Owlet, Inc. Q4 FY2025 earnings call

• Launched Owlet360 subscription in Jan 2025, crossed 110,000 paying subscribers by March, and launched international subscription. It reshaped customer relationship and is part of evolving into a comprehensive pediatric data platform.
• Launched Dream Sight camera in Sept 2025, which is a next-gen video monitor with onboard AI capabilities, paired with Dream Sock provides holistic view of child's wellness, and new camera-specific subscription features coming.
• 2025 was a monumental year with record revenue, gross margin, and adjusted EBITDA despite tariffs. Simplified capital structure via warrant exchange and strengthened balance sheet.
• Strategic growth areas in 2026: drive global adoption of Dream Sock, expand Owlet360 subscription platform, grow health care channels, and launch Owlet OnCall Telehealth Platform. In health care channels, sent first monitors to Children's Hospital of The King's Daughters, engaged 4 new hospital partnerships, expanded coverage network with 37 states on Medicaid reimbursement and 258 commercial insurance carriers.
• Leveraging AI across platforms, partnered with webAI to develop secure, specialized intelligence using pediatric health data set for personalized experiences.

In 2025, Owlet had record annual revenue of $105.7 million, up 35.4% over 2024. Q4 2025 revenue was $26.6 million, up 29.6% vs Q4 2024. Full year 2025 gross margins were a record 50.6%, with Q4 gross margins 47.6% including a 510 basis point tariff impact. Adjusted EBITDA for full year 2025 was $2 million, a $3.8 million improvement over 2024. Dream product suite and Owlet360 subscription drove growth. International revenue in 2025 was $19.2 million, up 27% vs 2024, with Q4 international revenue $3.9 million. Dream Sock had strong domestic sell-through, with Duo showing 53% year-over-year growth, and international sell-through also strong in regions like the U.K., France, and Nordics.

For Q1 2026, expected revenue $20M - $21M, gross margins 50% - 52%, adjusted EBITDA negative $2.5M - negative $1.5M. For full year 2026, expected revenue $126M - $130M (19% - 23% growth over 2025), gross margins 49% - 52%, adjusted EBITDA $3M - $5M (50% - 150% growth over 2025). Guidance includes tariff cost impacts consistent with Q4 2025 at 510 basis points per quarter. Seasonality positions Q1 as lowest revenue quarter, and 2026 revenue contribution expected to be ~40% in first half and 60% in back half as subscription revenue increases.

Q: As I sort of look at the full year, it looks like you bracketed the Street sort of on key metrics. But for Q1, in particular, I think revenue was a bit below where the Street was. But also just as I look at sort of the percentage of the full year revenue expectation versus what we've seen in prior years, I think it's a little bit lower. So can you maybe just talk about why that is this year? And I guess, more importantly, can you just talk about your line of sight to that second half ramp that's sort of implied here?

A: Yes. Yes, that's a fair question, Andrew. And I wanted to provide some context for the Q1 guide. First, inherently, we've got seasonality in the business with Q1, which is historically the lightest revenue contributor. When we're looking at the year-over-year comparison, we're lapping an exceptionally strong Q1, which was driven by a heavy RSV and flu season. The other thing to look at is the current macro environment. We did observe some softness in consumer spending through the Q4 holiday period, whether it was influenced by the government shutdown or broader macroeconomic pressures, we have seen retailers respond by tightening their weeks of supply, which is reflected in the Q1 guide. Just to be clear, though, we are the leader in the category. The timing of when the revenue is going to hit within the quarters is coming up lighter in Q1. But fundamentally, we are in a strong competitive position, and this confidence is baked into the full year guide, which reflects the strong long-term demand that we're expecting.

Q: Jonathan, you talked about launching some generative AI insights here in the coming months. Can you maybe just talk a little bit more about that, give a little bit of color on what those offerings might look like? And then as you sort of think about increasing the stickiness to 360, how do those sort of play into that?

A: Yes. Yes. We see a massive opportunity to leverage AI to support and drive our evolution from a hardware company into a leading pediatric data platform. We see it a couple of different ways. We see product intelligence. We're evolving from a simple hardware monitoring to real-time personalized AI sleep coaching. AI Sleep Insight will convert static data into actionable daily plans for parents. We believe that this is also going to drive high-value subscription features in our audio and our vision, really driving the whole ecosystem across both the Sock and Dream Sight, our camera. Additionally, we're really driving and focused on AI-assisted engineering workflows to reduce turnaround times and across all functions of the business to streamline regulatory submissions to automate financial data entry to drive measurable productivity gains. And then we're in the early phases of our web AI partnership where we're really going to work on real-time actionable on the edge AI functionality that, again, is going to help parents with real-time data to help on their parenting journey.

