Welcome to the Conference Call. For the 1st part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. I will hand the conference over to the speakers. Please go ahead. Line muted.
Thank you for joining us today. Today, we start by running through the KPIs for the quarter, and we will also add some further color to the revenue and subs development and how we're thinking about that going forward. I will also today spend some time walking you through a set of initiatives and new features that we have been building during the quarter. They are all in different states of rollout to our premium subscribers, and we are all very excited about them. Per will round off today's session talking about the financials, before we hand over to Q&A. Last quarter, I talked about how we are investing and putting more emphasis on product development and R&D at the moment, all in line with our strategy, where we want to continue to be at the forefront and be more relevant to our users.
In the light of this, we also reorganized part of our business, basically bringing marketing and product teams closer. This has turned out well. We now have more improvements and features in the pipe than ever before. We will look into some of these features later on. First, let's take a look at the numbers. We are at 881,000 subscribers right now, a slight decrease from last year, as expected and previously communicated. I want to stay on the subscribers for a moment. The way to think about subscriptions growth is that there are two dimensions. There are new subscribers and there are renewals. What we are seeing and what we have discussed on previous calls is that what is affecting the subs growth at this point is the new subscriber inflow.
Looking closer at the new subscribers, it is basically built upon a bit simplified two metrics, new users, that is installs, and conversion rates. In terms of product mechanics, we have done a really good job on the conversion rates. We've been adding features and optimizing payment flows, and we are happy about that metric, how that metric has been developing over time. At the same time, we also conducted price adjustments, that has effectively been offsetting this improved conversion rate, leaving it basically at the same levels as before the adjustments. All in all, we're now with maintained conversion rates and new improved ARPU at a significant better place in terms of revenue per install. Looking at the other part of new subscribers, new user inflow, we continue to see as many of our peers lower level of App Store engagement, that is organic installs.
This in turn is the major factor of the net decrease in subs growth. Looking forward on subs growth, we believe the decline will start flattening out during the year and pick up speed. Once again, we are optimizing the conversion flows and the acquisition campaigns on the new price points. Zooming out, we still have a very healthy, massive volume of new organic users coming into our front door every day. Users that has been recommended Sleep Cycle by their friends or found us by themselves on App Stores. On top of that, we have a large, actively engaged free tier user base. Both of these constitutes huge opportunities, and we're constantly iterating on keeping them engaged and monetize them further.
In the long-term way of doing that is keep investing in the product, learn about our users, release new features that retains and converts users. Moving to the right, ARPU growing 15%. The price adjustments are coming in more and more into effect and now at SEK 2.52. If you look at new subscribers, we're well above 300. Revenue growth of 13% and a stable EBIT on healthy 20%. By that, I'll leave over to Per to get deeper dive into subscribers and revenue.
Thanks. Looking at the subscription development, we had a challenging quarter. The reasons for that are, as Carl-Johan said, less engagement in App Store and declining downloads. We also met very tough numbers from last year, which was a very good quarter. Total subscriptions were down 4.1% compared to last year. While renewal rates continue to be very stable, we are mainly affected by new user acquisitions going down. On the positive side, our conversion rates are improving, and with the price increases implemented during last year, we continue to see a strong ARPU development. In the 1st quarter, a large part of the revenue growth was linked to foreign exchange movements. With a very good ARPU uplift in new users coming in and the price increases are now fully implemented on our largest markets.
Our strategy is focused on product-driven and profitable growth. We have invested a lot in product development during the last years. We now have a very exciting funnel of new product releases that we believe will take us back to positive subscriber growth. Carl-Johan will elaborate further on what's in our pipeline.
Thank you, Per. Okay, I want to talk about ongoing initiatives that we are excited about at the moment. They are all in some stage of rollout or testing out at the moment. These initiatives are regions from different product teams within Sleep Cycle, and they are all aimed to drive user engagement, which in turn affects our core business KPIs, installs, conversions, and renewals. First off, is a new revamped and more seamless onboarding that we are currently testing. Onboarding refers to the process of introducing new users to Sleep Cycle. For us, it means the 1st mins or seconds the user spends within the application.
In broader term, the one job for the onboarding is to get the user activated. The key metric we're looking at is the probability that the new user sleep at least one night with Sleep Cycle. If we're successful in that, we know that there's a high probability that that user retains within the product and then converts into a premium subscriber. I'm very happy to see in early testing indicating a good uplift in that metric, which long-term is driving business KPIs such as conversion. In full context, these projects and iterations are small in terms of investments, but they are very important to emphasize the need on continuously A/B testing and iterating on these parts of the product as they have big impact to our business.
Second initiatives is the Kids app, which we launched in an early version, of it during the quarter. The Kids app shares the same vision as Sleep Cycle, better sleep, but it's launched as a separate app because it takes a slightly different approach. If Sleep Cycle is about learning and improving your sleep, Kids is about helping parents with the kids sleep. By offering that, also improve, as all parents are well aware of, the well-being of the whole family. At the core of the Kids app, there's a smart sleep schedule. This schedule automatically adapts to infant aged, tracked naps, and nightly sleeping times. It updates accordingly to short or missed naps. It makes this optimization towards having less nightly wakes up, and shorter time falling asleep for the infant.
