Owlet, Inc. (NYSE:OWLT) Q2 2025 Earnings Call Transcript

Owlet, Inc. (NYSE:OWLT) Q2 2025 Earnings Call Transcript August 8, 2025

Operator: Good afternoon. Thank you for attending today’s Owlet Q2 ’25 Earnings Conference Call. My name is Tamia, and I will be your moderator for today’s call. [Operator Instructions] I would now like to pass the conference over to your host, Jay Gentzkow, Investor Relations. You may proceed.

Jay Gentzkow: Good afternoon, everyone, and thank you for joining us. Earlier today, Owlet released financial results for the second quarter ended June 30, 2025. I’m pleased to be joined today by Kurt Workman, Owlet’s CEO and Co-Founder; President, Jonathan Harris; and CFO, Amanda Twede Crawford. Before we begin, please note that our financial results, press release and presentation slides referred to on this call are available under the Events and Presentations section of our Investor Relations website at investors.owletcare.com. This call is also being webcast live with a link at the same website. The webcast and accompanying slides will be available for replay for 12 months following this call. The content of today’s call is the property of Owlet.

It cannot be reproduced or transcribed without our prior consent. Before we begin, I’d like to refer you to our safe harbor disclaimer on Slide 3 of the presentation. Today’s discussion will contain forward-looking statements based on the company’s current views and expectations as of today’s date. These statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, but are not limited to, those described in our most recent filings with the SEC and in the Risk Factors section of our annual report on Form 10-K as updated in the company’s quarterly reports on Form 10-Q and other filings with the SEC.

Please note that the company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. With that, it’s my pleasure to turn the call over to Kurt.

Kurt Workman: Thank you very much, Jay. Hello, everyone, and thank you for joining our second quarter 2025 financial results call today. I’m proud to report Q2 was another exceptional quarter for Owlet. Revenue exceeded our expectations at $26.1 million in the quarter, growing 26% year-over-year, contributing to our largest first half revenue performance in company history. Strong topline growth led to gross margins expanding year-over-year for a ninth consecutive quarter, and we recorded our fifth consecutive quarter of adjusted EBITDA profitability. We’ve continued to make great progress throughout the first half of 2025 and are focused on driving further gains through our strategic focus areas for growth. We’re confident in our continued momentum into the back half of the year and therefore, are again raising full year guidance.

Underpinning our performance was, again, the unmatched dedication of the Owlet team and our passionate community. We are building on Owlet’s transformation as a comprehensive pediatric health platform, and we believe we are just scratching the surface of Owlet’s potential. I’m extremely proud of our execution to deliver on this opportunity and our mission. Before we jump into the second quarter results, I want to take a moment to highlight an exciting and important leadership update. As of October 1, I’ll be transitioning out of the CEO role and into a new position as Executive Chairman of the Board. This move will allow me to focus more deeply on the things I’m most passionate about, expanding access to Owlet’s mission and helping guide the company’s long-term strategy as we continue to grow.

Starting October 1, Jonathan will become the new CEO of Owlet. This is a meaningful moment for Owlet and one I’m incredibly excited about. I founded Owlet over 12 years ago with a simple but powerful belief that every baby deserves access to medical-grade health monitors at home. Since then, we’ve created and led this category, launching the first Smart Sock in 2016 and establishing it as the gold standard with the first and only FDA-cleared health monitor available to parents in the U.S. and abroad. Now we’re closer than ever to making that vision a reality. In my new role, in addition to overseeing the long-term strategy and Board governance, I’ll be focused on driving broader access to our technology through affordability, insurance coverage and building on the clinical evidence needed to make health monitors part of the standard of care for families everywhere.

This change allows me to focus my time and energy on where I believe I can make the biggest impact for parents and for the company. We’ve built incredible momentum, and I truly believe this next chapter will accelerate it even further. Owlet could not have a better CEO going forward. Jonathan is an extremely accomplished executive with a proven ability to consistently deliver value to a full range of stakeholders. Jonathan’s leadership and commitment to Owlet’s mission has already made an incredible impact on the company over the last 2 years, with him leading our global go-to-market directly following FDA and CE Mark clearances, spearheading international growth and distribution, standing up our Owlet360 subscription offering and driving a more focused streamlined organization.

