Owlet, Inc. (OWLT) Earnings Call Transcript

Thanks for being here this afternoon, everyone. Earlier today, Owlet posted its results for the quarter that closed out the year and for the twelve months ending December 31, 2025. Joining me now are two people I'm glad to have with us: Owlet's President and CEO, Jonathan Harris, and our CFO, Amanda Twede Crawford. A quick housekeeping note before we dive in — you can find our press release, the presentation slides referenced on this call, and our financial results in the Events and Presentations area on our Investor Relations site, investors.owletcare.com. There's also a live webcast of this call, and you can reach it through a link on that same site. A replay of both the webcast and the slides will stay up for a full year after today. Everything shared on this call belongs to Owlet. No part of this may be copied or transcribed unless we give our approval beforehand. As we get started, please turn your attention to the safe harbor disclaimer located on Slide 3 of the presentation. Remarks made during today's call will include forward-looking statements grounded in the company's present perspectives and expectations as of today. Such statements amount to nothing more than predictions, and they carry specific risks and uncertainties that might lead actual results to diverge substantially from what those statements express or imply. The dangers and unknowns we face cover, though aren't limited to, the ones laid out in our latest SEC submissions, along with the Risk Factors portion of our yearly Form 10-K report, as revised through the company's Form 10-Q quarterly reports and additional SEC filings. Keep in mind that unless the law demands it, the company takes on no duty to revise any forward-looking statements — whether from fresh details, upcoming occurrences, or anything else. Having said that, I'm happy to hand the call over to Jonathan.

