onto the platform compared to last year, a result of hard work from our product and growth teams together with more efficient marketing. On top of that, we're also seeing more or less stable renewal rates across cohorts. Secondly, we're seeing continued increase in ARPU, which is, as we discussed in earlier calls, a result of converting and renewing a larger part of our subscribers on full $29 a year price. Also want to touch upon long-term outlook.
As we talked about last quarter, we still see the 30% growth target in 2022 as challenging, but we are on a good track, and we are getting up to speed in both product initiatives as well as partnerships. Next slide, please. So a quick summary of the first quarter, 12% subscriber growth, in line with our expectation. Pacing is good, especially times of changing marketing conditions. We're now at 920,000 subscribers, and we've seen a net add of 100,000 subscribers the last 12 months, compared to previous prior period.
Important to note here is also that the increase is primarily driven by being better activating and thus converting new users as paid acquisition is pacing slightly lower than the same period last year. In the middle, SEK 50 million revenue represent 21% currency-adjusted growth. It's a good acceleration compared to last year's 14% currency-adjusted growth. To the right, 25% EBIT, slightly higher than our full-year targets. But still, I mean, we're aiming for 20% for the full year 2022. The reason for the slightly higher EBIT this quarter is more to be seen as an effect of a more cost-effective organization combined with higher efficiency in paid acquisition.
Overall, a good quarter, continued accelerated revenue growth driven by product initiatives and thus a higher rate of new subscribers. Next slide, please. I just wanna quickly run you through an update on our current initiatives. First to the left and most important to us, the product. We are focused on two areas, expanding our tracking capabilities, and secondly, deepening our offering by providing insights, content, and tools that helps our users to improve sleep. We released our updated experience on Apple Watch early March. We'll talk about that release a little bit later on. Secondly, also important, we expanded our sleep aid library with audio-based sleep coaching available to our premium user base. Moving to the middle, increase reach.
We want to leverage partnerships, ranging from technical partnerships, where we provide technology as in our partnership with Samsung. We can also extend the value of Sleep Cycle by offering, for example, clinical pathway to common sleep condition or sleep problems. We're currently engaging in partnerships around the two big, that is insomnia and sleep apnea. A part of Sleep Cycle user base do have symptoms of either these two, and we are very eager to help them down the correct clinical pathway together with partners. We're still in a very early phase. I hope to get back to you on this further down the road this year. Corporate wellness and B2B, we continue to onboard organizations and companies on our B2B platform.
We're still on a small scale here, targeting the Swedish market, but we are iterating fast both in terms of packaging and the product. To the right, marketing. I want to talk a little bit about CRM this quarter. We're a consumer freemium app, meaning that we're not directly monetizing a large part of our user base. As previously mentioned, we have over 2 million active users on our platform and now north of 900,000 premium users. You can do the math by yourself, but that leaves a big chunk of our users to monetize further.
We're right now putting more focus on that, and we will continue to experiment on how to activate, convert, and also retain new and free users on our platform. Short note about subscriber and acquisition costs. Despite the challenging conditions on paid marketing platforms, we continue to be more efficient here. We're seeing a continued lower acquisition cost for the quarter, as a result of more efficient marketing and also increased conversion rates in the product driven by product launches. Next slide, please. I just wanna briefly touch upon how we're building value in our core business. I mean, in these times of changing marketing conditions, a lot of companies are suddenly talking about product-led growth.
It's kind of been the new hype since Apple introduced restrictions regarding IDFA. At Sleep Cycle, this is what we do, and this is kind of what we've done for a very long time, and I just wanna talk about it for a couple of minutes. At the heart of our product strategy is increasing the conversion and renewals in order to grow our subscriber base in numbers and also in ARPU. Looking to the right here, to do this, we basically have four levers. We can add more users, that is marketing and paid acquisition. We can activate, and we can engage users, and that's converting them into premium users. We can also retain our users in order to increase the number of renewals.