It’s without question that the momentum and performance we’ve delivered in recent quarters are a direct result of Jonathan’s impact on the business and his valuable leadership. Jonathan has been pivotal in the transformation of Owlet as a comprehensive pediatric health platform, and he is ideally suited to lead as Owlet’s CEO through this next phase of growth. I’m grateful to our Board for their support in this planned transition and excited to assume the Executive Chairman role and continue to actively support and collaborate with Jonathan as well. It’s been a pleasure and a privilege to be the CEO of Owlet. With that, I’ll pass it on to Owlet’s new CEO, Jonathan Harris.

Jonathan Harris: Thanks, Kurt. I could not be more thrilled at this opportunity to lead Owlet in this next chapter. On behalf of Owlet’s Board and all of the Owleez, we’d like to thank Kurt for his passion and dedication to this company. Simply put, there would not be an Owlet without him. He has been the driving force in our mission to bring safety and peace of mind to new parents, and we are fortunate that he will continue to play a critical role as Executive Chairman. We are at an exciting time with the significant opportunity to deliver on the amazing potential of this business to be the leading pediatric health platform in the world, and I’m honored to help drive this mission forward as Owlet’s CEO. Thank you. Okay. Now on to the financial results from the second quarter.

Looking at Slide 5, it was another outstanding quarter for Owlet, exceeding our expectations across all metrics. Revenue was $26.1 million in Q2, up 25.9% compared to the second quarter 2024. Gross margins expanded 180 basis points to 51.3%, representing our ninth consecutive quarter of year-over-year gross margin expansion. Gross margins included the impact from tariffs in Q2, which Amanda will go into in more detail. Adjusted EBITDA was $0.3 million, our fifth consecutive quarter of adjusted EBITDA profitability. Finally, we are raising our full year 2025 guidance to reflect both our outperformance in the second quarter and the confidence in our outlook. Amanda will provide more detail on our updated guidance. We are excited to maintain the momentum of our business into the back half of the year.

Turning to our strategic focus areas for growth. We continue to make really strong progress on driving continued global adoption of Dream Sock, transitioning Owlet into a service through the Owlet360 subscription, supporting parents from infancy into the toddler years and increasing our customer lifetime value and expanding health care channels to offer an insurance reimbursed monitor. Starting with our core business, Dream Sock, both domestic and international adoption continues to be very exciting. In the U.S., Dream Sock demand remains strong. Q2 saw another quarter of domestic sell-through growth of 37% versus Q2 2024. Sell-through strength was driven by ongoing demand for Dream Sock as well as solid execution by the sales and marketing teams.

We also continue to see positive trends in our registry data, a valuable leading indicator for our core business. Q2 showed a 54% year-over- year increase in total Dream Sock additions to the registries we track, which includes Amazon, Babylist and Target. We also continue to maintain our market leadership in the baby monitor category. In the quarter, Owlet again increased our share of total dollars spent on baby monitors versus prior year, based on consumer research firms, Circana and our own data. In addition, the data is showing our overall category is growing within the 12-month trailing time period, supporting the consumer spending on baby monitors is the highest it’s been in 5 years. We also continue to be a company with innovation at our core as we continue to invest to maintain our lead in the pediatric health space.

Brand health also remains in a very good position with Dream Sock s NPS over 73 to end the second quarter. Owlet also had our most successful Amazon event in company history at the Prime Day in July. The record sales of both our Dream Sock and Duo products with total sell-through units up 72% versus prior year, resulted in Owlet ranking as the #1 seller in the baby monitor and baby safety categories. And finally, Owlet was recently recognized with 2 awards for innovation in baby care. Dream Sock took home Baby Monitor Product of the Year in the 2025 Baby Innovation Awards. Secondly, we earned top honors at the 2025 Mother&Baby Awards, winning Silver for Best Baby Monitor and Bronze for overall Innovation of the Year with Mother&Baby naming it a game-changing device.