Thanks, Jay. Good afternoon, everybody, and I appreciate you being here. I'm happy to walk through the considerable strides we've made, since 2025 stood out as Owlet's best year ever, and we're set up to keep exceeding expectations in 2026. Starting on Slide #5. For Owlet, 2025 was genuinely a landmark, transformative period, defined by substantial expansion and by widening our lead and scale within pediatric health monitoring. Our team hit a great number of milestones and achievements, and I want to call out 3 of the most important ones. To start, rolling out our Owlet360 subscription service in January of last year turned out to be a tremendous win, essentially redefining how we relate to our customers and our long-range business approach. We're delighted to share that as of the beginning of March, we've passed 110,000 paying subscribers, which speaks to the worth and reassurance our connected services bring to families; and we've lately introduced our subscription offering internationally, creating fresh high-margin revenue streams and carrying our ecosystem advantages beyond borders. Bringing out Owlet360 represented a key milestone in our transformation into a full pediatric data platform. Through tapping Owlet's enormous pediatric health data set, we can better provide more sophisticated and tailored health and wellness information to our families. We're eager about the groundwork laid during 2025 for subscription and about seizing that momentum in 2026. Next, we released our new Dream Sight camera in September last year, our next-generation video monitor. Dream Sight elevates our camera platform with improved reliability and security plus future forward technologies, among them onboard AI capabilities, all at a price point that makes sense. Paired with Dream Sock, it provides a holistic picture of a child's wellness that no competing offering can equal. We see the arrival of Dream Sight as a key strategic catalyst for growing our LTV, given that cameras stay in use beyond 3 years of age. We've witnessed remarkable momentum since Dream Sight debuted, and we're delighted to start rolling out our new camera-specific subscription features over the coming quarters, which is one more chance to boost subscriber growth. Third, during 2025, we posted record annual revenue, gross margin and adjusted EBITDA, demonstrating new peaks in financial performance and operational efficiency even with the new tariffs. Last October, we streamlined our capital structure through a warrant exchange, then completed a successful offering to reinforce our balance sheet, aid a path toward cash flow independence and give us flexibility for opportunistic growth investment. Owlet's financial and operational health has never been stronger, putting us in position to execute well on our pediatric health growth opportunity and to deliver long-term stakeholder value. Owlet's journey so far has been remarkable, defined by innovation, strategic expansion and an unwavering commitment to our mission, reaching every baby. Our strategy rests on partnering with families through some of the hardest yet most rewarding moments in the parents journey. Our focus is on new parents—Gen Z and younger millennials—and among these women, 60% already have and depend on a connected wearable. For this group, biometric data is not something new; it's simply what they expect as a standard. Owlet is ideally suited to win over this demographic by connecting the wearable technology they already use personally with the predictive care they desire for their infants. Owlet has become a top family wellness technology company, not merely a monitor meant to give parents peace of mind. Through our product lineup and enormous pediatric data set, we digitally interpret patterns related to safety, health, wellness, and development. This empowers parents to act proactively with good information and creates a genuine biometric baseline for babies starting on night 1. As AI and advanced monitoring continue to advance, Owlet's data and its capacity to provide actionable insights will only grow more valuable as children get older. From that broader vision, let's turn to our fourth quarter 2025 results on Slide 6. Owlet posted another solid quarter, capping off a record-setting year. We generated $26.6 million in revenue during Q4 2025, up 29.6% from Q4 2024. The revenue gains came from broad-based growth throughout the Dream product suite and the Owlet360 subscription. Q4 revenue wrapped up a record year for Owlet, with total revenue reaching $105.7 million for 2025, representing 35.4% growth over 2024. Gross margins for the fourth quarter of 2025 came in at 47.6%, which includes a 510 basis point hit from tariff costs. Even with the tariff burden, full year 2025 gross margins also set a record at 50.6%. Adjusted EBITDA was $0.1 million in Q4, compared with $0.5 million in the fourth quarter of 2024. Tariff expenses were the main factor affecting the comparison to the prior year's adjusted EBITDA; for full year 2025, adjusted EBITDA was yet another record for Owlet at $2 million, a $3.8 million gain over 2024. The strength of our fourth quarter results and records across every key metric for the full year 2025 reinforce our confidence in robust performance and growth heading into 2026. Owlet is extremely well positioned as a company as we build on last year's momentum and set our sights even higher in 2026. Now to our strategic growth areas. Our strategy is unchanged from last year, and we've updated our priorities to capture what matters most in 2026. First, drive global adoption of Dream Sock. Second, expand the Owlet360 subscription platform; third, keep growing the health care channels. Lastly, launch the Owlet onCall Telehealth Platform. Starting with our core business in the U.S., demand for Dream Sock remains strong. Dream Sock and Duo showed strong domestic year-over-year sell-through at 9% and 53%, respectively, fueled by another robust holiday selling season. We saw an anticipated shift in sales from individual Dream Socks toward the Duo package, which pleases us since Duo offers an expanded LTV opportunity and an increase for subscription, providing parents a holistic view of a child's wellness that no competing offering can match. Robust customer satisfaction is underpinning this expansion, since Dream Sock's NPS came in at 77 to close out Q4, while our blended product NPS overall stood at 72. What we're seeing in registry activity keeps showing that Dream Sock ranks as a top priority for parents. Across the registries we monitor — Amazon, Babylist and Target — Dream Sock additions jumped 23% year-over-year during Q4. On top of that, we keep capturing share even at our current scale. Based on Circana consumer Research along with our internal figures, Owlet grew its portion of all dollars spent on baby monitors to 41% during Q4 2025, which is 24% higher than Q4 2024 and marks yet another all-time peak for share since we began following Circana data. That same data reveals the broader category is expanding, with 2025 consumer spending on baby monitors hitting its highest point across the past 5 years. Turning to international. International revenue for Q4 came to $3.9 million, capping off a record-setting year of $19.2 million, a 27% gain over 2024. Although Q4 revenue fell compared with a year earlier, that drop stemmed mainly from moving Amazon U.K. onto a direct import model; through this operational change, the point of revenue recognition shifted from collection to delivery, which pushed a substantial chunk of U.K. sell-in revenue — our biggest international market — out of Q4 and into Q1 2026. Sell-through internationally is still going strong, with the U.K. climbing 58%, France rising 41% and the Nordics gaining 80% compared with Q4 2024.