Q: As it relates to the international expansion, when should we start to see some of the sell-in revenue for new markets there? And would love to hear any early learnings from the international subscription that you rolled out, how that progress has been and any early learnings there? And then just lastly, in terms of your guidance for the year, what is baked in, in terms of your expectation on the low end and high end? Just would like to get additional color on the expectations that you have embedded in your guide.

A: Great. I'll take the first half of that. So we expect further international expansion revenue to begin the first half of this year with rollout in the first half of these new markets. So we're very excited about that. We continue to see very strong sell-through success across our European markets and continue to grow. And we're still very, very early on our international subscription, but we are excited to drive that. Right now, it's only English-speaking countries, and we look to expand further European languages in the first half of this year as well. So very excited to see more subscription drive on a global basis. All right. And then just regarding your question on what is baked into the low end and the high end. As far as revenue goes in our guidance, we have not baked in any like material contribution from our new countries or the telehealth opportunity. So we see that as upside in the guide. The high end versus the low end will depend on our hardware growth as well as the contribution from subscription. So within that range, the higher end would imply stronger growth in both of those areas. And then just from a cost of goods perspective, we said that in the remarks, but we are including tariffs that are consistent with what we saw in Q4. As everyone knows, the tariff situation remains volatile and is changing day-to-day. So depending on where those ultimately land, there can be a little bit of upside in the cost of goods as well.

Q: It looks like that OnCall Telehealth offering is launching in the back half of the year. I guess can you just walk us through the go-to-market strategy there? And more specifically, is this being positioned as a stand-alone paid tier? Is it a premium add-on to Owlet360? I it bundled into existing subscription plans? I guess, can you just give us more color on that offering?

A: Yes. I got that, Owen. Good to see you or hear you. So we began internally piloting a friends and family just recently, and we're continuing to grow that. So we're really flushing that out based on that real-world experience. And this will be an additional upsell, cross-sell, if you will, to Owlet360. It will be a separate platform. So we're really working on getting the experience right before launching in the second half of '26 and well ahead of the cold and flu season. So we're really excited and continue to build, and we're going to have this rolling out ahead of the second half of '26.

Q: You surpassed 110,000 paying Owlet360 subscribers. How is the stickiness looking there monthly churn, how has that trended over the past few quarters?

A: Could you repeat the question? You were breaking up a little bit. Sorry.

Q: Yes, no problem. I was just asking about how it rates looking on Owlet360 monthly subscribers and maybe how that's trended over the past few quarters.

A: Yes. We continue to see Owlet360 grow. We'll be sharing more data on Owlet360 on our upcoming calls because we just hit our 1-year anniversary. But what we can share is the metrics are trending in all the right directions. We've had 4 consecutive quarter of sequential growth across paying subscribers, MRR attach rate and retention rate. We've also been tracking a cohort analysis that's showing retention continues to improve at a consistent basis. And this is also helping us identify a time period where there's opportunity to target rolling out specific features to improve retention even further. Great example of that is just adding the additional features that we're looking to launch on Dream Sight and really bring in both the Sock and the camera subscription and that holistic view for the parent.

Q: I'm on here for Ben. And I was just wondering how do you guys view international revenue longer term? There's statistics show that there's more babies born outside of the developed world, obviously. And just wondering where you guys kind of see international sales ending up as a percentage of revenue several years down the road... And I was just going to add, if you had any thoughts on if there's a meaningful difference with the -- with adding subscription internationally or kind of what your thoughts are on that as well?

A: Yes. We continue to see this as a great opportunity. We have roughly 11% penetration in the U.S., meaning 11 out of 100 babies are actually wearing an Owlet sock. So we see that opportunity where in Europe, for example, we're closer to 3%. So if you just look at Europe, there's a tremendous amount of growth opportunity there. As we've mentioned before, there's 23 million babies born a year in India alone. So even if we look at the top strata, the top 1%, that -- just that top 1% is as large a market opportunity as both the United States and Europe. So we see that as a really strong opportunity, and they are English-speaking by and large, over there. So we're really excited to roll out more international subscription in various languages and provide the amazing success that we've seen on Owlet360 in the English-speaking countries and continue to expand and grow that. So we're going to continue to work on expanding and growing our adoption, both here in the U.S., in Europe and opening up new markets where we see strong opportunity and then layering on our subscription platform on top of that to drive a really nice high-margin reoccurring revenue stream.

Q: Another good question. Yes, we have not heard anything further from that communication that went out in September of 2025. But there is quite a bit of turmoil going on within the FDA, but we have a really strong relationship with them, and we're continuing to dive in. Our market share continues to grow in the U.S. where that is most applicable. And we're over 41% of all dollars fit in the entire baby monitor category and feel really strong about our position with or without the FDA, and we're going to continue to drive, and that would be a really nice additional tailwind if and when the FDA actually do something.