On top of that, it provides a set of engagement features such as shared view among caregivers, notification, and a rich library of science-based sleep recommendations. We will start pushing some traffic from Sleep Cycle cohorts during Q2. For example, when we in Sleep Cycle detect babies crying with our audio analysis, we can both track it and we can recommend the Sleep Cycle users to try out the Kids app. It fits pretty well into our user journey and vision on improving sleep. Near term goals is to iron out the user experience and the product mechanics, and my aim is that the Kids app will lift some noticeable revenue in the 2nd half of 2023. Another feature which we are especially proud of is breathing disruptions.
The breathing disruptions feature is based upon analyzing the user's snoring patterns and estimates the number of disruptions per hour. This in turn can act as an indicator of more severe health conditions. In breathing disruptions, we're leveraging our massive database of snoring data to create a powerful tool that it can help user identify and also correlate the potential unhealthy breathing patterns. This is a behavior we already see in the platform as user are analyzing, you know, listening to the snoring and bringing sleep cycles or audio clips to their doctor. With this feature, we are basically removing a couple of steps for the user, making their patterns more clear and more visual. Okay, that was a couple of projects that we have been building during the quarters. As mentioned, we do have speed at the moment, which is very important to us.
As always, when it comes to product development, not all of these will succeed or even be fully deployed in the 1st iteration. We are building, and we are learning, and for now, we're doing that in a speedy fashion. Over to you.
Thank you, Carl-Johan. Let's have a look at the numbers. Despite the decline in number of subscribers in the quarter, we saw continued revenue growth and the profits of 20%. Net revenues grew 12.7%, which was 3.3% currency adjusted. The main reason for the weak growth was the negative new user intake caused by current market climate. Still, we managed to grow revenues, but a large part obviously came from foreign exchange. Going down the P&L, SEK 0.5 million was capitalized on the profit and loss. In total, SEK 2.3 million was capitalized during the quarter, mainly related to the development of the new Sleep Cycle Kids app that was released during the quarter. We expect to continue developing this product with the new update and releases during 2023.
Platform fees were at SEK 12.6 million, which continued to decrease in relation to revenues, due to a larger part of sales coming from our own channels. On OpEx, we booked open SEK 3 million as exceptional items in the quarter relating to the public cash offer in the 1st quarter. Compared to last year, we had higher costs for both marketing and also external consultants during this quarter. The difference is due to a decision to decrease marketing spending in Q1 2022, which is also explaining the difference in EBIT margin between the years. Staff costs developed according to plan and decreased somewhat with more employees and adjusted salary levels. Adjusted EBIT margin came in on 20.2%. In the previous quarter, Q4 2022, we had an EBIT margin of 14%.
As communicated then, we managed to return to our margin target of 20%, although lower revenues than expected. Compared to one year ago, we have generated SEK 41 million in cash. Because of Apple's payment schedule, which doesn't follow monthly payments, we only received two payments instead of three during Q1 2023. That had a negative impact of about SEK 50 million in the quarter, which has been adjusted for now in Q2. On the outlook for full year 2023, we expect a challenging market climate and uncertainty in near-term subscription development. As Carl-Johan went through, we have an intense funnel of new products and releases. Together with the acceleration of Sleep Cycle Kids app, we hope to come back to positive subscription growth shortly.
In addition to that, we will continue to see positive impact from price increases on ARPU going forward. On profitability, we will increase our focus on efficiency in product development, in user acquisition, and in marketing. We have invested heavily during the last two years, and I'm sure we will see good results from those investments. Still, we are not satisfied with the current revenue growth, and we are evaluating how we can improve ROI and profitability. With increased efficiency, we expect EBIT margin about 20% for this year. We have grown our organization during the last years. We now expect higher speed in new product releases, but given the current market climate, we do not see any direct changes in the total number of employees for 2023. With that, I hand over to Carl-Johan for final comments.
Thank you, Per. To summarize, stable growth, good margins, as we see the price adjustments are kicking in. We're now seeing good effect on the investment into product and tech org, which we have expanded during the previous year. We can still be much more efficient, but I'm glad that we're seeing this 1st telltale that we're improving in higher speed in product releases. All will not succeed. That's part of the game. The important piece here is that we're improving, we're learning, and we are moving forward fast. All in all, I'm excited about the releases in the coming quarter and the compounding effect these improvements will have on our subscriber and revenue growth going forward. I think by that, we can leave over to Q&A.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Dennis Berggren from Carnegie. Please go ahead.
Morning, guys. First of all, a question on the comments regarding the App Store development. What do you think is the reason behind the installs and engagement on App Store and also, I mean, how dependent are you of an improvement on that side in order to see subscriber base development improving from there?
I have pretty bad sound quality from you, Dennis, but I think the question is about what we're thinking about the organic installs and what the causes is about that. I mean, when we're looking at organic installs, to be fully transparent, it's quite hard to see what exactly it is that are causing the decline. We have a couple of hypothesis that we're working on right now. So the 1st of all, I mean, zooming out and looking at macroeconomic level on this, we can see that basically app stores downloads and downloads has basically been flat since 2020, 2021, following a tremendous growth from, I mean, 2019. So that's the 1st thing.
