Owlet Q1 2024 Earnings Report

Owlet EPS Results

• Actual EPS: -$0.39
• Consensus EPS: -$0.14
• Beat/Miss: Missed by -$0.25
• One Year Ago EPS: N/A

Owlet Revenue Results

• Actual Revenue: $14.80 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Owlet Announcement Details

• Quarter: Q1 2024
• Date: 5/6/2024
• Time: N/A
• Conference Call Date: Monday, May 6, 2024
• Conference Call Time: 4:30PM ET

Owlet (NYSE:OWLT) Baby Care, Inc. is a consumer health technology company specializing in the design and manufacture of smart baby monitoring products. The company’s flagship device, the Owlet Smart Sock, is a wearable monitor that tracks a newborn’s heart rate and oxygen saturation levels and transmits real-time data to a mobile app. Owlet has since expanded its product suite to include the Owlet Cam, an HD video monitor with audio and motion alerts, and the Dream Sock, a non-wearable device that collects sleep metrics to help parents understand and improve their baby’s rest patterns.

Founded in 2013 by engineer and father Kurt Workman, Owlet is headquartered in Lehi, Utah. The company was created in response to the personal loss Workman experienced, with a mission to provide parents greater visibility into their child’s well-being. Since its inception, Owlet has pursued product innovation and safety certifications, including partnerships with pediatric specialists, and completed a public listing in 2021. Owlet’s solutions are available directly online and through select retail partners across the United States, Canada, the United Kingdom, and parts of Europe.

In addition to its hardware offerings, Owlet provides a subscription-based membership service that delivers enhanced analytics, personalized insights and cloud storage of historical data. The company’s integrated ecosystem of devices and digital services is aimed at building a comprehensive infant wellness platform. Leadership includes founder Kurt Workman and a management team with backgrounds spanning medical device development, software engineering and consumer electronics.

Owlet Q1 2024 Earnings Call Transcript

Key Takeaways

• Owlet delivered a strong Q1 2024 with gross billings of $18.4 million (up 48% YoY) and net revenue of $14.8 million (up 37% YoY).
• Gross margin expanded 500 basis points to 44.4% while operating expenses fell 19%, driving a 46% improvement in adjusted EBITDA loss year over year.
• Owlet secured FDA clearance for DreamSock and obtained CE Medical authorization in Europe, bolstering its position as a leader in infant health monitoring and unlocking EU distribution.
• The company launched BabySat in medical channels through a partnership with AdaptHealth and integrated with major insurers (Aetna, Cigna, United, Blue Cross) to enable insurance reimbursement.
• A new subscription service leveraging over one trillion recorded heartbeats is on track for a summer beta, aiming to extend customer lifetime value with personalized health and sleep insights.

Presentation

[Operator]

Good afternoon. Thank you for attending the Owlet first quarter 2024 earnings call. My name is Cameron, and I'll 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. I would now like to pass the conference over to your host, Mike Cavanaugh, Investor Relations. You may proceed.

[Mike Cavanaugh, Head of Investor Relations at Owlet]

Good afternoon, everyone. Thank you for joining us today for Owlet Baby Care Incorporated's first quarter 2024 earnings call. We appreciate your time and interest in our company. Earlier today, Owlet Incorporated released financial results for the quarter and full year, ended March 30, 2024. The release is currently available on the company's website at www.investors.owletcare.com. Our speakers for today's call are Kurt Workman, Owlet's Co-Founder and Chief Executive Officer, and Kate Scolnick, our Chief Financial Officer. Kurt will begin with an overview of our performance and key developments, followed by Kate, who will provide a detailed review of our financial results. Following their remarks, we will open the call for your questions. Before we get started, we would like to remind participants that today's discussion will contain forward-looking statements based on current expectations.

[Mike Cavanaugh, Head of Investor Relations at Owlet]

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 for the fiscal year ended December 31, 2024. 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, I would now like to turn the call over to our CEO, Kurt Workman.

