Sleep Cycle

Quarterly Report • Jul 26, 2024

APRIL – JUNE 2024

INTERIM REPORT APRIL - JUNE 2024 – SLEEP CYCLE AB

SECOND QUARTER APRIL – JUNE 2024

• Net sales totaled tSEK 65,442 (57,952) and increased by 12.9% (11.0%). Currency-adjusted net sales growth amounted to 10.5% (1.1%).
• Operating profit amounted to tSEK 20,964 (12,732), with an operating margin of 32.0% (22.0%).
• Adjusted operating profit totaled tSEK 20,964 (17,265) and adjusted operating margin was 32.0% (29.8%).
• The total number of paying subscribers at end of period was 898k (877k).
• ARPU in the quarter amounted to SEK 282 (263). Currency adjusted ARPU was SEK 277.
• Earnings per share before and after dilution for the quarter amounted to SEK 0.84 (0.51).

THE PERIOD JANUARY – JUNE 2024

• Net sales totaled tSEK 128,899 (114,114) and increased by 13.0% (11.9%). Currency-adjusted net sales growth amounted to 10.8% (2.0%).
• Operating profit amounted to tSEK 34,807 (23,646), with an operating margin of 27.0% (20.7%).
• Adjusted operating profit totaled tSEK 40,563 (28,477) and adjusted operating margin was 31.5% (25.0%). In the first quarter of 2024, adjustments have been made for costs of tSEK 5,756 related to the reorganization and consolidation of operations to the head office in Gothenburg.
• ARPU for the period amounted to SEK 279 (256). Currency adjusted ARPU was SEK 273.
• Earnings per share before and after dilution amounted to SEK 1.40 (0.95) for the period.

SIGNIFICANT EVENTS DURING THE QUARTER

• On April 8, it was announced that Petter Höglander had been recruited as CPO. Petter has a background in subscription-based businesses in the consumer sector. Petter took office April 15.
• Hans Skruvfors was elected as a new member of the Board of Directors at Sleep Cycle's Annual General Meeting April 11. Rasmus Järborg and Olof Nilsson declined re-election. The AGM also resolved on a new warrant program and an ordinary dividend of SEK 1.30 per share and an extraordinary dividend of SEK 1.00 per share for 2023.
• On April 12, it was announced that Sleep Cycle has recruited Elisabeth Hedman as new CFO after the current CFO Per Andersson wished to continue his career outside Sleep Cycle. Elisabeth took up her position on June 1.

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD

No significant events took place after the end of the period.

GROUP KEY PERFORMACNE INDICATORS

	Apr - Jun		Jan - Jun	Jan - Dec
tSEK	2024	2023*	2024	2023*	2023
Net sales	65,442	57,952	128,899	114,114	236,146
Net sales growth (%)	12.9%	11.0%	13.0%	11.9%	11.4%
Currency-adjusted net sales growth (%)	10.5%	1.1%	10.8%	2.0%	3.1%
Operating profit/loss	20,964	12,732	34,807	23,646	56,606
Operating margin (%)	32.0%	22.0%	27.0%	20.7%	24.0%
Items affecting comparability	-	-4,533	-5,756	-4,831	-4,831
Adjusted operating profit/loss	20,964	17,265	40,563	28,477	61,437
Adjusted operating margin (%)	32.0%	29.8%	31.5%	25.0%	26.0%
Profit/loss for the period	16,960	10,311	28,485	19,244	46,142
Operational key performance indicators
Total subscriptions (Thousands)	898	877	898	877	893
ARPU (SEK)	282	263	279	256	262
Average number of employees (#)	30	50	34	49	45

* Adjusted to reflect correction of VAT liability. See more under the section Financial overview.

For definitions, justifications, and deductions see page 16.

Statement by the CEO

LAYING THE FOUNDATION FOR CONTINUED SUSTAINABLE AND PROFITABLE GROWTH

We close the second quarter with continued revenue growth of 13 percent and an operating margin of 32 percent. Furthermore, we have made organizational progress and with the recruitment of Elisabeth Hedman, CFO & Head of IR, and Petter Höglander, CPO, the management team is complete. Our focus is now on increasing growth, and my expectation is that we will see results from the new strategy towards the end of 2024.

REVENUE GROWTH AND INCREASED OPERATING PROFIT

We show continued revenue growth, with net sales of tSEK 65,487 in the second quarter. This is an increase of 3 percent from the first quarter and an increase of 13 percent from the previous year. The growth comes from the increase in the number of subscribers in recent months, but also from the fact that we have managed to grow our existing partnerships. Our operating profit for the quarter amounted to tSEK 20,964 and our operating margin was 32 percent. The higher margin is a result of our focus on cost efficiency and something that enables us to scale up when the opportunity arises. We continue to see that our annual operating margin will be around 25 percent.