We’re proud to be recognized as an innovation leader in our efforts to advance health and safety in the pediatric industry. Turning to international. We continue to execute on our addressable global market opportunities. In Q2 2025, international revenue was $1.8 million versus $4.8 million in Q2 2024. It is important to note that revenue was down compared to last year given the timing shift of open orders to Q3. However, with Q2 sell-through up 33% year-over-year, we’re confident in the continued growth in the international business through the back half of the year. In the quarter, Owlet U.K. had a record Amazon Prime Day, showing sell-through units up 144% compared to prior year, and Owlet achieved the #1 seller in the baby monitor category.

France and Germany were again global standouts with sell-through up over 200% and up over 100% year-over-year, respectively. Shifting to Owlet360 subscription. We are now full 6 months since launch. In Q2, we made meaningful progress expanding the value of our subscription offering while driving continued growth. Total paying subscribers recently surpassed 66,000 with strong second quarter growth across monthly reoccurring revenue, attach rate, retention rate and consumer satisfaction compared to the first quarter. The strong trends and overall feedback have really been outstanding. Improving and enhancing subscription also continues. In Q2, we launched Sleep Position, one of our most requested features, which gives caregivers visibility into how much time their baby spends on their back, side or tummy.

This insight directly supports safer sleep practices and peace of mind. We also invested in scalable growth infrastructure, building out in-app and e-mail marketing automation tools to continue driving adoption. Looking ahead to the second half of the year, our focus is on bringing even more value to subscribers through deeper insights and expanded capabilities. We are planning to launch historical data trends, which allow caregivers to track progress and spot patterns over time. By the end of the year, we will also begin piloting AI-generated sleep insights built from Owlet’s proprietary pediatric data set, offering caregivers personalized data-backed guidance that only Owlet can provide. We’re now targeting a fourth quarter telehealth pilot launch to better align with our broader ecosystem of caregiver partners.

This timing also gives us the opportunity to deliver a more connected and valuable experience for our users. These innovations will continue to strengthen our relationship with caregivers, enhance the daily utility of our platform and drive long-term subscriber growth as Owlet360 enables our evolution from a consumer device company to a comprehensive pediatric health platform, while unlocking the value of what we believe is the largest and most scaled database of pediatric health data in the world. Finally, we’re excited about the opportunity to roll out Owlet360 internationally, and we’re in a strong position from a software development perspective. However, this year, we are prioritizing our Dream Sock and camera feature set as well as the telehealth pilot, and we’ll be rolling out Owlet360 internationally next year.

Finishing up on our third strategic area of focus, we continue to progress our mission to expand medical and health care channels to offer insurance reimbursed monitor. In the quarter, we continued development of a key component of our health care strategy, Owlet Connect, our enterprise data integration platform and service. Through Owlet Connect, for the first time ever, Owlet families will be able to share their baby’s health data via BabySat with health care providers in real time. Owlet Connect is critical to our holistic health care solution as it enables integration of Owlet’s unique pediatric data into clinical workflows, electronic health records and research databases. Our new alliance with Children’s Hospital of the King’s Daughters or CHKD is progressing as planned.

This includes beginning to integrate with CHKD via Owlet Connect to expand the servable baby population with BabySat. There is still a lot of progress to make in the health care side of the business, given the size of the opportunity with each of these steps from development of Owlet Connect to partnering with our first children’s hospital are important milestones to unlocking BabySat’s long-term opportunity in health care. Now I’d like to turn the call over to Amanda to discuss Q2 results and our updated 2025 outlook.

Amanda Twede Crawford: Thanks, Jonathan, and good afternoon, everyone. I’ll begin on Slide 10. Unless noted otherwise, I will be comparing second quarter 2025 results to the second quarter of 2024. We delivered another strong quarter in Q2, exceeding expectations across all key metrics. Revenue in the second quarter was $26.1 million, an increase of 25.9% compared to prior year. Revenue strength was primarily driven by stronger-than-expected sales of Dream Sock and Dream Duo. Gross margin in the second quarter was 51.3%, an increase of 180 basis points versus prior year, our ninth consecutive quarter of year-over-year gross margin expansion. Gross margin improvement primarily reflects strong product mix, improved fixed cost absorption, lower direct product and fulfillment costs, partially offset by the tariff impacts.