In Q4, we secured the go-ahead from regulators to market Dream Sock in India — a major step forward as we aim for a commercial rollout in the first six months of 2026. That country is enormous, recording over 23 million births annually. Even just the wealthiest 1% there is roughly the same scale as what we could reach in the U.S. or Europe. On top of that, we're pleased to announce that we've received regulatory sign-off to sell Dream Sock in Israel, opening up another promising distribution avenue; this brings an additional dimension to our overseas expansion, with a launch planned for the latter portion of 2026. Dream Sock is designed to function anywhere, and it's currently sold in 31 nations, backed by 7 regulatory approvals. As we turn our attention to 2026, we anticipate having both India and Israel in the mix. Our priority will be growing the markets we currently cover and steadily bringing new, regulator-approved sales channels online worldwide, so that Dream Sock can reach every part of the world. Shifting to Owlet360, we continue to make solid headway in enhancing what our subscription offering delivers. That progress contributed to a fourth straight quarter of quarter-over-quarter gains in paying subscribers, MRR, attach rate, and retention rate. On January 28, we hit the one-year mark for our subscription service. Parents' response, plus how the offering has performed, went beyond our expectations. We're pleased to share that by early March, we had more than 110,000 paying subscribers in total. In Q4, we managed to introduce Owlet360 to our initial markets abroad: the U.K., Ireland, Australia, New Zealand and South Africa. And in the quarters ahead, we plan to continue expanding subscription features into our remaining regulatory cleared countries. During our previous quarterly update, we noted that the vast majority of subscriber gains we've seen since launching have been driven by our emphasis on Dream Sock. We also recognize a substantial chance to boost subscription uptake by adding distinctive camera-based capabilities to our newest AI-powered camera offering, Dream Sight and Duo. This would fuel subscriber expansion while also lengthening customer LTV. For example, we could merge the proprietary biometric information gathered by the Sock with computer vision from the camera to create ever more tailored and proactive experiences for caregivers through feature releases planned for the future. We are dedicating significant effort to embedding AI throughout every one of our platforms, treating this as a long-term commitment meant to reinforce our competitive advantage and provide better assistance to parents. Teaming up with webAI is a strategic move that will speed up creation of safe, purpose-built intelligence powered by our distinctive pediatric health information; this AI setup, built for enterprise needs, is meant to generate worth through tailored experiences and stronger insights, and we think that difference will only grow clearer as our data expands. We feel great about what's ahead as we merge AI with our precious pediatric data that sits on the Owlet 360 base. Now on to our third area of strategic growth. Our work expanding Owlet's health care channels keeps moving forward well. During Q4, the first Owlet monitors went home from Children's Hospital of The King's Daughters, which marks the official start of this collaboration. We've kept the momentum going from what we built with CHKD, and over the past several months we've brought on 4 additional hospital partners. Getting the consignment feature and the RPM link with CHKD launched gave us the groundwork to soon announce the hospital partnerships that are coming. Each of those integrations sits at a different stage right now, and we expect to share more specifics in the near future. Beyond that, we continue to make solid progress in extending how far our coverage network reaches. We wrapped up the year with Medicaid reimbursement available in 37 states. At the end of last year, that figure was 6. The number of commercial insurance carriers we work with is now 258. A year ago it was 105. That translates into backing for over 90% of commercial births nationwide. Next, there's Owlet OnCall Telehealth, which is the last of our strategic growth areas. From where we sit, what's possible in pediatric telehealth represents a fundamental shift. As we've laid out before, pediatric health care spending in the U.S. by itself is over $30 billion each year, and upwards of 90% of those visits get treated and released. By pulling live infant information from Dream Sock and Owlet 360, and using it to provide remote care that's more tailored and easier to act on, we believe we can make a real difference — improving child health results overall while bringing down costs for families. To go after that chance, we're preparing to launch the Owlet OnCall telehealth platform, which will build on Dream Sock and Owlet360. During a telehealth appointment, parents would be able to share health vitals, pulse rate, heart rate, oxygen saturation, and the 30-day history from Dream Sock. That kind of capability ought to significantly raise the standard of care and improve patient outcomes, because without this essential data, conventional telehealth often relies on visual diagnosis that simply isn't enough. The first half of 2026 is when testing, learning and expansion of Owlet OnCall will happen. Our telehealth offering remains in the piloting stages, because we want the experience to be right ahead of a full launch set for later in the year, before the winter flu season arrives. In closing, I'd like to express thanks and congratulations to the Owlet team for a record 2025. My thanks also go to our customers and investors for the confidence you've placed in us. What sets our product platform apart, along with the leadership and expertise we have in pediatric health monitoring, gives us a strong foundation to build on going forward. Sustaining our momentum and keeping up high-level execution throughout our strategic growth areas has our complete focus. This strategy, I'm confident, will produce long-term durable growth and value creation; at this point I'll pass things to Amanda for the financial highlights and our 2026 outlook.

