Good Afternoon, and thank you all for attending the Owlet Q1 2025 Earnings Conference Call. My name is Brika and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions] Thank you. I would now like to pass the conference over to your host, Jay Gentzkow, Investor Relations. Thank you. You may proceed,

Good afternoon, everyone, and thank you for joining us. Earlier today, Owlet released financial results for the first quarter ended March 31, 2025. I am 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 twelve 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. 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 our CEO, Kurt Workman. Kurt?

Thanks, Jay, and welcome everyone to Owlet’s first quarter 2025 financial results call. As you saw from our earnings release, we had a fantastic start to 2025 with strong results we announced today, reflecting the ongoing momentum we are driving as a business. We exceeded our expectations for first quarter 2025 results by executing on our growth strategies and leveraging our position as the only FDA and CE cleared infant health monitors on the market. As a result, we continue to capture market share, as parents increasingly choose Owlet to improve overall infant health, sleep, and safety, driving 43% year-over-year growth and our fourth consecutive quarter of breakeven or better adjusted EBITDA. We also just signed a new distribution partnership with Children’s Hospital of the King’s Daughters, one of the premier hospitals on the East Coast. As part of the collaboration, for the first time ever, babies are now able to leave the hospital with a Baby Pat or Dream Sock. Finally, another takeaway from the quarter was the exciting momentum for Owlet 360 subscription. The early results and feedback continue to trend very positively as we differentiate ourselves from a hardware company to a comprehensive pediatric health platform. Q1 was an outstanding quarter setting a foundation for growth in 2025 and despite a more dynamic macro backdrop, we’re seeing very positive trends for our business. Before we detail the strong first quarter results, I’d like to highlight just one of many Owlet stories that really underscores why our team is so passionate about our mission. My husband and I originally purchased our Dream Sock for peace of mind. What we didn’t know is how much this device would actually help us. One night at 1AM, we received a notification that my son’s heart rate was 250 to 280 beats…

Thanks, Kurt. I’m thrilled with the execution of our team on delivering an amazing first quarter. Before an update on our strategic focus areas, I’ll quickly touch on the tariff situation and our strategic positioning. Upfront, I’m incredibly proud of Owlet team’s ability to anticipate and evaluate the risks in our supply chain prior to the most recent tariff decisions and move decisively such that where the tariff framework stands today, we don’t see material risks to our business. In the last two quarters, we’ve taken steps to transition manufacturing of our cameras from China to Vietnam. As a result, today we have minimal China manufacturing exposure, aside from some accessories which we are presently evaluating alternative sourcing options. Thailand is our largest manufacturing source as they supply our Dream Sock and Dream Duo products. As a result, assuming the current tariff rates, we are assessing the 10% additional tariff costs that are being applied to both Thailand and Vietnam. Historically, there have been exemptions for tariffs on medical devices for which we qualified. While that is not the case as we speak today, we continue to evaluate numerous ways to reduce our tariff impacts. I’d also add that the majority of camera monitoring products in this category have meaningful exposure to China, which we do not. As a result, given our positioning, we view the current situation as an opportunity to actually gain share in the infant health monitoring market. The tariff situation is very fluid and like all companies we’re adapting and assessing in real time. Now, turning to our strategic focus areas, we made excellent progress in the first quarter on driving continued global adoption of Dream Sock, transitioning Owlet into a service through the Owlet 360 subscription, supporting parents from infancy into their toddler years and…