[Kurt Workman, Co-Founder and CEO at Owlet]

Thanks, Mike. And also joining us on today's call is Jonathan Harris, Owlet's President and Chief Revenue Officer. Good afternoon, everyone, and thank you for joining Owlet's earnings call today. As always, we appreciate your ongoing support of Owlet. We're starting off the year with strong double-digit revenue and sell-through growth, gross margin expansion, significant operating cost savings, and adjusted EBITDA improvement over last year. In addition to our significant Q1 operational achievements, we met our business objectives in our healthcare business as we launched our go-to-market channels to include medical device sales and have now integrated our first telehealth partnerships with Wheel on owletcare.com. Our recent announcement of CE medical authorization in Europe, in addition to the recent FDA clearances, are a powerful endorsement of our technology, establishing Owlet as a leader in safe and effective health monitoring for infants.

[Kurt Workman, Co-Founder and CEO at Owlet]

There's robust and discernible momentum for Owlet in the market. We believe this year is the turning point, propelling us to our vision of a safe and healthy journey for every baby and a sustainable growth company. In 2024, we have three main growth objectives. First, with the first FDA-cleared monitor on the market, now is the time to drive significant adoption of the Dream Sock. Second, with the approval of BabySat, we are opening medical distribution channels to directly serve the babies who need the convenience and reliability of Owlet the very most with insurance reimbursement. Finally, we will be launching our new subscription service this year, leveraging our vast and growing data set to help guide parents through health and sleep challenges they face when caring for their newborn.

[Kurt Workman, Co-Founder and CEO at Owlet]

I'll turn this time over to Jonathan Harris, our President and Chief Revenue Officer, to talk about the first two areas of focus for 2024: accelerating adoption and our new medical sales channels.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

Thanks, Kurt. I've been fortunate enough to be a part of numerous hypergrowth companies, such as GoPro and Jawbone, and some of the key parallels I'm seeing with Owlet are the passion for the brand by the core audience and a strong word-of-mouth, sharing their stories with the global audience. And as Kurt just mentioned, we have some really strong momentum building, not only in the U.S., but across the globe. I'd like to start with adoption. The response to the new FDA-cleared Dream Sock here in the U.S. has been outstanding. We've witnessed strong parental engagement, with over 30 million organic views of our video content across TikTok and Facebook in the first quarter and over 1.3 million followers across our social channels.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

The early response to the FDA clearance of Dream Sock has been strong, with sell-through achieving over 60% growth compared to Q1 of 2023. Customer satisfaction supports this growth, with NPS scores exceeding 70, and Dream Sock hitting an all-time high in this category. We achieved this market enthusiasm while maintaining strong growth trajectory, including 50% gross billings growth and 35% revenue growth over Q1 last year. Here in the US, our partnerships with major retailers, Target and Walmart, are growing, with expanded merchandising and placements to bring the Owlet experience to life. Specifically, we are seeing sell-through at Target increase by over 31% year-over-year, and our Babylist registries grew at over 64% versus the previous year, proving our messaging is resonating with expecting parents.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

Owlet is still in the beginning stages of growth for Dream Sock, with about 8% of the 3.6 million births every year going home with an Owlet Sock. We believe that just like car seats, breast pumps, and strollers, every baby will have access to health sensing technology at home. I'm also very excited to announce that we recently obtained CE medical clearance, clearing the way for Owlet to increase reach in the significant European market, where over 3.8 million babies are born every year. Although it's extremely well-positioned to take advantage of our Europe clearance with key retail partnerships across the European market, U.K., and into Australia, where we're already seeing sell-through up significantly. For example, Baby Bunting, Australia's largest baby retailer, we saw year-over-year sell-through increase of over 200% of Owlet products.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

Our partners are helping us share our story globally, within their markets, and in their own languages. We expect continued growth and momentum as we launch Dream Sock as a medical device across these regions. This exciting growth opportunity comes on the back of continuing operating discipline. In 2023, we honed our efficiency, showing an impressive near 80% reduction in CPA, cost per acquisition, compared to prior periods, down to a lean $22. This efficiency extends throughout operations, improving our gross margin by 500 basis points over Q1 2023. We've also maintained disciplined control over operating expenses, holding steady at roughly $10 million per quarter, excluding stock-based compensation. All of this demonstrates our commitment to maximizing growth while moving decisively towards profitability. Secondly, opening new medical channels. In a similar vein, the response of pediatricians to Owlet's BabySat has also been overwhelmingly positive.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