A GROWING USER BASE

Our organic customer growth continues to be around 80 percent, which is a strong acknowledgement of the viral impact our product has. We saw an increase in the number of subscribers in the second quarter, from 893,000 to 898,000 subscribers. One year ago, we had 877,000 subscribers. This shows that our focus on the core product has started to produce results. Consumer subscription services generally have a high customer churn rate, but our total user base continues to grow. For me, it shows that we have a product with a strong market relevance.

GROWTH AREAS

Sleep Cycle is not only a personal health app, it is also a source of large volumes of anonymized and aggregated sleep data. We see potential in the amount of anonymized data we have, as well as the technology we own. As part of our strategic initiatives, we have now started to explore that potential. This is an area of our work that will intensify in the second half of the year and something I believe in very much. Another important strategic initiative to achieve the

expected growth is our focus on partnerships. Although the development of these partnerships takes time, I am optimistic about the progress we are making. It is clear that our global presence, our data, and our technology are of interest to the wider world.

NEW ORGANISATION IN PLACE

With the recruitment of Elisabeth Hedman and Petter Höglander, the management team is now complete, and I see that our collective expertise makes us well equipped for Sleep Cycle's next phase. Within our product organization, we have now divided ourselves according to our strategic initiatives and have begun to establish new cross-functional ways of working to ensure our efficiency and better reflect the customer journey. We have a strong team in place to continue our growth journey and as we now enter the third quarter, we have a clear idea of our priorities and what we need to achieve in the periods ahead.

I remain dedicated to driving growth, improving efficiency, and delivering more value to all our stakeholders.

Thank you for your continued support and belief in our vision!

Erik Jivmark, CEO

Product offering

Sleep Cycle is a leader in the development of AI-based sleep analysis. With more than two million users in more than 150 countries, Sleep Cycle is one of the most widely used sleep services in the world.

HEALTH AS BUSINESS MODEL

Our business is based on a subscription-based business model that creates predictability and a strong cash flow through advance payments and recurring revenues. Because we offer an appreciated product built on many years of development, and where customer influx is largely organic, our customer acquisition costs are low, resulting in attractive profitability. Combined with the fact that the cost of each new user is very low, our business is fully scalable.

TECHNOLOGY AND USER EXPERIENCE

AI and machine learning have revolutionized our ability to manage large amounts of data and extract valuable information. The application of advanced algorithms and techniques allows us to extract patterns and contexts that were previously unknown and inaccessible.

Sleep Cycle analyzes audio that, using a database of more than two billion nights, gives users individual insights, advice, and recommendations about their sleep. The fact that the analysis is sound-based also makes it possible to capture

snoring, coughing, tooth grinding, and other sounds that disrupt sleep and can provide additional health insights in a broader perspective.

FUTURE OFFERS

The future of sleep optimization offers expansive opportunities in both product development and accessibility of our services on more platforms and in new channels. With a nearly unrivaled volume of sleep data, patented sleep analysis, and a large user base, we are in a very strong position to develop new and innovative services for sleep analysis. Through continuous product development, Sleep Cycle continues to add new features for analysis of sleep, snoring, sleep hygiene, and coaching tools to help our users achieve better health. Future plans also include bringing out functions for optimizing health, sleep and well-being as well as functions to detect clinical sleep problems such as insomnia and sleep apnea.

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Strategy

GROWTH THROUGH INNOVATION

Sleep Cycle's driving force is to improve global health by helping people sleep better. Our product – with more than two million users across 150 countries – is a tremendous vehicle for this mission. We've exhibited consistent growth over time, but we're still convinced that there's more untapped potential. Against this backdrop, we have crafted a comprehensive new strategy with a singular focus: increased profitable growth.

STRUCTURAL TRENDS AND PROFITABILITY

Several structural trends are driving growth in the sleeptracking applications market: an intensified consumer emphasis on health, the acknowledgement of sleep's role in overall wellness, consumer empowerment within the health space, and the rise of recurring revenue models through subscriptions. Sleep Cycle's innovative AI audio analysis and powerful platform position us perfectly at the intersection of these movements by satisfying the bolder health and lifestyle aspirations of consumers worldwide.

GEARING UP FOR GROWTH

Our strategy reveals a bold target: doubling revenue in the medium term, while aspiring to an annual EBIT margin in the neighborhood of 25 percent. With a robust core-business foundation and a team replete with expertise, we're confident that our ambitious goals are attainable.

KEY STRATEGIC PILLARS

USER ENGAGEMENT

DATA AND PLATFORM OPTIMIZATION

USER ACQUISITION

With firm roots in organic growth, Sleep Cycle benefits from peer recommendations and natural market interest. We aim to enhance this organic viral growth by increasing visibility and brand presence in earned media outlets. Pushing the envelope, we focus on amplifying PR activities, building the brand, revitalizing partnerships, refining our pricing tactics, and bolstering UX alongside product innovation.

USER ENGAGEMENT

Given our subscription model, retention rates are paramount. Recognizing that engaged users stick around, we're steering towards upping user value through tech and product enhancement – effectively a magnet for user engagement. Our tech evolution and creative feature set aim to polish data precision, heightening user reliance. We're introducing elements such as personalized dashboards and strategic notifications to aid users in forming health-promoting routines ensuring consistently better sleep.