Thanks, Jonathan, and I appreciate everyone being here. I'd also like to express gratitude to our team for delivering yet another successful quarter and for the outstanding execution behind our record 2025 results. Starting on Slide 12. Unless I say otherwise, my comparisons will be fourth quarter 2025 against the fourth quarter of 2024. These financial results remain preliminary until our 10-K is filed. Q4 represented another strong period, with momentum carrying forward for Owlet. Revenue in Q4 reached $26.6 million, which is 29.6% higher year-over-year. The revenue gain came from broad-based growth across the Dream product suite and the Owlet360 subscription. For full year 2025, revenue hit a record $105.7 million, rising 35.4% compared to 2024 and landing at the high end of our guidance range. Q4 gross margin came in at 47.6%, which includes a 510 basis point impact from the cost of tariffs. Full year 2025 gross margin reached a record 50.6%, surpassing the high end of our guidance. Tariff costs reduced our gross margin by 270 basis points across the full year 2025. Moving to the next slide. We've stayed disciplined on operating expenses while growing the business. Total operating expenses for the fourth quarter came to $17.5 million, compared with $18.4 million in 2024 — an improvement of $0.9 million. Measured as a percentage of revenue, Q4 operating expenses were 66%, versus 90% in Q4 2024, as we keep driving strong operating leverage. That has produced consistently strong operating efficiency while we manage investing operating expenses behind revenue growth. Our LTV to customer acquisition cost ratio of 4.4% remains low and stands ready to improve as we layer on recurring revenues from subscription. Looking at revenue per full-time employee, we operate a lean and efficient team at $1 million per average FTE. Q4 operating loss was $4.9 million, compared to $7.4 million during the same period last year — an improvement of $2.5 million. Net loss for the quarter was $9.2 million, versus $9.1 million in the same period last year. Q4 adjusted EBITDA was $0.1 million, compared to $0.5 million in Q4 2024. Tariff costs were the main factor versus the prior year. Full year 2025 adjusted EBITDA was a record for Owlet at $2 million and at the high end of our guidance expectations. Compared to 2024, 2025 adjusted EBITDA improved by $3.8 million. Turning to our balance sheet. Cash and cash equivalents, excluding restricted cash, as of quarter end December 31, 2025, stood at $35.5 million, up from $23.8 million in the third quarter 2025; using a portion of the proceeds from the equity offering in October, we paid down $12 million on our line of credit, decreasing to $7 million at the end of Q4. We had $10 million of undrawn availability on the line of credit at the end of Q4, which increased our total liquidity to $45.5 million as of December 31, 2025. The principal balance on our term loan was $7 million at the end of Q4, versus $7.5 million at the end of Q3. We started paying down the term loan in November 2025, and by January 2028, we anticipate it will be fully repaid. Now turning to Slide 16 for our financial outlook. After Owlet's best year ever, our 2026 outlook rests on the scale and strength built during 2025, with a focus on continuing to execute across our strategic growth areas. For Q1 2026, we anticipate revenue between $20 million and $21 million, gross margins from 50% to 52%, and adjusted EBITDA ranging from negative $2.5 million to negative $1.5 million. As a reminder, business seasonality makes the first quarter consistently our smallest revenue contributor; also worth noting, comparing Q1 '26 revenue with the prior year's Q1 '25, that revenue was particularly strong because of a severe RSV and flu season. We also started investing after the offering in Q4, and now in Q1, in additional R&D resources to advance software and services for our Owlet360 subscription and OnCall Telehealth. Looking at our full year 2026 outlook, we anticipate yet another record year of growth; for 2026, we expect revenue ranging from $126 million to $130 million, which represents growth of 19% to 23% over 2025. As in prior years, we anticipate roughly 40% of revenue coming in the first half of 2026 and 60% in the back half, reflecting our typical seasonality and subscription revenue becoming a sequentially larger share of revenue throughout 2026. For full year 2026, we expect gross margins ranging from 49% to 52% and adjusted EBITDA ranging from $3 million to $5 million, which represents growth of 50% to 150% over 2025. Uncertainty persists around the volatile tariff situation and the war in the Middle East. Consequently, our 2026 guidance incorporates tariff cost impacts consistent with Q4 2025 at 510 basis points to our margin per quarter. With that, operator, please open up the call for questions.