The tariff situation remains fluid, and we are adapting and evaluating in real time. In the second quarter, gross margins were impacted by the 10% tariffs assessed in Thailand and Vietnam. With Vietnam tariffs now confirmed to increase to 20% and Thailand to 19%, we are modeling these impacts into the forecast. Total operating expenses in the second quarter were $15.3 million versus $12.5 million in the same period last year. As a percentage of revenue, Q2 operating expenses were 58.7% compared to 60.4% in Q2 2024 as we continue to drive strong operating leverage as we scale the business. Operating loss in the second quarter was $1.9 million compared to $2.2 million in the same period last year. Net loss in the second quarter was $37.6 million versus $1.1 million in the same period last year.

The increase was primarily driven by a $34.8 million noncash mark-to-market adjustment related to our common stock warrant liability. Excluding this adjustment, our net loss would have been $2.8 million. We announced earlier today that we’ve come to an agreement with various holders of our Series A and Series B warrants to exchange their warrants for shares of common stock, which will result in the elimination of over 90% of the Series A warrants and all of the Series B warrants. We’re very pleased to simplify our capital structure and eliminate the uncertainty the warrants have presented for current and prospective investors. The exchange will be subject to stockholder approval at our upcoming annual meeting and other customary closing conditions.

I’d refer those on this call interested in further information to refer to our Form 8-K and press release, both issued earlier today. Q2 adjusted EBITDA was $0.3 million, an improvement of $0.2 million compared to the same period last year. Strong revenue growth despite tariff costs drove the increase, our fifth consecutive quarter of adjusted EBITDA profitability. Cash and cash equivalents as of quarter end June 30 were $21.8 million versus $16.3 million at the end of the first quarter 2025. In the quarter, we drew down on our line of credit, increasing to $14.9 million at the end of Q2 versus $8.5 million at the end of Q1, the primary driver of our cash balance increase. Turning to our financial outlook. We are updating our 2025 guidance to reflect our strong first half 2025 performance and confidence in expectations for the balance of the year as well as incorporating recent tariff cost increases.

As was our message in the last quarter’s guidance update, the fluidity of the macro backdrop creates some uncertainty, specifically tariff policies that have potential to change. As a result, today’s updated 2025 guidance includes our best estimate based on the data we have available to us today. Owlet continues to execute at a high level. And as a result of our first half 2025 revenue strength and outlook for the second half of the year, we are raising our revenue guidance. For full year 2025, we now expect revenue in the range of $97 million to $100 million, representing 24% to 28% growth year-over-year. Turning to our gross margin guidance. We are reflecting the new increased tariff expectations of 20% on imports from Vietnam and 19% on imports from Thailand in the product cost of goods sold for our updated outlook.

As a result, we are reaffirming our 2025 gross margin guidance range of 46% to 50%. We expect our raised revenue guidance will be offset by the increased tariff costs. And finally, with Q2 adjusted EBITDA outperforming expectations and given our confidence in our outlook, we now fully expect to be adjusted EBITDA profitable for full year 2025. With that, we will now take your questions.

Q&A Session

Operator: [Operator Instructions] The first question comes from Charles Rhyee with TD Cowen.

Charles Rhyee: Congrats on the quarter here. And also, obviously, Jon and Kurt, congrats on the new roles. A lot of hard work done here, so congrats. Maybe if I could start on — Amanda, on the guidance here. Just trying to understand a little bit if you could help maybe quantify roughly what you think the tariff cost will be to cost of goods sold in particular? And I guess with 51% gross margins here in the second quarter, guiding 46% to 50%, maybe you can give us a sense on what that implies for the back half. I guess it would imply something more in the mid-40s. Is that the right way to think of it?

