Conference Transcript - OWLT 2026-06-02

Operator

Thank you, everyone, for joining us. I have the pleasure of hosting Amanda, CFO of Owlet, and Jay, head of IR. Owlet makes modern parenting more joyful with the first FDA clear, smart baby monitor and connected nursery ecosystem that provides trusted health insights. And we have a buy rating on the company as we believe its growth opportunities are underappreciated in the market today. And Owlet is poised to gain share in the baby monitoring category. So with that, maybe each of you can give me a little bit of your perspective, but since you joined, what has been the biggest change that you observed with the company, and what are you most excited about as you look out the next three to five years? So, Amanda, maybe start with you.

Amanda Twede Crawford, CFO

Yeah, I joined Owlette four years ago, and the first two years I was at the company, our focus was really heavily on getting FDA clearance, which is really important for us as an at-home monitor that monitors pulse rate and oxygen for babies, which is the first of its kind for use at home. and it was really important that we got that FDA clearance to give us credibility with parents as well as that competitive mode so that was the first two years following FDA clearance it's really changed the company where we have a really interesting hardware that enables us to offer software features so now the focus is on getting parents more data and insights about their child so that they can sleep a little better so it's really exciting what we can do with software we've got the explosion of wearables we all want to know what's going on with our own health and wellness and babies can't speak so we really help become the voice of the baby for parents okay yeah I mean FDA approvals is such an important moat for us but when we launched the out 360 subscription offering in January last year so just over a year ago it's really the first opportunity for us to move from kind of more of a consumer hardware product to a pediatric health app platform and subscription is really

Jay Gentzkow, Head of Investor Relations

the method with which we can communicate to parents about the health and wellness of their baby so we're moving more and more to a subscription first business subscription continues to go incredibly well it's also the unlock to the telehealth opportunity that we have just soft launch and are going to be working more and more on this year so yeah launch of subscription was big yeah and a key focus as a firm is driving higher LTV with the babies and the parents and you recently updated the camera features so that's been helping so as you think about sort of you know increasing the LTV with your customer what are key opportunities you see how are you sort of approaching it this year

Amanda Twede Crawford, CFO

yeah what's interesting is half of our nightly users are camera users and the subscription offering up until really the last just this quarter we launched camera features that opportunity is really large because parents will use their camera for several years so opening up that subscription to have like a multi-year relationship then parents have child number two and then it extends it by a few more years so we really believe we have the opportunity for a multi-year relationship with parents yeah I mean like subscription is such an important part of this puzzle because the more value we can add back to parents and families through the subscription offering and tell them

Operator

more about the health wellness safety of their children the more they're going to use the product which just extends both their time of use of subscription but also of course the use of the hardware products so holistic pattern that we're we're uh we're excited about yeah and you're relatively under penetrated even in the u.s the penetration is close to like low teens versus really saturated markets um in the 20s so how do you bridge the gap you think in across the u.s sort of what are you know you obviously have the new feature subscription but sort of what are key marketing strategies that go with that and um yeah Yeah.

Amanda Twede Crawford, CFO

Yeah. So right now in the US, it's about 11% penetration rate of births, which some of our markets are over 20%. So we see a big difference between key markets. And one of the biggest things that we've been working on is like AI search optimization, which is really critical. We've got a ton of awareness with our brand, but we want to make sure we maintain that awareness because we have new parents constantly entering the top of the funnel. So optimizing with AI search, really strong word of mouth. That's probably the biggest. If there's a mom that you trust that recommends the product, you're more likely to buy it. So that's one of the areas that we've been focused on is really like targeting maybe those markets where we haven't had as high of a penetration rate so that we can build that chain where parents are talking to other parents. And it's really helped us grow in all of our markets.

Operator

And BabyList has also been a big tool for you guys, right? The registry, how are you optimizing that channel?

Amanda Twede Crawford, CFO

Yeah, BabyList is huge for us. It really, BabyList took over registry following Bye Bye Baby's bankruptcy. so they've really replaced with that gifting platform and baby list is one of our fastest growing channels so we have really good partnerships with them for registry placements and we're doing really well and that's a growing channel for us and last quarter you referenced optimizing marketing and retail placements and then that's helping you drive higher sell through what are key changes you anticipate in your strategy this year and how do you ensure you continue to drive higher ROI?

Operator

You also have a very healthy CAC payback. Yeah, could you speak to that a little bit more?