DATA AND PLATFORM OPTIMIZATION

Sleep Cycle is not merely a personal health app; it's a repository for vast volumes of anonymized, collective sleep health data. This positions us to iterate ceaselessly, enhancing the user experience precisely and substantially. Our feature Cough Radar exemplifies our capability to transfer data into user value and accessing new market segments. Our strategy looks to further leverage such data via new monetization avenues and SDK opportunities, ensuring continued growth and innovation.

FINANCIAL OVERVIEW

As all significant operations in the Group are conducted in the Parent Company, the comments below refer to both the Parent Company and the Group. For profit and cash flow, comparative figures refer to the corresponding period for prior year. For financial position, comparative figures refer to the balance sheet item as of December 31, 2023.

SECOND QUARTER APRIL – JUNE 2024

SALES AND EARNINGS

The Group's net sales during the second quarter totaled tSEK 65,442 (57,952), an increase of 12.9% (11.0%) compared with prior year. The increase in turnover is mainly explained by higher ARPU and greater number of subscribers. Currencyadjusted net sales growth amounted to 10.5% (1.1%). Average revenue per subscription (ARPU) increased by 7.2% to SEK 282 (263), where price accounted for SEK 13 of the increase and exchange rate fluctuations SEK 6. The number of paying users totaled 898k (877k). The increase in the number of paying users is explained by continued positive customer acquisition, both organically and from our partnerships.

Operating profit totaled tSEK 20,964 (12,732) and the margin to 32.0% (22.0%) in the second quarter. The improved margin is a result of revenue growth and lower costs after the previous quarter's reorganization.

The second quarter of 2024 has not been affected by costs affecting comparability. The second quarter of 2023 was affected by costs affecting comparability of tSEK 4,533 related to a cost optimization program.

Net financial items for the quarter totaled tSEK 426 (274) and taxes on profit for the quarter totaled tSEK -4,429 (-2,695). Profit for the quarter totaled tSEK 16,960 (10,311). Earnings per share before and after dilution amounted to SEK 0.84 (0.51).

CASH FLOW AND FINANCIAL POSITION

Cash flow from operating activities in the second quarter amounted to tSEK 16,221 (19,049). The change is mainly due to the improved operating profit.

Cash flow from investing activities amounted to SEK -912 related to capitalization of development expenses. In the same period last year, the figure amounted to tSEK -2,593, which includes acquisitions of tangible fixed assets.

Cash flow from financing activities in the quarter amounted to tSEK -45,374 (-142,936) related to dividends paid, amortization of lease liabilities and option premiums in 2024. The change is mainly explained by higher dividends in 2023.

Cash flow for the quarter totaled tSEK -30,065 (-126,480). The group's liquid funds at the end of the period totaled tSEK 120,443 (104,716).

Consolidated equity totaled tSEK 45,146 as of June 30. Opening balance on January 1 was tSEK 60,998.

CORRECTION OF THE SECOND QUARTER 2023

A review in the fourth quarter of 2023 revealed that Sleep Cycle is liable for VAT in Japan, as this is not handled by Apple and Google, and in Switzerland, as this is not handled by Google in the specific market. The error has been corrected in 2023 by retroactively recalculating all affected items. Net sales for the second quarter of 2023 decreased by tSEK 282. Other operating income increased by tSEK 279. Tax on profit for the period decreased by tSEK 1 and total income for the period decreased by tSEK 2. Current tax receivables increased by tSEK 1,191. Other liabilities increased by tSEK 6,237, and deferred income decreased by tSEK 581. Equity as of June 30, 2023 decreased by tSEK 4,465. As of December 31, 2023, total other current liabilities of SEK 7.1 million have been recorded for VAT on sales for the years 2018 to 2023. Payment was made in the first quarter of 2024. As of 2024, Sleep Cycle handles VAT in Japan and Switzerland. A complete description of the correction can be found in the Annual Report for 2023.

PERIOD JANUARY – JUNE 2024

Changes in net sales, profit, cash flow and financial position for the six-month period of 2024 compared to the previous year are largely explained by the same reasons as for the second quarter. Development over a 6-month period is indicated below, with comments in cases where there are causes for development other than for the second quarter.

SALES AND EARNINGS

The Group's net sales for the period totaled tSEK 128,899 (114,114), which is an increase of 13.0% (11.9%) compared with prior year. Currency-adjusted net sales growth amounted to 10.8% (2.0%). Average revenue per subscription (ARPU) increased by 9.0% to SEK 279 (256) where price accounted for SEK 18 of the increase and exchange rate fluctuations SEK 5. The number of paying users totaled 898k (877k).

Operating profit totaled tSEK 34,807 (23,646) and the margin was 27.0% (20.7%) for the period.

