Welcome to the Sleep Cycle Audiocast with Teleconference Q3 2021. 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'm pleased to present CEO Carl-Johan Hederoth and CFO Per Andersson. Speakers, please begin.
Thank you. My name is Carl-Johan Hederoth. I'm CEO of Sleep Cycle, and with me here today are Per Andersson, CFO. It's been another fun and busy quarter for us as we see accelerated revenue growth driven by new initiatives, including the successful launch of our offering with Samsung. I will kick off with a short summary of the quarter before diving into our strategic initiatives. After that, Per will walk you through the numbers in more details. Next slide, please. Looking at the big picture for Q3, we're seeing continued growth in our subscriber base 13% year-over-year driven by accelerated addition of new subscribers and stable renewal rates. We are now at 884 total paying subscribers.
The accelerated growth in subscriber base is together with Samsung the main driver in the currency-adjusted revenue growth of 30%. Adjusted EBIT is at 25% in line with our plan as we're still continuing to invest in our core product initiatives, new channels and marketing. Next slide, please. Taking a look at our strategic priorities which will drive our growth ahead. Starting to the left here, product, Sleep Cycle has always been and will always be a company with a product at its heart. Sustainable growth is coming from building products that our users love and engage with. We remain focused on expanding our tracking capabilities and be accessible on the platforms where our users are.
We want to deepen our offering, offer users with sleep problems more insight and tools, including sleep content and coaching. Moving to the middle, we want to extend our reach and help more people with their sleep. First, we want to leverage partnerships, ranging from technical integration to commercial bundles with actors in sleep or adjacent industries. And finally, on marketing, as we've been communicating, we are accelerating our growth by scaling up marketing. We do three types of marketing, performance marketing, which aims to convert users into subscribers, and brand marketing, which drives awareness around Sleep Cycle. Overall, we are seeing good progress across all three initiatives. Next slide, please. Starting to the left again, product, the area closest to me.
We launched our offering on Android Wear and we're continuing to release updates onto this platform. I am proud to see how quick our team were on acting on this opportunity and also very thankful to all the help from our friends at Google. The platform is still very new with only Galaxy Watch 4 as the major hardware supporting it. We will see additional wearable built on this platform as we are moving along. I mean, this platform is still early days, but I'm glad to see our users are already picking up on this and we can see the user base on the Android Wear increases week by week.
During the quarter, we finished our transition to classifying our massive sleep database as health data according to GDPR. Basically, this means two things. First of all, we're giving our users the highest protection in terms of their data. Secondly, this sets the stage for managing data within more advanced sleep coaching and treatment solutions. Moving to the B2B corporate wellness. We have made good progress on our corporate wellness offering. We are continuing to onboard new customers. However, the initiative is moving slightly slower than expected due to longer sales cycles. Getting a foundation of customers is invaluable to us, and the feedback we get from the customers is very helpful for us when we are continuing to iterate better and faster on this offering.
Launching Sleep Boot Camp is the result of that. Sleep Boot Camp is a four-week-long sleep training program that aims to educate the participants on sleep and how to best use Sleep Cycle to improve sleep. It's been very well received, and I'm confident that we will be able to scale this up in our corporate offering during 2022. Samsung, as disclosed in quarter two, Sleep Cycle is the technology provider behind the snore detection on Samsung Galaxy Watch4 devices. This means that Samsung users will be able to track and analyze their snoring within Samsung Health. I mean, to have the trust from tech companies like Samsung in the area of sleep is of course very attractive to us as we are expanding our user reach.
The initiative has now been successfully launched, and since September, we are now able to see new customers joining us from the Samsung Health platform. After the successful launch, we are now in continued discussions with Samsung on further expanding in the joint offering to Galaxy Watch 4 owners and Samsung Health users. Moving to the right, on marketing, we are investing in our marketing capabilities, improving our data analytics platforms and growing the team. This investment has been paying off as we see continued decrease in our subscriber acquisition cost in Q3. We will continue to scale our marketing effort as long as it offers attractive return on our investments.
Brands, during October, we ran second wave of a broader TV campaign in Sweden, and we have seen an improved impact across all metrics, such as active users and new subscribers in Sweden. Still, we are evaluating TV marketing as a long-term effective acquisition channel. Also, as usual, we have seen an increase in downloads from mid-August. It is an expected seasonality trends that we see every year since people are returning back to school and work after summer vacation and getting back into the routines again. This year the trend is amplified. The past year of COVID is for sure a driver of this.