Amanda Twede Crawford, CFO

Yeah, I kind of already mentioned the AI search optimization. That's huge, making sure that our website blog posts has all the information that's going to feed the LLMs. But one other thing that we've focused on specifically with our retail partners is being really strategic with our dollars that we're investing there. So as far as like retargeting customers, we've seen really high ROI where maybe somebody has like explored our brand already and we were able to target those specific customers and we've seen really strong ROAS there. So that's really helpful. And then another thing is that for our customers, previously, a lot of people who purchased our product were looking for peace of mind. And what's changed is that people are actually looking for more data and more insights, ways that they can help their baby sleep better so that they can sleep better. So we're really trying to target a different subset where it's more of like the informed parent.

Operator

And subscription is a big part of your story. you're at 34% attachment rate with the dream sock what is the realistic ceiling for you and what drives incremental conversion from here and what's a realistic number that we can think about you know that's sort of embedded in your guide any color there would be helpful yeah so right now 34% penetration on sock which is about half of our users so there's a few different ways we can think about this first is that we're only in English-speaking countries.

Amanda Twede Crawford, CFO

So as we expand into some of our European non-English-speaking countries, that'll improve our subscriber base. Really rolling out features is what's going to get the penetration rate up. Right now, it's pretty low on camera, where we see this as the longest LTV opportunity.

Jay Gentzkow, Head of Investor Relations

So as we roll out features, it'll become more compelling, and I think we'll see that penetration rate improve and in terms of features what can we expect and sort of what's the timing of that yeah do you want to talk about that jay yeah i mean just like any company this is a big year for ai for us the more that we can leverage the information that we're getting off our products and put it right in front of parents so they can make quick decisions about their their kids the better so that's important um on some camera features um is a is a super big focus for us this year because there's kind of already a road map for competitors out there that have been successful there so we're working on those and that will be a big focus because our attach rate for for cameras near zero percent and Pearson space is closer to 30 to 40 percent so there's a lot of tailwind for a subscriber count to go on camera and on subscription you noted monthly single-digit turn what is the opportunity to improve the retention rate over time and sort of what are the key strategies behind that I know it's still early days for you but yeah but But we're at a critical mass where we have over 115,000 subscribers, so we're getting really good information about when they do churn off. Churn's improved every quarter since launch, so we are rolling out features that are resonating with parents and now able to kind of target in the specific months after subscribing when they churn off where we want to introduce features that keep them on longer and increase our LTV and make our parents and families happy.

Operator

Yeah.

Jay Gentzkow, Head of Investor Relations

And moving on to telehealth, which is another extension of, you know, subscription, you're in early stages, but could you just talk about the opportunity that you see ahead and, you know, what are the initiatives you have to scale the telehealth side of the business? yeah I mean so we just we had a friends and family period we're really testing we just launched in app to select participants for the first time now set on our last quarter earnings call so things are going well it's right where we want to some kinks to work out but it's a big opportunity for us because today you can you can do a telehealth appointment for your kid but in most cases they're gonna tell you to go and see the doctor because they're only able to diagnose visually we have the real unlock with the dream sock data getting respiratory oxygen vital data that can help triage that appointment and then decide if you need to go to the doctor or what we see in our data is 90% over 90% of ER visits in that first year life or treat and release and they send the baby home that's a big expensive VR bill in a tough environment to take them into and so if we can help bridge that gap to get parents answers and save them some money and get better health outcomes even better so that's the opportunity this year we're gonna be you know pretty cautious with how we measure that externally because we want to make sure we get the solution right it's a big

Operator

long-term opportunity but we'll be reporting quarterly about the progress there because it's important to us yeah and babysat is another segment of your business obviously not as big but how are you thinking about the roadmap to scale babysat and you know strategically how important is it for you to you know get more additional deals with different hospitals and get that buy-in from the healthcare community.