Adjusted operating profit totaled tSEK 40,563 (28,477) and the adjusted margin was 31.5% (25.0%). The first quarter of 2024 was affected by costs affecting comparability related to the reorganization and consolidation of operations to the head office in Gothenburg. The item other external costs includes costs affecting comparability of tSEK 794. Also included are personnel costs of tSEK 4,962. The second quarter of 2023 was affected by costs affecting comparability of tSEK 4,533 related to streamlining initiatives.

Net financial items for the period totaled tSEK 1,113 (637) and taxes on the profit for the period totaled tSEK -7,435 (-5,038). Profit for the period totaled tSEK 28,485 (19,244). Earnings per share before and after dilution amounted to SEK 1.40 (0.95).

CASH FLOW AND FINANCIAL POSITION

Cash flow from operations for the period amounted to tSEK 34,494 (21,029). The change is explained by better operating profit as well as payments from Apple that do not follow monthly payments and had a positive impact on working capital in 2024.

Cash flow from investment activities amounted to tSEK -1,097 (-5,606) related to capitalization of development expenses and acquisitions of tangible fixed assets. The change is explained by lower capitalization of development expenses in 2024

and investments in connection with the move to a new office in 2023.

Cash flow from financing activities amounted to TSEK -46,401 (-143,570) during the period, mainly related to dividend payments.

Cash flow for the period amounted to TSEK -13,004 (-128,147). The group's liquid funds at the end of the period totaled tSEK 120,443 (104,716).

Consolidated equity totaled tSEK 45,146 as of June 30. Opening balance on January 1 was tSEK 60,998.

CORRECTION OF THE PERIOD 2023

A review in the fourth quarter of 2023 revealed that Sleep Cycle is liable for VAT in Japan, as this is not handled by Apple and Google, and in Switzerland, as this is not handled by Google in the specific market. The error has been corrected in 2023 by retroactively recalculating all affected items. Net sales for 2023 decreased by tSEK 566. Other operating income increased by tSEK 388. Tax on profit for the period decreased by tSEK 37 and total income for the period decreased by tSEK 141. Current tax receivables increased by tSEK 1,191. Other liabilities increased by tSEK 6,237, and deferred income decreased by tSEK 581. Equity as of June 30, 2023 decreased by tSEK 4,465. As of December 31, 2023, total other current liabilities of SEK 7.1 million have been recorded for VAT on sales for the years 2018 to 2023. Payment was made in the first quarter of 2024. As of 2024, Sleep Cycle handles VAT in Japan and Switzerland. A complete description of the correction can be found in the Annual Report for 2023.

OTHER INFORMATION

EMPLOYEES

The average number of employees in the Group for the quarter from April to June 2024 was 30 (50) and for the six months from January to June 2024 was 34 (49). The calculation of the average number of employees has been adjusted to reflect the reorganization and closure of the Stockholm office, where the cost was charged to the first quarter of 2024. The number of employees at the end of the period was 30.

INFORMATION ON RISKS AND UNCERTAINTIES

The group's over-arching risk management aims to minimize negative effects on profit and position. Significant risks and uncertainties are described in the annual report for 2023. No significant events have occurred during the period that affect or change the descriptions of the Group's risks and their management.

PARENT COMPANY

The Group's operations are essentially conducted in the parent company, which is why reference is made to the information above for the Group.

RELATED PARTY TRANSACTIONS

There have been no related-party transactions aside from transactions with senior executives in their capacity as such.

UPCOMING REPORTING DATES

• Interim report Jul-Sep 2024 on October 24, 2024

OTHER INFORMATION

This report has not been reviewed by the Company's auditors.

A presentation of Sleep Cycle's interim report for April-June 2024 for shareholders, media, and other stakeholders will be held on July 26 at 9:30 a.m. Participants will be able to follow the presentation via a webcast.

THE SHARE

The company's share has been listed on Nasdaq Stockholm under the ticker SLEEP since June 8, 2021. Share capital on the balance sheet date totaled tSEK 563.

OUTSTANDING OPTION PROGRAM

	Number of	Corresponding number of	Percentage of total number of		Redemption
Option program	options	shares	shares	Exercise price	period
TO 2021 series 1	187,910	231,129	1.1%	77.14	2024
TO 2021 series 2	3,449	4,242	0.0%	77.14	2025
TO 2022	53,700	54,774	0.3%	69.58	2025
CEO LTIP	340,909	419,318	2.1%	196,87	2026
TO 2023	100,000	100,000	0.5%	52.60	2027
TO 2024	750,000	750,000	3.7%	59.20	2027
Total	1,435,968	1,559,464	7.7%

MAIN SHAREHOLDERS IN SLEEP CYCLE AB (PUBL) AS OF JUNE 30, 2024

Owner	Number of shares	Votes and capital
Maciek Drejak through company	8,707,984	42.9%
Pierre Siri through company	4,776,686	23.6%
Nordnet Pensionsförsäkring	1,112,525	5.5%
Avanza Pension	1,033,772	5.1%
Lancelot Avalon	585,000	2.9%
Petter Wallin	508,128	2.5%
Cancerfonden	339,993	1.7%
Cicero Sustainable Mix	199,446	1.0%
Oliver Molse	150,000	0.7%
DNB Asset Management SA	136,130	0.7%
Other	2,727,899	13.5%
Total	20,277,563	100%