As people are returning to offices and normal working hours, we are seeing more exposure on social media platforms, from influencers and so forth. As you all may know, Apple has also updated the policies around app tracking capabilities, also known as IDFA. Up to this date, we have seen a limited overall impact on our overall performance marketing. To conclude, we're making progress across all strategic initiatives. We have successfully expanded the product into wearables and upgraded our data processing to comply with the highest standards for health data. We have launched Sleep Boot Camp, enhancing our corporate offering, and we continue to see traction with our technology partner, Samsung. We are seeing good returns on our marketing efforts, amplified by more people returning to work. Next slide, please.
Before I hand over to Per, I just wanna briefly comment on the recent developments in commissions charged by Apple's App Store and Google Play. App Store and Google Play remain our largest channels for new users, and platform fees to these two channels constitute a significant part of our cost base. As such, I mean, we're of course following the recent development by Google and Apple. To Google, earlier this year, Google announced that they would reduce their sales commission fee from 30% on new sales to 15% on the first $1 million of sales starting July 1 this year.
Google has after that decided to extend this to all sales from January 1, 2022, such that the commission from all income from Google going forward will be flat on 15% starting next year. Our expectations to that is that this will lead to a full year cost reduction of approximately SEK 2 million for 2022. To Apple, I mean, we have been following the Epic Games v. Apple lawsuit in September. Apple's policies was deemed to be anti-competitive. These policies restricted app developers from directing users basically from payment methods outside the App Store. Following this, Apple has updated their policies accordingly and it's now possible to direct app users to other payment options.
At Sleep Cycle, we already have our website payments flowing, but it is, when it comes to App Store, still too early to provide any concrete numbers on the cost savings from these changes. I leave it over to Per.
Okay, next slide, please. Thank you, Carl-Johan. Looking to the left, we saw continued good volume growth in total user base, ending up at +13% versus last year during the third quarter. July started off quite slow due to seasonality, and we saw the same pattern also for our competitors. From mid-August, as Carl-Johan mentioned, from mid-August and September, also continuing in October, actually, we have seen good uplifts in new customer acquisitions. Looking to the right-hand side, revenues grew 21% versus last year. We continue to be negatively affected by foreign exchange. Adjusted for that, our growth rate was 30% for the quarter. Next slide. As I said on the previous page, revenue growth for the quarter was 21.1%.
Adjusted for currency, 30%. The main growth drivers was organic growth paired with performance marketing investments, as well as customer intake from our new initiatives such as Samsung. Going down the P&L, platform fees decreased somewhat in relation to revenues, ending up at 25.6% of revenues last year and this year, 24.6%. The Google fee decrease from 1st of July and the high share of renewals are the main explanation to that. Other operational expenses increased due to mainly marketing investments which doubled compared to last year to SEK 11.4 million. About SEK 9 million of that was related to performance marketing. Also, about SEK 3 million in NRIs relating to the IPO was recognized during the quarter.
Further on, we will not recognize any more NRIs relating to the IPO. Going down to staff costs, we have continued to scale up the organization in line with our plan. Average number of employees was 37 for the quarter compared to 22 last year, which explains the increase in staff costs together with also another mix of people as we have explained earlier. EBIT was mainly affected by increased cost in marketing and staff, explaining the deviation against last year. Adjusted for SEK 3 million in NRIs, EBIT was SEK 9 million compared to SEK 15.9 million last year. Cash flow obviously affected by the result but also due to some negative working capital changes during the period. Next slide, please.
The P&L for the first nine months is mainly impacted by same events as the quarter in addition to IPO-related costs for the full period. Currency adjusted revenue growth was 21.6%. Our target for next year is 30% growth, and I believe we are approaching the run rate we need given the sales growth we've seen in September and October. Considering that we have been growing at lower rates in the last year, partly affected by COVID, I believe we are now getting on the right track. Going down the P&L, marketing and staff costs are the main cost drivers in line with our plan.
With a lot of new employees hired during this year, we will start seeing payoff in terms of product development and sales during 2022, we believe, from the growth in number of staff. NRIs for the nine-month period was in total SEK 26 million, which together with the above cost increase explains the impact on EBIT. Adjusted for NRIs, EBIT was SEK 28.4 million, representing a margin of 21%, which is in line with our target. Next slide. Summing up, we confirm the outlook from the last quarterly presentation for growth. Our strategy remains firm. We continue to invest in product development and marketing to reach a 30% currency adjusted growth in 2022.