Amanda Twede Crawford, CFO

Yeah, Babysat is our prescription device. It's the same as the DreamSock, but a doctor can prescribe it. And one of the key unlocks for us has been through hospital partnerships, so making it available for parents as they're leaving the NICU. So we have had some hospital partnerships we're working on more. With that, it is a slower channel for us. we think that there could be more opportunity in the future we're still working on it but for this year it is it is going to be immaterial it's not included in our guide but I think the key unlock is those hospital partnerships yeah and in terms of just investment cycle as you think about it how what innings are you in in terms of investments you've made like how much more do you think you still need to invest in the business to support you know additional features or or others we just would love your perspective on the sort of investment side where we are yeah I mean a lot of the major investments have already been made with the biggest one being is the getting the hardware ready for FDA clearance going through all of the clinical studies to prove safety and effectiveness that was a significant chunk of money took several years which is great because it gives us that competitive moat but moving forward it's really focusing on software feature development that's that's key and then there will always be ongoing hardware refreshes but really at this point it's like about we're focused on our core products and we're innovating within those products and we talked about channels a little bit obviously babyless you're on amazon you're with some retailers is there room to improve sort of your retail partnerships within existing partnerships can you increase shelf space and are there other retailers that you can sort of partner with in the u.s yeah i think definitely partnering closely with our retail partners can help us drive return on investment we are in all of the stores that we intend to be in there is a little bit of opportunity for door expansion like For example, we're expanding our Walmart doors this year with our Duo product, which is a really great opportunity for us and for our customer to be able to pick up our product same day. But as far as retailers that we want to work with, we're really focused on the top five largest retailers within the U.S. and feel like we're in the stores that we need to be in.

Operator

And in terms of the guidance, you noted, you know, on the last earnings calls that revised outlook also reflects more conservative sell-through view. What are key assumptions for the category demand, any promotional cadence that's different, and retailer inventory behavior that's embedded in guide, any sort of details?

Amanda Twede Crawford, CFO

Yeah. So within the sell-through guidance is really focused on improving our non-promotional run rate. which we have seen improvements versus prior year, and then really showing up at the key pillar events. This is when the customer's wallets are open. We need to be there, we need to be present, so like Prime Day, Black Friday. So it's really within the same cadence that we were last year. And then just making sure that we're also investing behind it in terms of ad placement, so we really win those key events. Yeah, and have you?

Jay Gentzkow, Head of Investor Relations

Yeah, and inventory trends, and we had communicated those on the first quarter, how some of our retail partners had reduced their inventory turns. We're expecting that to stay consistent through the end of the year and would be pleasantly surprised to the upside, but want to be conservative with where we are there.

Operator

And how do you think about sort of your pricing strategy? Is there room to sort of increase pricing? Is that a lever for you? And sort of in terms of promotions, what is the normal cadence? You mentioned the big holidays, but how are you strategically thinking about balancing promotions and AUR?

Amanda Twede Crawford, CFO

Yeah, so there is a key balance between volume and price, and we do see a lot of our volume come through promotional activity. As far as pricing changes, we don't intend to have any retail price increases. We're really mindful in tracking how our promotions perform, what kind of lift we're seeing just to make sure we're getting the right return on investment but as far as pricing goes what we've seen is really going all in for big events is critical for us because if we don't go all in the competition well right right and when you mean like go all in what are some marketing sort of strategies we can expect let's say around prime day what is a typical sort of marketing messaging and engagement that you you try to drive yeah it's really actually in the lead up to Prime Day so making sure that we're getting ahead of Prime Day so that we're top of mind for customers so we are planning to make investments upfront leading to it and then obviously during the promotional period as well yeah and how important is social media for you do try to engage more on the influences side like sort of what are key drivers for organics that word of mouth yeah component we used to spend a ton of money on influencers but what we've found is that we don't actually need to do that so what we end up doing is sending influencers and even micro influencers they're just like a free product and if we see a post going well or going viral well we can put some like dollars behind it to amplify it but we don't spend a ton on influencer marketing yeah and just going back to guidance obviously you've raised your EBITDA guidance while lowering revenue can you detail the drivers just on the margin side and where do you expect the majority of sort of the savings come from yeah as far as margin goes there's a couple of things that are helping there is our subscription offering is becoming a more meaningful relative percentage of revenue which has higher margins we also have a little bit of I mean who knows what's going on with tariffs but we were previously at 19 and 20 percent they're at 10 percent now we don't know what's we don't know the legality anyway there could be some upside there and then from an optics perspective like as we were looking at our plans we had a ton of headcount additions planned for 26 but with like how fast AI is moving we've really pulled back on that so that you see that reflected in the updated guide is that we're really leaning in and leveraging AI in a bigger way and then the last thing is just narrowing our focus so before we had a lot of initiatives going on all at the same time so we're really narrowing focus and winning those areas yeah and then that includes pulling back on some of the simultaneous global launches we had planned which were our exciting opportunities but were time intensive and expensive and and that'll trickle down to the bottom line by not doing those not that we won't in the future but just not in the near term right and just is similar to that what gives you confidence that you know you can achieve the guidance like what you sort of based on what you're seeing or sort of the key puts and takes that you can think about in the second half what gives you confidence that that you can hit the guidance yeah it's really we watch sell through carefully and it's watching the non-promotional run rates making sure that we're growing and then just tracking performance at those key pillar events we continue to grow our dollar share in the baby monitoring category so we're feeling really good about that and are