Thank you, Jonathan, and good afternoon, everyone. I’ll begin on Slide 9. Unless noted otherwise, I will be comparing our first quarter 2025 results to the first quarter of 2024. Q1 was another strong quarter as we kicked off 2025 exceeding expectations across all key metrics. Owlet continues to execute at a very high level. Revenue in the first quarter was $21.1 million, a year-over-year increase of 43.1%. Revenue growth outperformed expectations driven primarily by very strong sales of Dream Sock and Dream Duo. We also believe a heavy flu season was a contributing factor in the stronger than expected Q1 sales. Gross margin in the first quarter was 53.7%, an increase of 930 basis points year-over-year. This was our highest gross margin since going public and our eighth consecutive quarter of year-over-year gross margin expansion. The significant gross margin improvement reflects strong volume growth, favorable product mix towards Dream Sock and Dream Duo, a reduction in return rates and improved fixed cost absorption. Entering Q1, our leading position in the baby monitoring category provided us with leverage to negotiate improved terms with our vendor partners contributing to year-over-year margin expansion. Total operating expenses in the first quarter were $14 million, including stock-based compensation of $1.7 million and one-time litigation settlement costs of $0.9 million related to the shareholder derivative suit we detailed in Q4. This represents an increase of $1.7 million versus the same period last year. Operating loss in the first quarter was $2.7 million, compared to a loss of $5.7 million in the same period last year. Net income in the first quarter was positive $3 million versus $3.3 million in the same period last year, including a $6.7 million gain on warrant mark-to-market. Q1 adjusted EBITDA was $0.0 million, an improvement of $3.1 million compared to…

Thank you, Amanda. We will now start the question-and-answer session. [Operator Instructions] The first question we have on the phone line comes from Charles Rhyee with TD Cowen. You may proceed.

Hi, this is Lucas on for Charles. Thanks for taking the questions and congrats on the quarter. I want to ask about your guys’ partnership with the Children’s Hospital of the King’s Daughters. I guess, one, can you kind of give us some better understanding of how this partnership works in terms of parents being shown the Dream Sock and Duo, just kind of how that works on the, on the ground. And then I guess to, since this partnership, have you guys seen any or at least reached out to other hospitals and sought to create other partnerships?

Yep. Great question. We’re really excited about this partnership. For the first time ever, babies are now able to leave the hospital with an Owlet infant health monitor. So this collaboration involves implementing a consignment program in the NICU for discharges, integrating the Owlet data into the remote patient monitoring workflows, as well. So, this is super exciting and this is the first that Adapt has helped us, partner with, and we have many more in the queue, as well.

Great. And then, I guess maybe you want to ask about the, Owlet 360 offering and the strong uptake that you’re seeing. I understand that most of the revenue contribution or at least the outperformance came in Dream Sock and Duo, but obviously some strong - stronger than our estimates uptake of subscribers. So I guess, what’s resonating well there? You did give some customer feedback earlier. I guess, how should we be thinking about the contribution from this product moving forward?

Yeah, I mean, the feedback from parents has been overwhelmingly positive. Just in in terms of the product experience, they now have access to insights around their baby’s health, their sleep, for capturing key moments with the camera and so parents love having access to that. We went from 25,000 subscribers that we shared last quarter to over 50,000 subscribers in just a couple months. So the adoption has been incredible and we’re going to continue to drive it. In terms of contribution to the quarter, we’re still filling up that subscriber base and we just changed the price to $999 So that’ll continue to be an awesome contributor, especially as that funnel fills up and we have an even larger cohort of subscribers. So it’ll make meaningful contribution towards the end of this year, we’re hoping.

Okay. And then last question for Amanda. Obviously, you raised the guidance to reflect 1Q strength. How should we think about the revenue cadence throughout the year? Should we think about it generally being the same maybe on a - off of a higher 1Q base? Yeah, any color there would be great.

Yeah, we’re expecting from a quarterly basis to see sequential growth each quarter with Q4 being the biggest quarter for the year, which is due to the holiday promotional season.

Okay. Appreciate it. And I’ll leave it there. Thanks again. Congrats on the quarter.

Thank you. Thanks for joining.

Thank you. [Operator Instructions] We have a question from Colin Ricker with Northland Capital. Please go ahead.

Hey, guys. Congrats on a pretty stellar quarter here. Quickly, can you provide us with any color on your overall marketing strategy for 2025? And what levers are you pulling on here? And what should we be keeping your eye on going forward?