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Apr - Jun		Jan - Jun		Jan - Dec
tSEK	Note	2024	2023*	2024	2023*	2023
OPERATING INCOME
Net sales	4	65,442	57,952	128,899	114,114	236,146
Other operating income		45	330	245	455	864
OPERATING EXPENSES
Capitalized work for own account		164	569	164	1,029	1,105
Platform fees		-14,444	-13,034	-28,750	-25,676	-53,641
Other external expenses		-13,557	-12,344	-28,530	-29,172	-53,127
Personnel expenses		-14,489	-18,319	-32,824	-32,970	-59,507
Depreciation and impairment of tangible and intangible assets		-2 ,127	-2 ,286	-4 ,251	-3 ,903	-14,858
Other operating expenses		-70	-135	-147	-230	-376
Operating profit/loss		20,964	12,732	34,807	23,646	56,606
FINANCIAL ITEMS
Financial income		654	479	1,513	872	2,793
Financial expenses		-228	-205	-400	-235	-1,207
Profit before tax		21,390	13,006	35,920	24,282	58,192
Tax on profit for the period		-4,429	-2 ,695	-7 ,435	-5,038	-12,050
Profit for the period attributable to the parent company's shareholders		16,960	10,311	28,485	19,244	46,142
Other comprehensive income		-	-	-	-	-
Comprehensive income for the period attributable to the parent company's shareholders		16,960	10,311	28,485	19,244	46,142
Earnings per share before dilution, SEK		0.84	0.51	1.40	0.95	2.28
Earnings per share after dilution, SEK		0.84	0.51	1.40	0.95	2.28
Average number of shares outstanding for the period before dilution		20,277,563	20,277,563	20,277,563	20,277,563	20,277,563
Average number of shares outstanding for the period after dilution		20,277,563	20,277,563	20,277,563	20,277,563	20,277,563

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

tSEK Note	06/30/2024	06/30/2023*	12/31/2023
ASSETS
INTANGIBLE FIXED ASSETS
Capitalized expenses for development work	3,724	11,669	4,474
Patent	-	-	-
Total intangible fixed assets	3,724	11,669	4,474
TANGIBLE FIXED ASSETS
Right-of-use assets	13,432	17,777	15,605
Cost of improvement on other's property	651	825	738
Equipment and computers	1,559	1,997	1,703
Total tangible fixed assets	15,642	20,599	18,045
FINANCIAL ASSETS
Other long-term receivables	435	411	411
Total financial assets	435	411	411
DEFERRED TAX
Deferred prepaid tax	105	33	83
Total deferred tax	105	33	83
CURRENT ASSETS
Accounts receivable	32,190	30,276	38,224
Other receivables	784	755	2,602
Current tax assets	3,793	4,214	2,148
Prepaid expenses and accrued income	34,464	31,768	31,086
Cash and cash equivalents	120,443	104,716	133,471
Total current assets	191,674	171,727	207,531
TOTAL ASSETS	211,580	204,440	230,545

EQUITY AND LIABILITIES

EQUITY
Share capital	563	563	563
Other contributed capital	2,590	-	288
Retained earnings, including profit for the year	41,993	33,249	60,147
Total equity attributable to the parent company's shareholders	45,146	33,812	60,998
LONG-TERM LIABILITIES
Leasing liabilities	9,585	13,854	11,743
Total long-term liabilities	9,585	13,854	11,743
CURRENT LIABILITIES
Leasing liabilities	4,268	4,084	4,175
Accounts payable	14,519	11,405	13,908
Other liabilities	4,436	9,926	10,322
Accrued expenses and deferred income	133,625	131,358	129,399
Total current liabilities	156,848	156,774	157,804
TOTAL EQUITY AND LIABILITIES	211,580	204,440	230,545

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Attributable to the parent company's shareholders
tSEK	06/30/2024	06/30/2023*	12/31/2023
Opening balance according to adopted balance sheet	60,998	160,834	160,834
Correction of errors (after tax)	-	-4,324	-4,324
Adjusted opening balance	60,998	156,510	156,510
Comprehensive income for the period	28,485	19,244	46,142
Dividend	-46,638	-141,943	-141,943
Option premiums	2,302	-	288
Closing balance	45,146	33,812	60,998

* Adjusted to reflect correction of VAT liability. See more under the section Financial overview.