Amanda Twede Crawford: Yes. So when it comes to tariffs this quarter, the impact was less significant than we’re expecting in Q3 and Q4 just because the tariffs were temporarily set at 10% and then increased to 19% for Thailand and 20% for Vietnam on August 1. So during Q2, we saw about a $500,000 impact to gross profit. When we push that forward looking ahead to Q4, we’re expecting about a 5% impact on gross margin. And then Q3 will be kind of a blend between the 2 quarters just because we’ll continue to have the 10% rate, which is in our inventory right now. And then as the [indiscernible] we’ll see a little bit of an increase in Q3 as well.

Charles Rhyee: Okay. That makes sense. And just remind me, like how many days of inventory are you typically carrying?

Amanda Twede Crawford: We target about 6 weeks.

Charles Rhyee: Okay. And then maybe Kurt or Jonathan, maybe a progress on the health care side with DME vendors. And just if there’s a — if you can give us an estimate on how much maybe health care revenue contributed in the quarter?

Jonathan Harris: Yes. Health care continues to be a slow progress for us. So we’re continuing to drive on that. The revenue was inconsequential, but we have expanded. Adapt is currently accepting Medicaid plans in 29 states, so we are seeing an increase in our adoption of reimbursement. And we are making great progress on CHKD with the integration into Owlet Connect. So I think once that’s fully up and stood up, I think we’re going to continue to see additional hospitals, health care systems join onboard and continue to grow. So it’s a slow process, but we’re continuing to gain momentum.

Charles Rhyee: Great. And maybe one last question for me then. The warrant exchange, I saw the announcement that just — that it has been — that you announced this. What does that turn into for common shares if they’re all exchanged?

Jonathan Harris: We’ll get back to you on that, Charles.

Operator: The following comes from Ben Haynor with Lake Street Capital Markets.

Benjamin Charles Haynor: Thanks for taking my question. Can you hear me okay?

Amanda Twede Crawford: Yes, we can hear you. Can you hear us?

Benjamin Charles Haynor: Okay. Great. Yes, I can hear you fine. Sorry about that. On just kind of wanted to touch on telehealth, and I apologize, I m jumping between a couple of calls here. Any update to the plans there? Is that something that you expect to kind of roll out similarly to the subscription offering where initially offer it to a subset of folks on the platform and then they expand it later? And have you set pricing or any other details there?

Jonathan Harris: Yes. So we’re super excited about the opportunity to roll in the telehealth. It’s still under development. Integration is taking a little bit longer than expected. So we will roll it out by the end of this year, and we have not set or structured pricing on that at this time.

Benjamin Charles Haynor: Okay. Fair enough. And then any more color on kind of the interest level from other children’s hospitals or other entities after seeing CHKD?

Jonathan Harris: Yes. The dialogue with our hospitals has really picked up since that announcement, and we’re lining them up. Nobody wants to be first, but they sure don’t want to be last. So we’re really standing up to our Owlet Connect. Once we get CHKD set up with that, then we’re going to begin rolling out to other hospital groups. But we are already in conversations with a few as we speak.

Benjamin Charles Haynor: Okay. Got it. And then I think lastly for me, just following up on the prior question on BabySat and you re now in 29 states. Are you seeing any trends that are similar to what you’ve seen as you kind of get adoption to a certain level in a given geography amongst these sort of Medicaid populations? Or is it too early for that?

Jonathan Harris: Yes. I’d say it’s still too early for that. We’re building momentum, but it’s a slower process than the consumer side.

Benjamin Charles Haynor: Fair enough. Congrats on the quarter and the guidance and the new roles, Jonathan and Kurt.

Operator: [Operator Instructions] The next question comes from Owen Rickert with Northland Capital Markets.

Owen Ray Rickert: Congrats on a great quarter. Just can you dive a bit deeper into this Owlet Connect offering? Maybe just provide us with a little bit more color there. What are you excited about with this one?

Jonathan Harris: Yes. Great question. We’re excited because this is going to provide real-time monitoring back from our babies that are discharged from the hospital, from the NICUs into their homes. This will give real-time information back to the neonatologists through the Connect. So this is not changing the workflow on the neonatologist side. But for the first time ever, babies at home will be able to share information with their doctors back at their offices or back at the hospital in real time. So we’re super excited about this opportunity. It’s taking a little bit longer to get the full integration, but we believe once this is live, this will be groundbreaking technology for discharges and children at home.