Operator

confident that the guidance we issued is something we're gonna meet yeah and we shared on the Q1 earnings call that coming into Q2 April sell-through was above 30% both for dream stock and duo that's a really good indicator coming out of what was a software Q1 of that look for the year and so and it's trended in a similar direction yeah and we obviously we we published the cell through data and we've seen your out performance versus appear what are you seeing on the competitive dynamic front you know are you seeing sort of a clear share gain in your category for you and what is driving that yeah we are seeing a clear gain for Alan I think it's our differentiation just because

Amanda Twede Crawford, CFO

we're so unique in this space we're the only brand that is FDA cleared can monitor vitals and I think that's really what's changing it for us whereas for companies that are maybe just like a fancy camera like they're struggling because they don't really have that value proposition that we have and then with our new camera being launched at 99 it becomes a no-brainer to pair with our dream sock as well we have seen a mixed shift from our sock to our duo product which is a positive thing to us and increases that LTV opportunity so I think it's multifaceted and I think it's just because we are so unique that we're continuing to drive share yeah and how do you think about sort of customer awareness of your brand did you think there's a lot of still room to to grow do a lot of people know you're the only FDA clear device like how do you approach that internally yeah awareness of our brand is extremely high most new parents have heard of outlet are familiar with it I think one opportunity though is to help parents better understand what that actually means like what does it mean to be FDA cleared and it's that we're not just like a gadget or you know a toilet we actually work we're medical grade technology at home and I think conveying that message to parents in a clear way is is probably an opportunity for us yeah and it's structurally sort of thematic that theme

Jay Gentzkow, Head of Investor Relations

that we do see is obviously focus on longevity wellness and we talked about wearables among adults how do you see that trickle down to sort of people wanting to get baby you know monitoring device do you have a way to track sort of your parents are using wearables as well like how do you sort of think about that theme just just unfolding yeah maybe not perfectly but it's it's obviously a trend that more and more of the younger generation are walking around wanting to know about their health in real time so it's only a fair assumption that they're going to want to know the same thing about their babies so we're starting to see more and more of that of the next generation really embracing what you're getting from from the duo from cam from dreamstalk to know what your baby's how your baby's feeling it may be obvious but babies two year olds three year olds can't communicate so when we wake up in the morning and we didn't have a good night's sleep we know it they can't necessarily communicate that so the more that we can give parents the tools through our products to help bridge that gap and help them know a little bit more about their kids the more value we're going to deliver yeah and we talked about international a little bit obviously you pull back on expanding into new markets but you're you still are present in some of the other you know like UK and other international markets what is your strategy there to increase that penetration rate and how do you think about sort of balancing international

Amanda Twede Crawford, CFO

versus US longer term yeah so right now in Europe we're in the low single digits in terms of penetration and you think about that compared there's just as many babies born in in Europe as in the United States so we do believe we have a big opportunity ahead and in Europe it's a little bit different than in the US because we have such high awareness in the U.S. It's really gaining awareness in those markets, primarily through social media marketing, just making sure parents know who we are and why it's important for them to buy our product.

Operator

And just out of curiosity, internally, how do you think about the birth rate in the U.S.? It's not exactly going north, right? How do you think about that category, not category, but birth rate, and how do you think your growth opportunity fits into that? I'm sure you heard those arguments, but I would love to hear internally how you're thinking about it.

Amanda Twede Crawford, CFO

Yeah, I mean, there's about 3.6 million births in the U.S., and it's been relatively flat for a while. But what's interesting, though, is parents are spending more per child than they ever have. So yes, parents are having less children, but on average, families will have two children. So we still think it's a big multi-year opportunity for us. You know, say there's like two years apart, it's still like a four to five year relationship that we can have with parents. So we're, yeah, we're well aware of that, but don't really see it as a challenge, more of an opportunity to keep parents with us for longer.