CONSOLIDATED CASH FLOW STATEMENT

		Apr - Jun		Jan - Jun
tSEK Note	2024	2023	2024	2023	2023
CASH FLOW FROM OPERATING ACTIVITIES
Operating profit/loss	20,964	12,732	34,807	23,646	56,606
Adjustments for items not included in cash flow:
Depreciation and impairment	2,127	2,286	4,251	3,903	14,858
Interest received	654	479	1,513	872	2,793
Interest paid	-228	-205	-400	-235	-1,207
Tax paid	-3,920	-3,032	-9,102	-6 ,644	-11,639
Cash flow from operating activities before changes in working capital	19,596	12,260	31,069	21,542	61,411
CHANGE IN WORKING CAPITAL
Change in operating receivables	12,803	11,806	4,474	-11,383	-20,497
Change in operating liabilities	-16,178	-5,017	-1,049	10,871	11,809
Cash flow from operating activities	16,221	19,049	34,494	21,029	52,723
INVESTMENT ACTIVITIES
Capitalization of development expenses	-912	-1,626	-912	-3,906	5,086
Acquisition of tangible fixed assets	-	-967	-185	-1,699	-1,727
Cash flow from investment activities	-912	-2,593	-1,097	-5,606	-6,813
FINANCING ACTIVITIES
Repayment of leasing liabilities	-1,038	-993	-2,065	-1,627	-3,647
Option premiums	2,302	-	2,302	-	288
Dividend	-46,638	-141,943	-46,638	-141,943	-141,943
Cash flow from financing activities	-45,374	-142,936	-46,401	-143,570	-145,302
Cash flow for the period	-30,065	-126,480	-13,004	-128,147	-99,392
Liquid funds at the beginning of the period	150,532	231,196	133,471	232,862	232,862
Reclassification of cash and cash equivalents	-24	-	-24	-	-
Liquid funds at the end of the period	120,443	104,716	120,443	104,716	133,471

PARENT COMPANY INCOME STATEMENT

		Apr - Jun	Jan - Jun		Jan - Dec
tSEK Note	2024	2023*	2024	2023*	2023
OPERATING INCOME
Net sales	65,442	57,952	128,899	114,114	236,146
Other operating income	45	330	245	455	864
Capitalized work for own account	164	569	164	1,029	1,105
OPERATING EXPENSES
Platform fees	-14,444	-13,034	-28,750	-25,676	-53,641
Other external expenses	-14,754	-13,542	-30,918	-31,028	-57,378
Personnel expenses	-14,489	-18,319	-32,824	-32,970	-59,507
Depreciation and impairment of tangible and intangible assets	-1,041	-1,200	-2,079	-2,178	-10,961
Other operating expenses	-70	-135	-147	-230	-376
Operating profit/loss	20,852	12,620	34,591	23,516	56,252
PROFIT FROM FINANCIAL ITEMS
Interest income and similar income	654	479	1,513	872	2,793
Interest expenses and similar expenses	-68	-	-68	-	-594
Profit before tax	21,438	13,099	36,036	24,388	58,451
Tax on profit for the period	-4,439	-2,714	-7,458	-5,058	-12,101
Profit/loss for the period	16,999	10,385	28,579	19,330	46,350
Comprehensive income for the period	16,999	10,385	28,579	19,330	46,350

In the parent company, there are no items that are reported in other comprehensive income, which is why comprehensive income for the period is consistent with profit for the period.

PARENT COMPANY BALANCE SHEET

tSEK	Note	06/30/2024	06/30/2023*	12/31/2023
ASSETS
INTANGIBLE FIXED ASSETS
Capitalized expenses for development work		3,724	11,669	4,474
Patent		-	-	-
Total intangible fixed assets		3,724	11,669	4,474
TANGIBLE FIXED ASSETS
Cost of improvement on other's property		651	825	738
Equipment and computers		1,559	1,997	1,703
Total tangible fixed assets		2,210	2,822	2,441
FINANCIAL ASSETS
Participations in group companies		50	50	50
Deferred prepaid tax		18	-	18
Other long-term receivables		435	411	411
Total financial assets		503	461	479
Total fixed assets		6,437	14,953	7,395
CURRENT RECEIVABLES
Accounts receivable		32,190	30,276	38,224
Other receivables		784	755	2,602
Current tax assets		3,793	4,214	2,148
Prepaid expenses and accrued income		34,464	31,768	31,086
Total current receivables		71,231	67,012	74,061
SHORT-TERM INVESTMENTS
Other short-term investments		80,000	75,000	-
Total short-term investments		80,000	75,000	-
Cash and bank balances		40,344	29,607	133,363
Total current assets		191,575	171,619	207,423
TOTAL ASSETS		198,012	186,571	214,818
EQUITY AND LIABILITIES
RESTRICTED EQUITY
Share capital		563	563	563
Fund for development expenditures		3,724	11,669	4,474
Total restricted equity		4,287	12,232	5,038
UNRESTRICTED EQUITY
Share premium fund		2,590	-	288
Retained earnings		9,975	2,319	9,514
Profit/loss for the period		28,579	19,330	46,350
Total unrestricted equity		41,144	21,649	56,151
Total equity		45,432	33,881	61,189
CURRENT LIABILITIES
Accounts payable		14,519	11,405	13,908
Other liabilities		4,436	9,926	10,322
Accrued expenses and deferred income		133,625	131,358	129,399
Total current liabilities		152,580	152,690	153,629
TOTAL EQUITY AND LIABILITIES		198,012	186,571	214,818

NOTES

Note 1 General information

The address of the company's registered office is Drakegatan 10, 412 50 Gothenburg, Sweden.

