Owlet, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Leadership Transition: Kurt Workman is transitioning to Executive Chairman, and Jonathan Harris is becoming CEO effective October 1. Kurt highlighted Jonathan's role in driving international growth, Owlet360 subscription, and organizational streamlining.
• Financial Performance: Q2 revenue was $26.1 million, up 26% YOY. Gross margins expanded 180 basis points to 51.3% (ninth consecutive quarter of year-over-year expansion). Adjusted EBITDA was $0.3 million, fifth consecutive quarter of profitability. Cash and cash equivalents were $21.8 million as of June 30.
• Operational Progress: Strong domestic and international sales, success at Amazon Prime Day, awards for innovation, progress on Owlet360 features, and health care integration with Owlet Connect and CHKD.

Segment Performance

• Dream Sock: Q2 revenue was $26.1 million, with domestic sell-through growth of 37% year-over-year. International revenue in Q2 2025 was $1.8 million vs $4.8 million in Q2 2024, but sell-through was up 33% year-over-year. Owlet maintained market leadership in the baby monitor category, had a record Amazon Prime Day, and received awards for innovation.
• Owlet360 subscription: Total paying subscribers surpassed 66,000 in Q2. Progress included launching Sleep Position feature, planning to launch historical data trends and AI-generated sleep insights, and targeting a fourth quarter telehealth pilot. Rollout internationally is planned for next year.
• Health care channels: Progress on Owlet Connect, an enterprise data integration platform, and alliance with Children's Hospital of the King's Daughters (CHKD), but health care revenue was inconsequential.

Guidance

• Raised full-year 2025 revenue guidance to $97 million to $100 million (24%-28% YOY growth).
• Reaffirmed gross margin guidance of 46%-50%, impacted by tariffs with Q3 and Q4 expected to have higher tariff impacts (Q3 to be a blend, Q4 expected to have ~5% impact on gross margin).
• Expect adjusted EBITDA to be profitable for full year 2025.

Risks

• Tariff Uncertainties: Tariffs in Thailand increased to 19% and in Vietnam to 20% in August, impacting gross margins. Q3 and Q4 expected to have higher tariff impacts.
• Warrant Liability: Agreement reached to exchange Series A and Series B warrants for common stock, but previously presented uncertainty for investors.
• Slow Health Care Adoption: Progress in health care channels is slow, with revenue from this segment still inconsequential.

Q: Congrats on the quarter and guidance. Can you quantify tariff impact and gross margin outlook for back half?

A: Tariffs in Q2 impacted gross profit by ~$500,000. Q3 to be a blend, Q4 expected to have ~5% impact on gross margin.

Q: Remind me of inventory days carried?

A: Target about 6 weeks of inventory.

Q: Update on telehealth plans?

A: Telehealth pilot to be rolled out by end of year, pricing not set yet.

Q: Interest in other hospitals after CHKD?

A: Dialogue with hospitals has picked up, lining up rollout after CHKD is set up.

Q: Owlet360 subscription progress and price sensitivity?

A: 66,000 paying subscribers, seeing strong momentum, conversion rate slightly less after price increase but still positive.

Q: Hospital onboarding process?

A: Involves committee review, integration through Owlet Connect, and partnership with DME partners.