To the left here, looking at the state today at Sleep Cycle during the last years, we have millions of users coming into the Sleep Cycle platform every year. They come to us organically. They find us on app stores, they find us on the web, and they get recommended by friends and family. The number of organic new users equals a pretty significant marketing campaign. Increasing that is costly. As you all know, cost to install on the major marketing platforms is not trending downwards right now. Our priority is to leverage this huge amount of users hitting our landing pages every day. The way our business works is that in small increments, the product, the conversion flow has significant impact on our business.
may be, I mean, improving product landing pages at our app stores, new content and feature, or how we engage with the new users through emails and push campaigns. Combining these facts, high new user inflow, our large active free user base, we're seeing increased cost per installs and the impact we have on recent product launches. We're pretty confident right now that doubling down on product initiatives is the right way forward. In terms of spending our marketing money, we will still continue to be very prudent and do that in a very cost-efficient manner. Finally, a few words about ARPU. You have seen our trend pointing upwards since we're getting more volume on full price.
The mechanics is built in, and it's an effect of previous price increases. We have more users basically converting and renewing on full $29 a year. I mean, when we expand our product offering, we also create room for price increases. These price increases will first and foremost affect new users coming into the platform, but they will have an effect on ARPU going forward. When we talk about price increases, I just want to quickly touch upon subscriber growth. In terms of effect on subscriber growth, it's still too early to guide you, since we still are conducting surveys.
Because of price increases or other optimization might also in the longer term include lower prices on certain markets. There's a higher subscriber growth on certain markets. Increased prices will also differ lower conversion rate, but it will also create opportunities in marketing and campaigns when we have a larger headroom in terms of total lifetime value. Looking historically, I mean, we have done price adjustments before. What we've seen is initial period of lower subscriber growth before the full machinery is optimized and tuned for the new pricing. To summarize, I mean, we are at $29 a year right now. The last price increase we've done was over four years ago.
We have expanded the product significantly, and we are low price compared to competitors. Next slide, please. A very short example. A practical example of the previous slide, basically. Seamless tracking on the Apple Watch was a highly asked for feature. A large portion of our U.S . User base do have an Apple Watch paired with their phone. With the release, we actually provide an easier way to track sleep, meaning users have a more consistent sleep data, which in turn increase the value of our core features that leverage sleep data, such as trends, insights, and weekly report and so forth. This also, of course, opening up and enabling Sleep Cycle against the fast-growing wearable market.
Since launch in March, we have seen very good interest both in terms of conversion in new and existing user base. We're seeing a higher engagement. We basically see more nights tracked per users a week. We're also effectively using this feature launch to reactivate and retarget inactive users. In short, I mean, this is an example of a well-executed product initiative that drives core KPIs forward and increases both conversion and engagement in our user base. Importantly, positioning Sleep Cycle in the wearable market. With that, I want to hand over to Per for diving deeper into the numbers.
Yeah. Next slide, please. Thank you, Carl Johan. Subscription revenues continue to develop on the positive trajectory that we've seen from previous quarters. Subscriptions grew 12.2%, the revenues grew 19.2%. Adjusted for FX, revenues grew 21.3%. Compared to last year, in Q1 2021, revenues only grew 10.5%. In other words, we almost doubled the growth rate this year. That's obviously driven by subscription growth, but also to a large extent explained by an uplift in ARPDAU, which is mainly impacted by positive price- mix development. With the better product experience and the price adjustments Carl Johan explained, we expect ARPDAU to continue to develop positively going forward. Next slide.
Looking at the P&L for the first quarter, and as said on the previous page, we managed to grow revenues at a higher pace than previous years. That is a combination of volume growth and ARPDAU increases. The second takeaway from the P&L for the first quarter, increased efficiency through margin. During 2021, we invested heavily in the organization and in marketing. One focus during Q1 2022 has been to make sure that we get return on those investments. That is now confirmed, I can say, and it gives us confidence to increase product investments going forward. Going down the P&L, we see that platform fees have continued to decrease in relation to revenues.