In the first three months, we've seen hundreds of pediatricians prescribing BabySat. This feedback we are receiving from doctor tells us that BabySat is a powerful new tool, which enables not only remote monitoring of babies under their care, but also informs more effective ongoing disease management of various conditions. We launched our partnership with AdaptHealth in Q1 to expand our distribution in medical channels. AdaptHealth serves as a cornerstone for successfully entering this vital market. We've integrated with all major insurance plans, including Aetna, Cigna, United, and many of the Blue Cross networks, removing barriers and ensuring families can access BabySat when they need it most. We're also streamlining adoption through partnerships with providers like Wheel, offering telehealth services directly through owletcare.com for prescription access.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

Parents can now seamlessly get a prescription and submit for reimbursement through the Owlet website, with nearly 70% of private insurers integrated with BabySat. AdaptHealth then handles all the verification and fulfillment of the BabySat device as a nationwide DME. We've also begun educational teach-ins to AdaptHealth's large sales force with relationships across over 100 hospitals. We expect this channel will take some time to mature, but we see this as a very large opportunity to offer the families with medical necessity, our innovative technology reimbursed through insurance. In 2024, we'll continue to add new distribution partners to help us reach every baby as they leave the hospital. I'll now turn it back over to Kurt to talk about our product development efforts with subscription.

[Kurt Workman, Co-Founder and CEO at Owlet]

Thanks, Jonathan. In addition to our channel expansion, we're also focused on driving additional value to our customers through a new subscription service. Our unparalleled data set, informed by capturing over 1 trillion baby heartbeats, provides deep insights into infant health and sleep, and we're unlocking its potential. Parents lose over 44 nights of sleep in the first year alone, and there's over 92 million healthcare visits for kids 0-4 years old. When navigating these challenges, parents want to know what's normal and when they need to get professional support. Parents want access to information that can help them better navigate when to visit the doctor and when to stay home, and they want the ability to seamlessly share that information to a doctor from the comfort of their home. They also want information that can help them personalize sleep coaching for their baby.

[Kurt Workman, Co-Founder and CEO at Owlet]

Health and sleep are the fundamental concerns of every parent. Our subscription service will analyze this data to offer parents personalized recommendations and support. Engineering work on the service is progressing rapidly, and we expect a beta launch this summer that parents can subscribe to for an additional monthly fee. We believe this subscription will address real pain points for families, creating a compelling and valuable monthly offering. Apart from offering data and insights to parents during the initial year of their child's life, we firmly believe that our products and services can extend their value well into the toddler years and beyond. By focusing on core parenting pain points in health and sleep, and leveraging our data to drive continued releases of software features, we believe this can expand our TAM and significantly extend our LTV per customer. Owlet is in a stronger position than ever.

[Kurt Workman, Co-Founder and CEO at Owlet]

We're a growth-oriented company, operating efficiently and bringing innovative solutions that address the fundamental needs of parents. With our landmark FDA clearances, we're established as a pioneer in infant health technology. This unique set of circumstances has the company poised for success, and we continue to deliver value for our families and stakeholders alike. Thank you. We're excited to share this incredible journey with you. I'm now gonna turn the time over to Kate for the financials.

[Kate Scolnick, CFO at Owlet]

Thank you, Kurt, and thanks to everyone joining us today. In Q1 2024, Owlet demonstrated strong financial performance. I'll spend the next few minutes walking through Owlet's key financial metrics and providing some additional detail. Gross billings for the first quarter were approximately $18.4 million, up over 48% year-over-year. Product promotions and discounts were $2.2 million, and returns and allowance reserves were $1.4 million, approximately 8% of gross billings and within our average range. Q1 net revenue, which includes promotions, discounts, and returns and allowances, was approximately $14.8 million, up over 37% year-over-year.