Sleep Cycle is developing of one of the world's most widely used sleep platforms. Sleep Cycle's sleep solutions help users fall asleep more easily, measure sleep habits and improve sleep and with the extensive sleep database contribute to improved sleep habits and increased sleep awareness worldwide. The business is essentially conducted in the parent company. The parent company's holding of shares in group companies as of June 30, 2024 consists of the wholly owned subsidiary Sleep Cycle Sverige AB (559278–9688).

Sleep Cycle's interim report for January-June 2024 was approved for publication on July 26 per Board decision on July 25, 2024.

Note 2 Accounting principles

The consolidated financial statement for Sleep Cycle AB has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, the Swedish Annual Accounts Act (ÅRL) and the Swedish Financial Reporting Board's RFR 1 "Supplementary

accounting rules for groups". The parent company's financial statements are prepared in accordance with the Annual Accounts Act and RFR 2, "Accounting for Legal Entities." This interim report has been prepared in accordance with IAS 34 "Interim Financial Reporting." Disclosures in accordance with IAS 34 are provided in notes as well as elsewhere in the interim report. The accounting principles and calculation methods applied are in accordance with those described in the annual report for 2023. New standards and interpretations that came into force on January 1, 2024 have not had any effect on the group's or the parent company's financial reports for the interim period.

Note 3 Segment information

Sleep Cycle's CEO, as the most senior executive decision-maker, monitors and analyses profit and loss and the financial position of the group in its entirety. The CEO does not track results at a level lower than the Group as a whole. The CEO thereby also decides on allocation of resources, and makes strategic decisions based on the Group as a whole. Based on the above analysis, which is itself based on IFRS 8, it is concluded that the Sleep Cycle group consists of a single reporting segment.

Note 4 Distribution of net sales

	Apr - Jun			Jan - Jun
tSEK	2024	2023	2024	2023	2023
Subscription income	63,181	57,826*	124,759	113,799*	234,948
Other income	2,261	126	4,139	316	1,198
Total	65,442	57,952	128,899	114,114	236,146

* Adjusted to reflect correction of VAT liability. See more under the section Financial overview.

Note 5 Financial instruments

tSEK	06/30/2024	06/30/2023	12/31/2023
FINANCIAL ASSETS VALUED AT AMORTIZED COST
Accounts receivable	32,190	30,276	38,224
Other receivables	1,219	1,167	3,013
Cash and cash equivalents	120,443	104,716	133,471
Total financial assets	153,852	136,158	174,708
FINANCIAL LIABILITIES VALUED AT AMORTIZED COST
Accounts payable	14,519	11,405	13,908
Other current liabilities	2,478	8,627*	10,560
Total financial liabilities	16,997	20,032	24,468

* Adjusted to reflect correction of VAT liability. See more under the section Financial overview.

Sleep Cycle does not hold any financial instruments that are valued and reported at fair value. For all financial assets and liabilities, the carrying amount is considered as above to be a reasonable approximation of fair value.

DEFINITIONS OF KEY PERFORMANCE INDICATORS AND CALCULATIONS

Sleep Cycle applies the guidelines for alternative key performance indicators issued by ESMA. This report presents certain financial key performance ratios, including alternative key performance indicators which are not defined under IFRS. The Company considers these key performance indicators an important complement, as they facilitate a better evaluation of the Company's financial trends. These financial indicators should not be assessed independently or considered substitutes for performance indicators calculated in accordance with IFRS. In addition, such key performance indicators, as defined by Sleep Cycle, should not be compared with other key performance indicators with similar names utilized by other companies. This is because the key performance indicators below are not always defined in the same way, and other companies may calculate them differently than Sleep Cycle.

KEY PERFORMANCE INDICATORS	DEFINITION	BACKGROUND OF THE USE OF THE KEY PERFORMANCE INDICATOR
Net sales growth	Change in net sales compared with the same period of prior year.	The measure shows the company's growth in net sales compared with the same period of prior year.
Currency-adjusted net sales growth	Defined as net sales for the year divided by net sales for the previous year translated at average exchange rates for the year.	Used to measure the company's underlying net sales growth adjusted for currency effects.
Operating profit/loss	Operating profit before interest and tax.	Operating profit is used to understand the company's earning capacity.
Operating margin	Operating profit as a percentage of the company's net sales.	Operating margin is an indication of the company's earning capacity in relation to net sales.
Items affecting comparability	Items of a non-recurring nature that are not part of normal business and therefore affect comparison between different periods. Refers to costs related to IPO in 2021, public cash offer in 2022, a cost optimization program in 2023, and reorganization in 2024.	The measure is used to understand the company's development and comparison between the years.
Adjusted operating profit/ loss	Operating profit adjusted for items affecting comparability.	Adjusted operating profit is used to understand the company's earning capacity adjusted for items affecting comparability.
Adjusted operating margin	Adjusted operating profit as a percentage of the company's net sales.	Adjusted operating margin is used to understand the company's earning capacity adjusted for items affecting comparability.
Total subscriptions	Total number of subscriptions at the end of the period (closing balance).	The measure indicates how many subscribers the company has at the end of the period.
ARPU	Average annual subscription revenue per subscriber during the period. Quarters and periods are annualized.	The measure indicates the company's subscription income per subscription on average during the period.