Jay Gentzkow, Head of Investor Relations

Yeah, yeah. and as you think about sort of long-term growth potential of the company what is the right framework to think about both top and bottom line growth and what is sort of your steady state margin profile look like and how would you sort of bridge from where you are today and to hit that sort of longer-term target yeah we haven't shared longer-term targets we're thinking more and more about doing that as we have better predictability with the subscription revenue and want give investors a framework of how we see the long-term business so stay tuned there but the way we think about it is we're at 11 adoption in the u.s um in our products and some of our highest adopting states are at 20 or higher so there's there's an opportunity to bring up the lower quintile states up to that 20 and the our top four states grew year over year so even those higher adopting states there's room to grow international opportunity just in the uk and Europe we're still low single digits adoption so there's a lot of room to move up to where current domestic is we just launched a new camera we think there's a lot of opportunity in the market to take to continue to take share and then the subscription opportunity we're a year into it the growth has been above our expectations and that's really just been on dream stock features so roll out more features for camera we just expanded internationally in December in English speaking company countries so room to grow there chipping away at the medical

Amanda Twede Crawford, CFO

opportunity that's a longer term one but there's no no babies that need our technology more than the high-risk ones coming out of the NICU and then telehealth is is here and while we're going to be conservative with with numbers this year we think that's a real opportunity that's going to make a difference next year yeah yeah just to add and I as subscription becomes a morning a more meaningful relative proportion of revenue we should start to see margins improve we're also working on like several hardware cost down initiatives to improve the hardware margin so we definitely see margin improvement over time as well that'll trickle down to the bottom line and with improved profitability and eventually cash flow positivity

Operator

yeah and you mentioned april obviously sell through improved but are you seeing any sort of headwind from the macro noise on the parent sort of maybe pausing the spend or they're waiting for bigger promotions is there any sort of difference nothing different than what has been there persistently last you know six nine months like you know parents can plan ahead to buy our products so the promotional periods are really important as Amanda detailed but nothing nothing different in may versus what we were seeing and yeah a few months ago yeah and maybe for for the audience how difficult is it for someone to get fda cleared like from a competitive mode standpoint

Amanda Twede Crawford, CFO

right like to to give us a better picture of that realistically how difficult is that to get fda clear with someone to try to knock off your product right i mean owlet started back in 2012 2013 and by By the time we started the FDA clearance, we were on the third generation. So you have to think that we had billions, possibly trillions of hours of heartbeats, sleep data. We had to get the algorithm right. There was so much work that went into just the product. Then you have to do the clinical studies to prove safety and accuracy.

Jay Gentzkow, Head of Investor Relations

For BabySat, we had to compare to Mossimo. for DreamSock we were a de novo so it was the first of its kind there's it took several years several iterations and multi millions of dollars that we feel like we've got this moat for quite a while and then you got to have a product that really resonates with parents we had a competitor Mossimo that came into the market they got FDA approval obviously large company big pull stock symmetry company that had a lot of resources got FDA approval they didn't last in the market past nine months because their product didn't resonate with investors they didn't know the consumer space so we feel like we have such real strong differentiation the space to kind of propel that to our

Amanda Twede Crawford, CFO

other growth opportunities and then you mentioned obviously you have very full breadth of data that you've collected over the years what is the opportunity with with the data set that you have yeah it's really exciting we believe we have the largest set of pediatric data on the planet there's no nobody else who's been monitoring babies at home like we have, it's a really exciting opportunity to unlock, especially when we think about AI and potential for extracting pieces of data that can really help parents. So there are some things that we're working on. One of the key things, though, is making sure that we have credible tokenized data. So while we have a ton of historical data, one of the things we're also working on is like a data registry where parents can enroll and then we can compare our outlet babies to the rest of the population so that we can make certain claims for various outcomes so there's a lot of information that we can already see in our data set but this will really help us validate those claims and allow us to make them right and as we close out what do you think is the most misunderstood by investors at this point and what do you want the audience to take away from today's session do you want to take that jay yeah i mean i'll just hit home the uh the the real moat we have with our fda approval and how we're able to leverage that to

Jay Gentzkow, Head of Investor Relations

um you know deliver more information back to parents and then like as i outlined uh we're 120 person company um we're micro cap but there's a lot of different ways to win here from a growth perspective and we're accelerating profitability in the process so flies under the radar because we're small but it's a it's a big opportunity that we're really optimistic about yeah yeah I think the other side of it is just how far we can take this really I mean being at 11% adoption in the US there's just a lot of room to grow I think that there's more that we could do following like that

Amanda Twede Crawford, CFO

that I just talked about like different claims that we could make and possibly I don't want to commit to this but like there's possible for like insurance reimbursement broadly and things like that just different outcomes that we think that this could be a whole lot bigger well thank you Jay and Amanda for your time really appreciate your engagement thank you thank you