[Kate Scolnick, CFO at Owlet]

... Revenue growth was primarily driven by higher sales of Dream Sock products, reflecting an increase in consumer demand and sell-through as compared to the same period in the prior year. Our gross margin for the first quarter was approximately 44.4%, from 38.7% margins in Q1 of last year. Gross margins increased year-over-year, primarily due to higher revenue and lower direct products and fulfillment costs. During the quarter, we experienced some cost of goods expense impact from elevated transportation costs related to the global disruptions in inventory routing. Along with other companies seeking shipping alternatives, we're working to mitigate these factors. Operating expenses in the first quarter were approximately $12.3 million, including stock-based compensation of $2.2 million, representing a 19% decrease in operating expenses year-over-year.

[Kate Scolnick, CFO at Owlet]

Operating costs decreased year-over-year, primarily due to transaction costs and lower spend on G&A to support the business. Excluding stock-based compensation, Q1 operating expenses were approximately $10.1 million. First quarter net income was approximately $3.3 million for the quarter, compared to a net income loss of approximately $11.9 million in Q1 2023. Net income in the first quarter of 2024 was primarily driven by Owlet demonstrating stronger operating results over last year, and a gain related to the company's common stock warrants outstanding of approximately $9.2 million from a decrease in the fair value of common stock warrants outstanding. This compared to a gain of approximately $1.9 million in the fair value of common stock warrants outstanding in the first quarter of 2023.

[Kate Scolnick, CFO at Owlet]

Adjusted EBITDA loss for the first quarter was approximately $3.1 million, improving approximately 46% from adjusted EBITDA loss of approximately $5.8 million in Q1 of last year. Turning to the balance sheet, Q1 ended with approximately $18.4 million in cash and cash equivalents, including the $9 million financing announced in February. We're beginning the year with good financial flexibility to execute on our 2024 growth initiatives and the necessary working capital resources to meet the growing customer demand for FDA-cleared products. Remain focused on executing on our strategic initiatives to further strengthen our commercial and financial performance in 2024, and the year is off to a strong start. Looking ahead, we will be refraining from providing specific quarterly revenue guidance.

[Kate Scolnick, CFO at Owlet]

We are focused on executing on the core business activities in 2024 that will maximize the following initiatives: supporting Dream product commercialization globally and driving continual balance of sell-in and sell-through consumer retail inventory. From a sell-in linearity perspective, we anticipate a seasonal sell-in revenue increase from Q1 -Q2 for Mother's Day holiday promotions and Prime Day. Following Q2, sell-in to retailers for the November, December holiday seasonal promotions usually takes place in Q3. Continuing to make decisive strides in BabySat commercialization with new DME partnerships and Wheel integration on owletcare.com. As a reminder, we anticipate BabySat product revenue will be ramping in 2024 as we develop these partnerships and will align for revenue impact in 2025.

[Kate Scolnick, CFO at Owlet]

Focusing operationally on driving gross margins within our target range of 45%-50% through unit volume, product mix, and operational efficiencies, and driving leverage in our business operations towards breakeven and sustainable profitability. Through 2024, we are targeting operating expenses, excluding stock-based compensation, between $10 million-$12 million per quarter. With that, I'll turn the call over to the Q&A portion. Operator, please open up the call for questions.

[Operator]

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question, and we will pause here briefly as questions are registered. And the first question is from the line of Charles Rhyee with TD Cowen. You may proceed.

[Charles Rhyee, Managing Director at TD Cowen]

Yeah, thanks. Thanks for taking the questions. Hey, wanted to talk about the quarter itself. You know, obviously, you know, the gross billings growth 50%, you know, sounds very strong. Just curious, obviously, we're kind of coming off sort of depressed levels. If you were to compare that to levels prior to the FDA warning letter, how would that compare? I'm just trying to get a sense on, are we back to pre-warning letter levels yet?

[Kurt Workman, Co-Founder and CEO at Owlet]

I think we're getting really close, Charles. Thanks for the question, and I'll let Kate kind of follow on with this. But yeah, we're getting closer to that. I definitely wouldn't say Q1 is all the way back to Smart Sock levels, but we're seeing the demand. The demand's there, we're seeing the growth, and we believe that we'll be able to surpass that, but we're not quite there yet.

[Kate Scolnick, CFO at Owlet]

Yeah, I agree with Kurt's comment, too. And yeah, agree.

