Kurt Workman: Good question. It’s for an over-the-counter product. Europe is a little bit different in terms of their — we have prescription over-the-counter tier for Pulse Oximetry there. You can get medical distribution and have an over-the-counter product, but it is specifically for over-the-counter use, we’ll be able to sell it through all of our retail channels that we’ve set up there. And we think it’s going to have a huge impact on not only the expanded distribution that we’ve been working on, but also the same thing, with the opening up to the bottom part of the funnel. We’ve worked hard for a few years to build awareness, and we believe this is going to drive additional conversion and more partnership opportunities. So we’re very close to it. We’ve been able to leverage a lot of the work and a lot of the studies that we did for FDA clearances, and we feel like we’re in the kind of final steps to getting clearance.
Charles Rhyee: Great. And maybe my last question, Kate, if we kind of look at the quarter here and we kind of back out sort of the onetime items that you kind of noted with particularly with the shift to Amazon. It would look like gross margins were north of 50% and adjusted EBITDA would have been positive for the quarter. I know you’re not really giving forward guidance per se, but maybe you could help us think through sort of how margins — how you’re thinking about margin progression and sort of move to profitability here?
Kate Scolnick: Yes. As I said, we’re looking at the trajectory that we have through the year. What we’re trying to get to for our long-term model is really margins between 45% and 50%. Some of the undulation just kind of comes with the pace through the year, as we talked about the Q1 being a step down from Q4 just given volumes and then as it ramps up in Q2, Q3 with the different holidays and the promotions in Prime Days. So I think that what we’re seeing is the more gravitation that we have towards our Sock product. That is obviously Hero product as it relates to margins. So mix moving towards there is a benefit. Looking further out, as I mentioned, as BabySat ramps out further, into 2025, that will be margin benefit to the model as well.
In terms of adjusted EBITDA, we’re not changing our profile as it relates to expense. So excluding stock-based compensation, operating expense being between $10 million to $12 million per quarter. We’re looking at leverage in the model that way. Depending on where the revenue kind of lay on each quarter, we’ll see that improving, too. Our goal is to be in a sustainably profitable company and benefits of 2023 that we made in taking as much expense as we did out. We don’t want to lose that momentum that we have. So the opportunities that we have to put our working capital towards the FDA-cleared products this year having revenue growth that will get us to that over the sustainable line, if you will, in 2024 and beyond to make this really a company that is focused on being that independent growth company with a profitability lens.
So still some work to do in 2024, but I think what you’ll see is that improvement continues as we go through the year.
Charles Rhyee: That’s great. I’m sorry, maybe one more here. You talked about opening at the bottom of the funnel, and you saw that kind of double in the fourth quarter. Can you give us a sense on what that trend looks like on the sell-through here in the first quarter so far? Are we still seeing…
Kurt Workman: Yes, I would say it hasn’t been a double kind of in the first quarter of 2024, but we’ve seen definitely double-digit growth year-over-year for Dream Sock, which is part of the sales mix that’s really starting to outperform and do is close to that. So we have seen sustained sell-through lift that’s really promising. As we go into 2024, we can build on and it’s significant.
Operator: There are no further questions in queue. So I will now pass the conference back over to Mike Cavanaugh for further questions that came in via e-mail.
Mike Cavanaugh: Thanks very much, operator. Yes, we did — we have received some questions from investors and particularly some of our retail investors that we wanted to share during the Q&A session today. So the first one, congratulations team on the 13 trillion heartbeat. Are there efforts to identify potential correlation between heartbeats and various medical conditions or sleep quality? And what can you tell us about the product road map and some of the other products like band and crib considering both FDA clearances and your extensive data set compared to competitors that should be an advantage for you.
Kurt Workman: Yes, I’ll take this one. Yes, Owlet has one of the largest data sets of infant health at home and a fantastic data science team. We’ve known for a long time that the potential of our data and our technology and the value we can drive from those insights is immense. We’ve really been limited for years just being a consumer device and limitations around being in the consumer device space. So — now with FDA clearance, we can really start to unleash our data and technology for parents and providers. That’s a big part of this year. I talked a little bit about software and services. So our focus in 2024 is really two things. It’s to drive adoption of our medical devices, and we’re seeing the momentum in that area and launching software and services to leverage Owlet data.
So we really do believe that there’s significant revenue and margin growth as we progress here by focusing on those two specific areas with about 140 million babies born globally. We’re just scratching the surface of Owlet long-term potential. So Stay tuned for more. This is a really exciting area that we’ll be sharing more and more.