That's mainly due to Google's fee decrease from first of January, and also because a larger part of sales take place in our own payment channels. Adjusted for non-recurring items in Q1 in last year, other OpEx in Q1 2022 were on par with previous year, despite we are now a considerably larger organization. We have intentionally decreased marketing spending somewhat during this quarter, but without affecting the number of new users acquired, meaning we have lowered the CAC levels to between SEK 220 and SEK 230 during the quarter. Staff costs have increased compared to last year, and now reflects an organization with 45 FTEs. Coming back to the margin, EBIT margin came in at 25.4%, which is higher than previous quarters.
The improved margin is mainly due to higher efficiency in performance marketing, and also good cost control in general and a more efficient organization. Cash flow came in at SEK 26.9 million, which is almost double compared to EBIT. That's due to prepayments from subscriptions and also linked to Apple and Google's payment schemes, which impacted positively this quarter. As per 31st of March, we held SEK 190 million in cash. Next page, please. Looking a bit ahead and on our focus areas, growth remains our number one priority. We've seen continued positive development in our underlying KPIs, and we expect both the price adjustments mentioned and continued investments in product development to drive growth going forward.
Our growth target of 30% year-on-year is ambitious, but we aim to reach that on a quarterly basis by end of 2022. We continue to aim for an EBIT margin of around 20%, which is our communicated target. The high margin we saw in Q1 creates good flexibility for the remaining part of 2022 and for further investments in both marketing and in product development. Recruitment are progressing according to plan. We expect 5-10 more people to be employed during this year, which is in line with our strategic growth plan. Looking at the opportunities during this quarter, we have engaged in two pilot projects around partnerships for sleep apnea and insomnia.
We continue to see many ways to create growth in new verticals, and we are currently evaluating further areas to invest in. Since the IPO last year, we have spent some time to build up the company and to create an efficient organization. We now see it's time to gear up, and we will start to invest more in new areas from this quarter on.
Thank you, Per. I just wanna close by stating that we are really excited about the business this coming year. As you've seen today, the core business is performing well. Again, even though we had a tougher 2021 than expected and the 30% growth for 2022 will be challenging, we still have strong confidence in our strategy and our acceleration in product development and innovation. We're a healthy, profitable, growing business with world-class talent, and we'll continue releasing new features that, I mean, despite headwinds in the marketing landscape, driving core business KPIs in the right direction. I think we now also have a good velocity, as you've seen today. Our investment in 2021 in terms of organization is starting to kick in.
I'm happy where we are, looking at the core business, and you will, in the coming 12-24 months, see an even increased speed in product and commercial initiatives, taking an even larger part of the growing digital sleep and health tech opportunity. With that said, I think it's time to lead over to Q&A.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name has been announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. Currently, we have one person in the queue so far. That's the line of Dennis Berggren of Carnegie. Please go ahead. Your line is open.
Good morning, guys, and thanks for taking my questions. Starting with the discussion on price increases, could you provide some more flavor on how certain you are that this will have a limited impact on new subscriber adds, and potentially also provide some color on the number of markets that are affected, and then also how important these markets are as of today? Is, for example, the U.S. one of the countries that will see price increases over the coming quarters?
Hi, Dennis. I mean, the U.S. market is our largest market, so that's one of the markets that we as of now are conducting tests in. I mean, in subscriber growth, we have seen it before. We saw it in 2018. We have a bump in new subscribers that are coming after a price increase. I think I mean, looking at the total opportunity here when it comes to making the marketing more efficient, it's very hard to actually guide on actually subscriber growth. We usually see a kind of a bump in new subscribers the following months before the machinery is optimized to the new price.
We'll give further color on that down the road.
Perfect. Thank you. Also, what's your view on the subscriber intake during this quarter? Are you satisfied with the outcome? Also, I think you were pretty clear on underlying development, but could you also provide some flavor on installs?