[Charles Rhyee, Managing Director at TD Cowen]

Yeah, I think the-

[Kurt Workman, Co-Founder and CEO at Owlet]

And part of that, Charles, is that we're doing a lot of work.

[Charles Rhyee, Managing Director at TD Cowen]

Mm-hmm.

[Kurt Workman, Co-Founder and CEO at Owlet]

I was just gonna say, we're doing a lot of work to build the word of mouth. This quarter is kind of, we launched both devices at the beginning of Q1 and have done a ton of work to build demand and word of mouth in the market, and we're seeing that really take hold. We're building the medical distribution channels. We're updating POP and all the retail channels. We're updating our registry programs. We're seeing registries grow.... So all the signs point in the right direction, and this is our first quarter kind of back in the market with now the FDA clearance.

[Charles Rhyee, Managing Director at TD Cowen]

Got it. And I guess maybe on the BabySat side, it's good to hear sort of the positive commentary on BabySat and physicians already looking to prescribe. You know, maybe talk a little bit about sort of your DME partnership with AdaptHealth here. Is that fully up and running then? Are physicians able to get access to the product? And given sort of that commentary, I know, Kate, you kind of mentioned that you still can expect really contribution more of a 2025 event. Any reason why we couldn't see more of a benefit this year?

[Kurt Workman, Co-Founder and CEO at Owlet]

Jonathan, do you want to take that one?

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

Jonathan, I'll take. I'll take. Yeah, I'll take the first part. Charles, thank you for the question. Yes, so we are up, fully up and running. We launched with AdaptHealth at the beginning of Q1, and then we launched with our Wheel integration, our telemed for prescription. So we are seeing those numbers increase dramatically. In addition, we are beginning at the early stages of healthcare reimbursement, insurance reimbursement, and we really see that as a driving factor. So AdaptHealth has been a fantastic partner, really helping us get up and running. But as you know, the medical community and healthcare takes a little bit longer than consumer, so we're definitely building that, and we're driving it to be conservative, but we're very optimistic about where we're going and the direction we're heading, and the feedback we're hearing so far.

[Charles Rhyee, Managing Director at TD Cowen]

Got it. And, and just to be clear, there's existing reimbursement codes for... that you, you can apply for the BabySat, right? You're, you're not waiting for the creation of any new codes, are you?

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

No. No, that is totally correct.

[Charles Rhyee, Managing Director at TD Cowen]

Okay.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

What we're doing now is just bringing on more insurance partners.

[Charles Rhyee, Managing Director at TD Cowen]

Okay, awesome. And, and then, Kate, can you remind me, you talked about sort of promotion level. Obviously, we're going to have greater promotions in Q2 for Mother's Day and, and ahead of Prime Day. Can you remind me, you know, on a relative basis, I think you said for 1Q, promotions were about $2.2 million. You know, does that double in 2Q? Like, how should we think about, sort of net revenue in 2Q relative to 1Q, perhaps?

[Kate Scolnick, CFO at Owlet]

Yeah. Usually, what we do is, you know, as it relates to promotions, we take a reserve, just depending. And usually, it just depends on what we get the- when we do the timing, in, in, as a... You know, what we've talked about, too, is that we have Mother's Day, during the time. So from a sequential standpoint, the big swing factor, too, is that depending on when we load in for Prime Day, that can also have an impact-

[Charles Rhyee, Managing Director at TD Cowen]

Mm-hmm

[Kate Scolnick, CFO at Owlet]

... for Q2, so our sequential growth there. But where we've averaged, just kind of as it relates to that kind of Q1, or sorry, the difference between on the growth and the net, you know, we've talked about that being kind of average on the 8% difference, just in that, that walk. But Q1-Q2 sequentially-

[Charles Rhyee, Managing Director at TD Cowen]

Sure

[Kate Scolnick, CFO at Owlet]

... I'd say that, we, you know, we'll expect to see that we'll have, you know, probably back to a, a pretty healthy run rate from Q1-Q2.

[Charles Rhyee, Managing Director at TD Cowen]

For revenue?

[Kate Scolnick, CFO at Owlet]

Yes. Mm-hmm, for gross sales.