Operator: The following question comes from Alex Fuhrman with Lucid Capital Markets.

Alex Joseph Fuhrman: I wanted to ask about the Owlet360 subscription offering. That’s pretty big growth from last quarter, getting to 66,000 subscribers. Can you talk a little bit about what you’ve learned over the past couple of months? It looks like you’ve kind of changed the price a couple of times as you’ve tested things like that. Has there been any sensitivity to price? And what as you’re onboarding as you’ve been selling new devices, what kind of attach rate have you gotten on the subscription to activators of the new devices?

Amanda Twede Crawford: All right. Thanks for the question, and thanks for calling in. We’ve seen really strong progress on subscription. We’re seeing everything that we want to see. Growth in total paying subscribers, the MRR attach rate, retention rate and overall satisfaction and feedback. We’re not ready to share those specific metrics yet, as this is still emerging. But currently, we’ve got 66,000 paying subscribers. They are at different pricing levels as some were in an introductory period versus the more recent pricing structures. But something we are seeing since we’ve increased the price, the conversion rate was slightly less, but not to the extent that it was worth having the higher price, if that makes sense. So we’re seeing really good, strong momentum given our current price point.

So we do expect to scale throughout the year. It’s still early, but we are excited for the long-term impact that we expect subscription to have on the business just from a financial standpoint, but as well as we are in our transition to become a pediatric health platform.

Operator: The next question comes from Boris Peaker with Titan Partners.

Boris Peaker: Great. I do want to add my congratulations to the great quarter. Just a few questions here. Maybe on the hospital side of things, what is the actual process or at least from the contract that you’ve signed already, what is the process of bringing another hospital on board? Do they — is there some kind of an internal committee that needs to make a decision? Do they do a little pilot trial? Or just help us understand how that works and what that can imply about kind of future hospital contracts.

Jonathan Harris: Yes. Great question, Boris. So yes, it definitely comes through the committee working through that. And then it’s getting the integration through our Owlet Connect integrated into whatever their remote patient monitoring platform that they’re using. So there is an integration cycle. And then it’s also partnered through one of our DME partners to make sure that they’re supplying the BabySats into the hospital itself. So sort of 2 components. One is the hardware itself. And then the second is the integration into the service on the backside. So it’s a little bit of a process. And as you know, hospital contracts can take a while to negotiate.

Boris Peaker: Got it. And maybe just a question on tariffs. Assuming that these higher tariffs remain, is there a strategy to bring manufacturing to the U.S., or maybe to another country with a lower tariff? Or is the kind of strategy to just continue paying them as that’s the most optimal path forward?

Amanda Twede Crawford: Yes. We are looking into other options for other manufacturing sites. At this point in our journey, we are hitting up against capacity and had planned expansion anyway. So this is a really good opportunity for us to diversify our sourcing and look at other possible locations. So it’s something that we’re actively looking into and seeking to minimize the overall impact of the tariffs.

Operator: There are currently no other questions.

Amanda Twede Crawford: Just wanted to address the question that Charles had just regarding the exchange agreement with the warrants. So we are exchanging about $7.2 million of Series A and $1.8 million of Series B for an aggregate amount of 5,429 newly issued shares. So that is disclosed in our press release and 8-K. So I just wanted to make sure that we answered that question.

Operator: [Operator Instructions] No more questions have queued at this time. I’ll now turn it back over to Jonathan Harris for closing remarks.

Jonathan Harris: Thank you for joining us today. We’re incredibly proud of the progress we’ve made this quarter from our strong financial performance to the continued expansion of our global footprint. Our commitment to empowering parents with the information they need to care for their babies remains at the heart of everything we do. We believe that our FDA-cleared products, combined with our strategic partnerships and growing subscription service, position us for sustained growth and profitability. We are confident in our vision for the future and look forward to updating you on our progress. Thank you again for your time and continued support.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect your line.