That's the kind of the macroeconomic trend we're seeing. If we dive a little bit deeper and how we're looking at it is that organic traffic can basically. You can divide organic traffic into two big buckets basically. It's search traffic that are users that are coming into app stores actively searching for something that helping them with their sleep or actively looking for Sleep Cycle. The other part is browse traffic, and that are people that are basically browsing app stores and are bumping into Sleep Cycle because of we're on a top list, chart or Apple are featuring us and so forth. What we can see in these buckets is that the main decline, the last year has been in the browse traffic.
That is very hard for us to exactly know the inner mechanics of, but we know for one thing is that basically, what happening with the App Stores recently is they try to also diversify the exposure of apps to consumers. That's one part. We also know that, I mean, top high charts, being like the most downloaded app, doesn't have the same effect. People are not looking at these charts at the same level as before. The good thing I would say is that we're still having a very high relevance to keywords such as sleep on this App Store.
I mean, we're looking at this, and we're working on this. A lot of our initiatives that we're driving right now is targeting this. Everything from adding more markets and more platforms as for example, the deployment on Huawei AppGallery. How we look at partnerships and corporate wellness such as Gympass. You will also see this year a little bit more emphasis on growth tactics such as iterating on referral mechanics within Sleep Cycle. Basically, wanting to have one download becoming 1.2 downloads. As a basis, I mean, we're very confident that when we're continuously investing in the product, this was also drive new users, long term, as well, and we're confident in that strategy as well.
Got it. Thank you very much for that very detailed answer. A question on the comment regarding the price increases being fully implemented on the largest markets, was it some specific market where the changes were completed in the quarter, or how should we read that comment and sort of the potential from additional ARPU effects coming through going forward?
I think the impact on ARPU will be as we have described before. It's ticking upwards, and we see that for every month, basically, we take in more users on the new price level. That trend is continuing. What was completed in the quarter was mainly that now we are fully implemented on the U.S. market with the new prices, and that's our most important market. We roll out prices in steps, and we always have like a control group to compare them with. Now we are fully implemented on the largest market and our most important market. We are obviously starting with other markets as well within Q2 and Q3, we will have reached more of our user base with the new prices.
Got it. Very clear. Then finally from my side, zooming out a bit, you're currently pretty much behind your organic growth target. What of these discussed initiatives do you find most important to re-accelerate subscriber growth from here? Also when exactly do you expect the subscriber base development to pick up again?
As mentioned earlier, we think that the decline that we had the previous quarter will start flattening out during the year. I mean, the focus for us right now is that we see a big opportunity. I mean, we still have, I mean, a good couple of millions of users coming into Sleep Cycle every year. I believe there are very high, or very huge opportunity in expose these new users to the features we releases and also the existing user base. I mean, we have a couple of hundred thousand free users actively engaged within the application. We have been targeting some of them, but I think there's a lot of things we can do that.
The basis of doing that is continuing to release new features to this and expose them in a better way to our users. Basically driving conversion rates and also in long term as a proxy metric for that engagement within the app.
I think just to summarize, it's difficult to make any projections, but as Carl-Johan said, when we see that the traffic in App Store flattens out, we are now more efficient in conversion, meaning that we will be able to acquire more new users through those channels. In addition to that, we have the Sleep Cycle Kids app that we will try to accelerate now in the coming quarters. Hopefully we have a few good things now that can actually drive subscriber growth upwards again.
Got it. Thank you very much.
The next question comes from Mark Siöstedt from Redeye. Please go ahead.
Thank you. Good morning, Carl-Johan and Per. I'm gonna try to pick up from the Sleep Cycle Kids app. Could you comment on, like, the launch of the app and what are your, like, main takeaways so far, and how has, like, the initial reception been, and what kind of iterations are you working on?
Thanks. A good question. The way we think about launching new products is that we want them out early in the hands of our users. That's the way we operate. We learn from user feedback, we learn from data within the product, and so forth. And that's why we're also kind of a little bit waiting on putting on the traffic from Sleep Cycle at this point. Because I mean, there are always things that we want to iron out. There's bugs, there's glitches in the user experience, and so forth. And to have a healthy volume of organic users coming in and learning from them is the key point here in iterating on that.
That's kind of the way we're doing with a lot of initiatives at Sleep Cycle. I mean, in terms of launch, it's out there, we're learning, we're getting fee-feedback, and that's the way we move forward from here. Once we are happy with kind of the user behavior with the app and the feedback we get, then it's time to kind of put on the commercial initiatives on top of that.
Yeah. All right. Will in-app cross-selling be like the main sales channel, or will you market it outside of the main app as well?
Well, we'll start, I mean, we have a pretty good volume of users in Sleep Cycle. We
All right. I understand. Thank you very much.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. [crosstalk] There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Yeah. Thank you. Thank you. We have a good quarter, healthy growth and stable margins. Thank you for listening in today, and see you in three months.