[Charles Rhyee, Managing Director at TD Cowen]

Yes. Okay. All right, and then if I could ask, obviously, there was an announcement, I think today, Masimo just also received that the approval for an over-the-counter monitoring product. Maybe can you talk about sort of how a second product in the market would mean for you guys? Could that be actually a good thing because the category itself is growing, maybe gives you something to compare yourself against? You know, maybe thoughts on that. And then maybe just remind us sort of how your relationships with Target and, you know, Amazon work. Is there any exclusivity with Target, perhaps, that would keep the Masimo product off the shelves? Or, you know, any kind of color there would be helpful. Thanks.

[Kurt Workman, Co-Founder and CEO at Owlet]

Yeah. Thanks, Charles. I'll take the first part, and then Jonathan, if you want to jump in at the end. I, this is a massive market. We, we mentioned in the call today, there's 3.6 million babies born every year in the U.S., 3.8 million babies born in Europe. Owlet is, you know, has built this category. We created it, we're expanding it, and, we're leading it. We're in the market with two FDA-cleared products. We just announced our CE-made mark. We have the highest levels of brand awareness. We have an amazing product. We believe we have the most unique and valuable feature set, trusted technology with the FDA clearance. We're clearly the leader in the category. We've also developed a large distribution footprint with channel partners.

[Kurt Workman, Co-Founder and CEO at Owlet]

We expect, you know, the other health monitors in our category will need the same approvals. And, you know, Masimo coming in, I think, is validation of the category for sure. We believe that eventually every baby will have access to health sensing technology like Owlet, and that we will lead that category. So I think it's a good sign. We're also addressing any IP concerns where we see them. Most importantly, we're going to do what we've always done, which is leading the category and driving innovation for parents. In terms of the distribution with Target and Walmart and some of these other retailers, maybe I'll just finish on that one. You know, Owlet has, we've negotiated improved placements across all of these channels. We have the largest footprint.

[Kurt Workman, Co-Founder and CEO at Owlet]

I think we have the strongest, we definitely have the strongest brand awareness and reputation. When parents come in to buy a health monitor, they're thinking about Owlet, and I think that's the most important thing we'll focus on. Jonathan, any other comments?

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

No, I would just expand on the relationship and the partnership with our major retailers, not only here in the U.S., but also internationally. And really driving that relationship and the Owlet brand and word-of-mouth amongst parents. Not only, you know, the parents who are using our products, but them speaking to new parents coming in, you know, newly expecting parents, is a strong, strong driver for us.

[Charles Rhyee, Managing Director at TD Cowen]

Great. And maybe, Kate, one last question for you here is, I know you're not really giving, you know, formal full-year guidance, but maybe just to help folks think about sort of trajectories in terms of revenue as we move through the course of this year. Sort of any high-level thoughts as you think about, you know, this year and then going forward. And then obviously, with the profitability, you know, I think last quarter, you know, ex one-time items, it would have been a positive. This quarter, we're still down $2 million. Maybe give us a sense for trajectory on profitability as well. That'd be helpful. Thanks.

[Kate Scolnick, CFO at Owlet]

Yep. You know, we'd like to see... You know, we really feel like we're starting out this year with a very strong start, obviously, with the 2 domestic clearances for both of our core products. And then, we just announced the CE mark as well internationally, which is very important for our business. So I think those opportunities are very important to us, as Kurt mentioned, and we're gonna be layering in a new product with subscription. So I think we'd like to be ahead of, you know, well ahead of where we were last year. We had specific headwinds, you know, outside of waiting for those clearances. We had specific headwinds last year with some customers that we do not anticipate repeating this year as well. So strong double-digit growth in revenue is what we're striving for.

[Kate Scolnick, CFO at Owlet]

Q2 and Q3 will be very telling for those opportunities. But more importantly, the benefit of setting up BabySat with the partnerships that Jonathan mentioned and setting up subscription with the launch here this summer is what we see the momentum for 2025, beyond where we get to in 2024. So we're really excited about what that kind of puts us even further into going out. In terms of the profitability opportunity, we're very focused on getting to on the other side of the adjusted EBITDA side. We have maintained this kind of $10 million-$12 million on the actual operating spend, excluding the stock-based compensation.