Perhaps this is the spot to begin regarding guidance. When I take a look at the entire year, it appears you placed the Street within a range on the metrics that matter. Yet for Q1 specifically, I believe revenue came in somewhat under what the Street had. And beyond that, when I examine the proportion of total-year revenue expectations compared with prior years, it seems slightly reduced. So could you explain the reason it's like this in the current year? And what matters more, I suppose, is whether you can describe your visibility into that back-half acceleration that appears to be suggested here.

Yes. Yes, that's a reasonable question, Andrew; and I was hoping to give a bit of background on the Q1 guide. To begin with, by nature, seasonality exists in our business during Q1, which has historically contributed the least revenue. In terms of the comparison against last year, we're up against an unusually robust Q1, one that a severe RSV and flu season propelled. Another factor to consider is today's macro climate. We noticed certain weakness in how consumers spent across the Q4 holiday stretch, and whether that stemmed from the government shutdown or wider macroeconomic strains, we've witnessed retailers react by reducing their weeks of supply, something the Q1 guide captures. Let me be clear, however, we hold the leading position in this category. The moment when revenue lands across the quarters is arriving softer in Q1. Even so, at our core, our competitive standing remains solid, and that assurance is incorporated into the full year guide, which mirrors the robust long-term demand we anticipate.

All right, that's helpful context. So, Jonathan, you mentioned that some generative AI insights are going to be rolled out in the next few months. Could you expand on that a bit and share some detail about what those offerings would actually look like? And when you consider how to make 360 stickier, how do those fit into that?

Yes. Yes. There's a huge opportunity we see in using AI to bolster and propel our shift from being a hardware company to becoming a top pediatric data platform. There are a few angles we look at it from; one is product intelligence. We're moving beyond basic hardware monitoring toward real-time personalized AI sleep coaching. AI Sleep Insight is going to turn static data into actionable daily plans for parents. We think this will also fuel high-value subscription features in our audio and our vision, really powering the entire ecosystem across both the Sock and Dream Sight, our camera. On top of that, we're strongly focused on AI-assisted engineering workflows to cut turnaround times, and throughout every function of the business to simplify regulatory submissions, to automate financial data entry, to generate measurable productivity gains; and then we're in the early stages of our web AI partnership, where we're really going to focus on real-time actionable on the edge AI functionality that, once again, will assist parents with real-time data to support them on their parenting journey.

Regarding growth outside the US, when do you expect sell-in revenue from new markets to start showing up? Also, I'd like to hear about any early takeaways from the international subscription you launched — how is that going and what have you learned so far? Then finally, on your full-year guidance, what's assumed at both the low end and the high end? I'm hoping for more detail on what's built into your outlook.

Great. I'll handle the first part. Additional revenue from international expansion should start appearing in the first half of this year, as we roll out in these new markets during that same period. We're really enthusiastic about it. Sell-through continues to perform very well across our European markets, and we keep growing; we're still at a very early stage with our international subscription offering, but we're eager to push it forward. At present, it covers only English-speaking countries, and we aim to add more European languages in the first half of this year too. So we're quite excited to see subscription momentum build worldwide.

Okay. Now, on your question about what’s assumed in the low end and the high end — when it comes to revenue in our guidance, we haven’t assumed any meaningful contribution from our new countries or the telehealth opportunity. So we view those as upside in the guide. Whether we land at the high end or the low end will hinge on our hardware growth and the contribution from subscription; so within that range, the higher end would suggest stronger growth in both of those areas. Then, from a cost of goods standpoint — we mentioned this in the remarks — we are factoring in tariffs that align 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.

From what I can tell, that OnCall Telehealth product is set to arrive during the latter portion of the year. Could you take us through how you plan to bring it to market? And to be more precise, will it stand alone as a paid tier? Does it function as a premium add-on for Owlet360? Or does it come bundled within current subscription plans? If you could, please share additional detail about this offering.

Sure thing, Owen. Great to see you, or rather hear you. We kicked off an internal pilot with friends and family not long ago, and we keep expanding it. So we're truly refining it thanks to that hands-on, real-world learning. This is going to serve as another upsell — cross-sell, if you like — for Owlet360. It's going to be its own separate platform. So we're focused on perfecting the experience prior to a launch in the second half of '26, and comfortably before the cold and flu season arrives; so we're quite thrilled and we'll keep developing, and we plan to have this introduced before the second half of '26.