Yeah, great, great question. We’re really continuing to drive on our FDA and CE medical clearances. That’s really resonating with parents of having that peace of mind and the clearance from the FDA. But ongoing, we’re continuing to work on our every baby communication of really bringing this baby and parent stories forward, which ties in extremely well to Owlet 360 subscription and really bringing a breadth of services and insights to parents. So, what’s working today continues to work and we’re building that momentum and we’re seeing very strong response. The baby registry just gives us a great idea of what is happening in the marketplace in the interest of new parents and wanting to bring an Owlet into their nursery. And we’re seeing over 50% growth quarter-on-quarter. So the messaging is working. We’re continuing to lean in and drive on that.

Great. And secondly, it per the call and the PR, it doesn’t really sound like you’re seeing any shift in consumer behavior, just given some of the ongoing macro difficulties. But is there anything that you’re seeing there? Are your typical customers just more insulated to these macro headwinds?

Yeah, that’s a great question. Again, we’re keeping a close eye on it and maybe registry uses our best insight. But as of right now, we’re driving and continuing to have robust sell-through and continued success. But we’ll see where it goes, but we’re cautiously optimistic on the year.

Perfect. Thanks for answering my questions and congratulations on the quarter.

Thank you.

Your next question comes from Ben Haynor with Lake Street Capital Markets. Your line is open.

Good afternoon, guys. Thanks for taking the questions and congrats on the quarter. It was fantastic. First off for me, on the Owlet 360 subscription offering, given the 50,000-ish customers already, what sort of - I guess or pop ups or awareness raising has occurred within the app? Is there still things that you can dial up there? How would you characterize, maybe how aggressive you’ve been with the - making people aware of it?

Yeah, absolutely. So we do have in app messaging. So, you know, every new parent that comes on to the Owlet platform downloads the approximately. So we have access immediately to the parents through in-app messaging. But we have other marketing tools as well, such as email and SMS that we’re leveraging. And then, we’re going to continue to drive our messaging through our advertising, through social, sharing stories and really just continuing to drive that drumbeat onto the awareness.

Excellent. And then, just kind of big picture, how - I know another firm with which you compete has kept a lot of these kids on and parents on the platform until they’re several years old. Do you do you guys have kind of a cut-off of where you think that or how late in the child’s development that that can potentially go with Owlet 360?

Yeah, so today, parents sees our sock. We’re FDA cleared for up to eighteen months. But we do see that they use the camera for four years or more. So really building up the feature set and subscription around camera to continue to go as the child progresses from the crib, into the bed and beyond. We see a really strong opportunity to continue to drive that relationship that we’ve built from the with the parents from the day they bring their child home from the hospital.

Okay. Great. And then, lastly for me, and I apologize if you’ve already covered this. But just thinking through competitively, it would seem that many of the products that show up on in the same category and baby registries likely would be impacted by tariffs. Do you see any tailwind from your competitors potentially getting hit by the tariffs?

Yeah, yes. We do. Yeah. Many of the camera manufacturers, in particular are manufactured in China, which right now have very, very high tariffs. So we actually believe that, if these 10% tariffs stick, which we hope they don’t go up, we actually see this as a potential opportunity to capture additional market share. And we’re going to lean in with our partners and really try to push and increase our market share in the in the infant monitor market.

Fantastic. Excellent. Well, that’s all I have folks and thanks for taking the questions.

Thank you very much.

Thank you. I can confirm that does conclude the Q&A session and I’d like to hand it back to Kurt Workman, CEO and Co-Founder for some final closing comments.

Yes. Thank you. Appreciate it. And thank you all for your support of Owlet today. I’m really thrilled with the results in Q1, which sets us up well to deliver continued growth through 2025 and I’m confident in our ability to navigate kind of the evolving market dynamics that we have. We’re very well positioned to capture additional share in the category, execute on our growth opportunity, expand profitability and create long-term value for all stakeholders. Owlet is well on its way to transitioning from a consumer hardware company to a comprehensive pediatric health platform through Owlet 360, through the medical device approvals that we’ve gotten and the healthcare channels that we’re opening up. We are going to be the platform for pediatrics making a meaningful difference in the lives of parents and their children. And I’m just excited to continue to update you on this journey. So thank you so much.

Thank you all for joining the Owlet Q1 2025 Earnings Conference Call. I can confirm today’s call has concluded. Thank you all for your participation and you may now disconnect.