Conference Transcript - OWLT 2026-06-03

Operator

all right hi everyone good afternoon um thanks for joining the final session of the wednesday uh at our growth stock conference we're very happy to have the team from allett joining us we've got amanda and jay amanda is the cfo jay is this is uh in investor relations amanda will go through uh prepare some prepared remarks in the investor presentations then we'll cut the webcast and when we'll do a little bit of q a in this room so with that um one last thing i am required to tell you that for a whole list of research disclosures, please visit WilliamBlair.com. I'll turn it over to Amanda.

Amanda Twede Crawford, CFO

Thank you. Thanks for having us, and thanks to all of you for being here. Oh, we have our own disclaimer as well, if you would like to read it. All right, so first I wanted to start off by introducing Owlet to those of you who aren't quite familiar with what we do. so Owlet is a holistic pediatric health platform really arming parents with data and insights to help them so we have a few key pillars the first is safety our hero product is the dream sock it is FDA cleared which means it's a medical device it's not just a silly gadget it actually works it's comparable to a hospital-grade monitor that parents can use at home to monitor their child. The technology behind it is pulse oximetry, so it measures pulse rate and oxygen and alerts parents when their baby needs them, so if it falls outside of a preset range. Beyond that, safety is our foundation, but we've been able to pivot into more of a health platform. Think about the explosion of wearables. You see a lot of adults with their aura rings, their whoop bands, they want to know about their own health and wellness. But what's most interesting is I know if I went out and had drinks last night, I'm going to sleep terrible. I'm not saying a baby is going to have drinks last night, but we don't know if our child didn't sleep well or if maybe they're starting to get sick so what's really interesting is that using the data from our dream sock we're able to give parents additional insights so that they can help their baby and what that means for parents is that they're more informed and they can get better sleep and then lastly we have our camera so most parents who have a dream sock they also want to have a video monitor so we have our third-generation DreamSight camera that was just launched last year that gives you the visual view of your baby so when you open up the app you can see the real-time vitals information as well as like a picture of your baby or a video I should say of your baby so we think that this is this is a really interesting advantage especially with With the new generation of parents coming through, they're used to this health technology for themselves, which really gives us a competitive advantage because we are the only monitor on the market that is medically cleared for at-home use. So there's just a few key stats. I'm not going to read through all of them. A lot of these bragging rights were the number one baby monitor in Dollar Share, first and only FDA-cleared monitor. We also have clearances in Europe and the UK, as well as Australia and a few other countries. So that really gives us a competitive moat just because we're the only player in the space. From an active user perspective, we have almost 700,000 users on our network every single night. last year we grew our revenue 35 percent and we have the largest set of infant health data which has enabled us to provide those insights through our app what's really exciting and new for the company is historically we've been a one-time sale so just the hardware but we've moved to a services platform called outlet 360 it's our subscription offering we launched this early last year, and we had 115,000 paying subscribers to close out Q1. That was about a 34% penetration rate on DreamSock users in the United States. The subscription fee is $9.99. Where we have an opportunity to extend LTV further is through launching into other geos. So currently, it's only available in English-speaking countries. We'll be launching that in some of our other markets here shortly this year. The other side of it is that our initial subscription has really been focused on the SOC, but we're working on developing additional features for the camera, which really presents a strong LTV opportunity since customers will use their cameras for three to five years. So those are up and coming. Our new camera is AI ready. It's got an AI-enabled chip so the capabilities are there, it would just be like a software push. So here's a little bit about our journey, kind of where we're at today. What's really exciting about Allet is we look back and the FDA clearance was a huge milestone for us. We achieved adjusted EBITDA profitability last year. We launched our subscription, our new generation product. project, we cleaned up our cap structure a little bit last year, so now where we're headed, we're growing that high margin subscription business. We continue to see our subscribers grow every single month and our churn rate has improved every quarter. It's currently the monthly churn rate is in the single digits and improving. We wanted really our focus here for the company moving forward and looking at 2026 is to really sharpen our focus. We're focused on our subscription offering and a new telehealth offering which I'll talk about in a minute. We really want to win the markets that we're in. We're really excited about the opportunity right in front of us and then we're focused on operating efficiency and profitable growth. So, a little bit more details on subscription. It is a higher overall blended margin for us. Our blended margin for 2025 was 50 percent, so our subscription margins are much higher, and we see this as a multi-year opportunity. Most parents who have children will have two, and we see this as a multi-year opportunity. Baby number one arrives, they're on our platform for about two years. Then baby number two arrives, and we've got another two years for a four-year relationship with parents. Another thing that's really unique for Owlette is we just launched to a limited user set our telehealth. We could call it Owlette on Call. And what's interesting is that parents, every year, for the first year of a child's life, parents have at least one ER visit. 95% of the time they're sent home with Tylenol, it's treat and release, so there's really no emergency. What is exciting about the telehealth opportunity is we actually have vital signs and biometric data that can be shared with a pediatrician in our app, saving our customers and the healthcare system some costs by being able to triage some of this at home, helping parents determine if they actually need to go in. We see that as a big opportunity for us. For this year, it's more of a test and learn. It's not a big revenue driver in our guide, but we do see it as a big part of our long-term strategy. And then here we are winning the markets that we're in. In the United States, we have about 11% of births are using our dream sock. So while that penetration rate is really strong, we see some states with rates above 20%, whereas there's other states that are in that lower, you know, single digits. So we have an opportunity to narrow focus and really win the markets that we're in and expand our penetration in the United States. We still think there's a big opportunity here for the core business. Then on the international side, in Europe, we have low single digit penetration with some countries like the Czech Republic over 10%. We see a big opportunity there internationally in the markets that we're in. We've talked a lot about our global clearances in the past, and while they're still important for our long-term strategy, we're really just focusing on the geos that we're in as opposed to doing simultaneous country launches this year. And then lastly is operational efficiency and profitable growth. So this is our revised guidance that we issued on the Q1 call. Revenues of 118 to 122 million. It's a 12 to 15% year-over-year growth. We've expanded our gross margin guide to 50 to 52% and then from an adjusted EBITDA perspective we're guiding 7 to 9 million so really driving that operating leverage. If we compare to last year we were at 2 million approximately in adjusted EBITDA so this is substantial growth and we're committed to sustainable profitable growth. So really the key drivers of this updated guide is pausing those global clearances focusing on where we already are. We want to have AI driven headcount efficiency originally in our plans this year. We're a little over 100 person company. Our revenue per FTE is over a million, but we had plans to add about 40 headcount for our growth initiatives. We pulled back on that, not because we're not investing in the business, but because Because we have so many AI capabilities broadly across the organization, so we're focused on driving efficiency over adding headcount, which has helped us improve our adjusted EBITDA And then lastly, we're deferring lower ROI projects outside of the key areas of focus. We have an exciting year ahead. That's all I have. Thank you.