RECONCILIATION OF ALTERNATIVE KEY PERFORMANCE INDICATORS

The table below derives from the calculation of alternative key performance indicators not defined in accordance with IFRS or where the calculation is not shown in another table in this report.

NET SALES GROWTH AND CURRENCY-ADJUSTED NET SALES GROWTH

	Apr - Jun		Jan - Jun		Jan - Dec
tSEK	2024	2023*	2024	2023*	2023
Net sales previous period	57,952	52,188	114,114	101,959	212,034
Net sales current period	65,442	57,952	128,899	114,114	236,146
Net sales growth	12.9%	11.0%	13.0%	11.9%	11.4%
Currency-adjusted net sales previous period	59,223	57,321	116,335	111,878	229,045
Net sales current period	65,442	57,952	128,899	114,114	236,146
Currency-adjusted net sales growth	10.5%	1.1%	10.8%	2.0%	3.1%

OPERATING PROFIT AND OPERATING MARGIN

	Apr - Jun		Jan - Jun		Jan - Dec
tSEK	2024	2023*	2024	2023*	2023
Net sales	65,442	57,952	128,899	114,114	236,146
Other operating income	45	330	245	455	864
Capitalized work for own account	164	569	164	1,029	1,105
Platform fees	-14,444	-13,034	-28,750	-25,676	-53,641
Other external expenses	-13,557	-12,344	-28,530	-29,172	-53,127
Personnel expenses	-14,489	-18,319	-32,824	-32,970	-59,507
Depreciation and impairment of tangible and intangible assets	-2 ,127	-2 ,286	-4 ,251	-3 ,903	-14,858
Other operating expenses	-70	-135	-147	-230	-376
Operating profit/loss	20,964	12,732	34,807	23,646	56,606
Operating margin	32.0%	22.0%	27.0%	20.7%	24.0%

ADJUSTED OPERATING PROFIT AND ADJUSTED OPERATING MARGIN

	Apr - Jun		Jan - Jun		Jan - Dec
tSEK	2024	2023*	2024	2023*	2023
Operating profit/loss	20,964	12,732	34,807	23,646	56,606
ITEMS AFFECTING COMPARABILITY
Other external expenses	-	-83	-794	-381	-381
Personnel expenses	-	-4,450	-4,962	-4,450	-4,450
Total items affecting comparability	-	-4,533	-5,756	-4,831	-4,831
Adjusted operating profit/loss	20,964	17,265	40,563	28,477	61,437
Adjusted operating margin	32.0%	29.8%	31.5%	25.0%	26.0%

During the first quarter of 2024, a total of tSEK 5,756 has been adjusted for related to reorganization, of which tSEK 794 relates to other external costs and tSEK 4,962 relates to personnel costs. In the second quarter of 2023, tSEK 298 was adjusted related to the Board's evaluation of the cash offer in 2022. Furthermore, a total of tSEK 4,533 has been adjusted for in the second quarter of 2023 related to streamlining programs implemented in 2023, of which tSEK 83 relates to other external costs and tSEK 4,450 relates to personnel costs.

ARPU

	Apr - Jun		Jan - Jan		Jan - Dec
tSEK	2024	2023*	2024	2023*	2023
Subscription income	63,181	57,826	124,759	113,799	234,948
Number of subscriptions previous period (thousands)	893	881	893	904	904
Number of subscriptions current period (thousands)	898	877	898	877	893
ARPU (SEK)	282	263	279	256	262

SUBMISSION OF INTERIM REPORT JAN – JUN 2024

The Board of Directors and CEO assure that the interim report provides a fair and accurate overview of the operations, financial position and earnings of the parent company and group and describes significant risks and uncertainties that the parent company and the companies included in the group face.

Gothenburg, July 25, 2024

Anne Broeng Chairman of the Board

Maciej Drejak Board member

Hans Skruvfors Board member

Mathias Høyer Board member

Erik Jivmark CEO

SLEEP CYCLE INTERIM REPORT APRIL - JUNE 2024 18

Contact

For further information, please contact:

ERIK JIVMARK, CEO Tel: +46 72-159 20 23 email: erik.jivmark@sleepcycle.com

ELISABETH HEDMAN, CFO AND HEAD OF INVESTOR RELATIONS Phone: +46 76-282 89 58 email: elisabeth.hedman@sleepcycle.com

JONNA GRENFELDT, PR AND COMMUNICATION Tel: +46 70-735 75 39 email: jonna.grenfeldt@sleepcycle.com

SLEEP CYCLE AB Business reg. No. 556614-7368 Drakegatan 10, 412 50 Gothenburg, Sweden www.sleepcycle.com