On profitability, the target is an adjusted EBIT margin of approximately 20% for this year and next year. Going down to organization, as I said during the last quarter, we have continued to build out the organization to be able to scale up our product development and sales initiatives. As of September 30, we were 42 people employed, and by October we were 43 people. That means the staff has almost doubled from January this year. We will continue to hire a few more people in the coming quarters. For the full 2022, we will not grow as much as we did in 2021. Next year, we will focus on getting return from the organizational growth that we have seen in 2021.
As we said on the last quarterly presentation, the IPO clearly strengthened our brand and we definitely are in a position now where our name can open doors. We are currently working on the strategy and business plan for next year, and we will come back on how we can leverage this position and the new opportunities that we now see. Next page. That sums up the presentation and we are now available for 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 your question is answered before it's your turn to speak, you can dial zero two to cancel. There'll be a brief pause now whilst we register any questions.
Okay. We have received a few questions by mail. We can start by those.
Yep. Currently, there are no questions on the phone, so please go ahead.
The first question is, do you foresee any more one-time payments by Samsung, or any similar payments coming up your way ahead? No. Currently, we are not in any such discussions. I mean, we are obviously evaluating other partnerships and especially in the area of technical integration as we did something, but currently we don't see any more of these types of payments.
To add to that, I mean, we have seen a good inflow of customers from Samsung. We are strategic when it comes to partnerships like this. I mean, our expectation on this is very, very conservative. I think so far it's looking good in terms of that.
Yeah. The next question is, can you talk a bit about CAC and churn trends in the quarter?
Yeah. In terms of our subscriber acquisition costs, we have seen a very good trend when it comes to that. Comparing to last quarter, we have seen a decrease in that cost. Two parts to that. I think to the first point is that the team has been working very well on reallocating marketing spend to more channels and more platforms and being more effective when it comes to performance marketing. The other trend we see also is that we have when we are in this period of this year, we're also seeing an increased interest and higher intent from users to care about sleep that the lower acquisition costs.
Thank you. The third question is, how does the average revenue per user decline sequentially? Can you provide flavor to this? Is this due to rev share with Samsung and lower ARPU in B2B? We had an ARPU in the third quarter of 209 SEK, similar for the first nine months. That is, in previous years we have had around 211 SEK. I would say that change is mainly due to FX. Meaning that looking at the impact FX has had on total revenue, I still believe we have managed to keep up a very good average revenue level.
I can tell you that the change in ARPU is definitely not connected to the rev share with Samsung and the B2B offering. Currently, we don't offer those subscriptions at any price that should impact ARPU. The fourth question is, what should be expected in terms of subscriber intake coming from Samsung and B2B agreements moving forward?
Yeah, in terms of Samsung, I mean, we've been running this for the new first customers were coming to us in September. We've been running this for 2 months now. As I was mentioning before, I think so far it's been beating our expectations. We hope the trend is kicking off. It's very early both in the partnerships, but also, I mean, the platform, the Samsung Galaxy Watch 4 is also new to the market. It's too early to say anything about future expectations on Samsung. I think it's a very, very interesting channel, Samsung, going forward.
It's a very cost-effective way for us on acquiring new customers to our platform.
I think we can add that the growth we're seeing in these two months from Samsung has been really good, and we see a clear increase in number of subscriptions, although it's still on low absolute levels. It is increasing and we're also obviously in contact with Samsung and about their health offering and we do see potential in going forward as well.
Yep. To add to that, also happy to see that Samsung is also pushing us in their channels, in the boost campaign and then Samsung Members campaign, in Samsung Health on samsunghealth.com. Very good to see their engagement in this as well.
Yeah, regarding the B2B and the corporate offering, as we mentioned before, after we launched the Boot Camp in Q3, we've seen very good interest and good traction. We have built up quite a good pipeline. I would say it's a bit too early to speculate on how big this channel can become. What we will work on now and especially in the next year is to scale up the offering. What we really like with that channel is that it's a channel that we control ourselves. I mean, we currently have a sales force.
We will build that out to be able to scale up and that provide us with a good tool to affect the new user acquisition in a good way.
To add to that, to the sleep, it's like a boot camp. We also see that these kind of initiatives when we're educating the user about sleep and how to actually use Sleep Cycle does affect the users very well when it comes to activation. I think this concept is very good when it comes to making people understand the benefits of using Sleep Cycle and why they should care about sleep and how to improve it. Happy about that.
Yeah. Those were the questions we have received by email. Are there anyone, any more?
Currently, there are no questions coming through on the phone lines.
Okay.
Okay. Thank you all. Looking forward to meeting you all again in three months. Thank you.