Yeah. I think in terms of installs, I mean, we're not seeing any direct upward trends or downward trends in that sense. As I mentioned, I mean, we have a huge number of installs. I think as I mentioned during the call here, I mean, the focus for us right now is to actually leverage this high new- user inflows and installs in a better way. I think that would give us the most bang for the buck right now. Also, as I've been talking about today, I mean, we get a lot...
Not a lot of new installs that end up in our free offer, and I think we have an opportunity as well there to be better on getting these over to our premium subscription.
I think from a financial point of view, we are happy with this quarter in terms of the new users coming in, since we've managed to decrease the marketing, meaning we pay less for acquiring new users. We've seen increased ARPU, meaning we take in new users on full price to a larger extent, and we also see good renewal levels. Overall it's a good quarter.
Perfect. On marketing investments, what is your thinking here for 2022? I mean, it's now markedly lower compared to the quarters in 2021. I think it is in line with your signaled increased focus on product development initiatives, but I believe that you previously signaled expectations of marketing spend on par with last year. How should we think regarding marketing investments from a financial perspective here over the coming quarters?
Well, I think we believe we will be on a bit higher level than in the first quarter, approximately SEK 2.5 million per month. I think I said in previous calls, and that we will be on, I believe. With the higher prices, the opportunities also rise, since we now get a higher long-term value of each new user. We will not be afraid of increasing investment if we see that we can get a good return on that.
Perfect. Finally, can you also provide some comment on the financial development of other external costs, if you also would exclude marketing costs? Because this also seems to have decreased quite a lot compared to earlier quarters. Even quarters without non-recurring transaction-related costs as well.
Yeah. Except for marketing, I believe the main difference is that we now leverage our own personnel to a larger extent. We've been able to cut down a bit on consultants and other services that we purchase, and we do more in-house, basically. Which in turn, well, it is. That's what we mean by becoming more efficient organization. We now see that we can leverage the staff we employed during the second half of last year to a larger extent.
Perfect. Thank you very much.
Thank you.
Thank you.
Thank you. Once again, if there are any further questions, please dial zero one on your telephone keypads now. We've had one further question come through. That's from the line of Erik Classon of Citi. Please go ahead. Your line is open.
Hi, good morning. A couple of questions on my side. First, looking at the subscriber intake of just below 20K, it was a bit higher last year during the quarters. I just wanna hear your thoughts on how we should think about the intake going forward. I know it's, I guess, dependent on pricing and stuff, but should we expect 20% to be a fair assumption going forward, or could it be higher or lower?
Yeah. I think I mean, the subscriber growth rate the last quarter is fluctuating a little bit. I mean, we've been up to 15% and 12%. I mean, that is also dependent on previous cohorts from previous quarters as well, what kind of quality subscribers we're getting. I mean, let's have an example. If we have a really nice position on app stores for one month, that might drive less quality subscribers into our platform that actually tend to leave to a higher degree the coming year. I mean, that is to a large extent also dependent on previous cohorts.
We're looking at new subscribers that we get in right now. I'm really happy with the quality of that because they're coming from a large part of the product initiatives right now. I'm happy with that.
Okay. Makes sense. In terms of price increases, are we talking, you know, potentially starting broader price hikes within the coming month or September or later 2022? Since it affects the subscriber intake as well, it would be interesting to hear ballpark what you're thinking.
Right now, as I mentioned, we're conducting surveys on certain markets. I think this will be also a gradual rollout to markets. It will not be an increase that affects all subscribers, all new subscribers globally, but we will do this market by market. Also important to note here is that we are actually in this iteration, we are increasing prices for new subscribers and not for existing subscribers. That would also limit the effect on churn and things that can come with price increases in general.
Okay. That's all from me. Thanks, guys.
Thanks.
Thank you.
Thank you. Once again, if there are any further questions, please dial zero one on your telephone keypads now. Okay, there seems to be no further questions coming through, so I'll hand back to our speakers for the closing comments.
Oh, thank you. Thank you, everyone.
Thank you.