[Kate Scolnick, CFO at Owlet]

There's a little bit that we're spending, just around some very discrete items, but other than that, we're really trying to control costs as it relates to employee costs and hiring and, and anything that's discretionary. So as we move into these, opportunities around revenue, I think that that's where the, the leverage of the model kicks in. So we're, we're really trying to get there as we move through the year, and that, that will be the leveler, getting into these, these higher growth ranges for revenue.

[Charles Rhyee, Managing Director at TD Cowen]

Great. Appreciate all the comments. Thanks, everyone.

[Operator]

Thank you, Charles. We will now hand the call back over to Mike Cavanaugh, who will share some questions received via email.

[Mike Cavanaugh, Head of Investor Relations at Owlet]

Thanks, operator. First question is for Kate. Can you please give us an update on your investor outreach efforts and how you're engaging investors in the Owlet stock?

[Kate Scolnick, CFO at Owlet]

Yeah, sure. So, as we've just been talking about, first and foremost, is delivering strong operational results and communicating on that execution. We've been talking about our financial results, our growth objectives, and accomplishments around our products, around our channels, both domestically and internationally, our regulatory clearances, and then growing that investor engagement. So we've been growing our presence both virtually and in person. We've announced a number of conferences we've been at in Q1 and Q2 here, so look for more opportunities as we head through the year.

[Mike Cavanaugh, Head of Investor Relations at Owlet]

Great. Thanks, Kate. Next question for the team: Can you please discuss the growth plan in terms of new product pipeline, new channels, and new marketing efforts?

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

Yeah, I'll, I'll take that one. This is Jonathan. I think we answered a lot of this, but, reiterating, really focused on the retailers that, that we have today. We're in process of expanding our in-store merchandising throughout Target and over 1,000 Walmart stores to really bring to life the Owlet experience for parents and newly expecting parents. Additionally, we're working, increasing our marketing efforts, focused on sharing parent stories from our customers, with new parents, showcasing how Owlet helped provide better parenting insights and peace of mind. So really sharing those story, the storytelling of our existing parents and customers. Growing channels, we've talked a little bit about international, continuing to strengthen and grow international, which is critically important to us as well with our CE clearance. And medical sales channels.

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

We're presently partnered with AdaptHealth, a national DME, and that will provide direct access to BabySat, and in many cases, full insurance reimbursement for the BabySat product to parents. Lastly, subscription service. Lengthening our LTV, offering data and insight to parents during the initial year of their child's life. We firmly believe that our products and service can extend their value well into the toddler years and beyond. So, we really believe that we have a strong partnership on distribution platform here and internationally, continuing to expand medical channels, and build out our subscription services.

[Mike Cavanaugh, Head of Investor Relations at Owlet]

Great. Thanks, Jonathan. And last question for the team. So, can you tell us where you are in terms of working with health insurer, insurance providers, to secure reimbursement for BabySat?

[Jonathan Harris, President and Chief Revenue Officer at Owlet]

Yes. As we previously mentioned, through AdaptHealth with our BabySat product, we've integrated with many major insurance plans, including Aetna, Cigna, United, and many of the Blue Cross networks. So we're focused on expanding our DME and provider partnerships, as well as integrating with Medicare and Medicaid, to expand the opportunity for every baby who needs Owlet to have the ability to have it.

[Mike Cavanaugh, Head of Investor Relations at Owlet]

Great, thanks, Jonathan. That is, that is all the questions we have. I think with that, we can turn it back over to Kurt Workman for final remarks.

[Kurt Workman, Co-Founder and CEO at Owlet]

Thanks, Mike. Thanks for joining us today. It's been an exciting journey for Owlet, and we are grateful for the continued support. I'd like to take this opportunity to thank our talented team for their incredible dedication and hard work. Your commitment to our mission and drive for innovation is just inspiring. We've achieved significant milestones this quarter, demonstrating strong financial performance and continued growth. As we move forward, we remain focused on executing our strategic initiatives to further strengthen our commercial and financial performance, and we're confident that our innovative solutions, unwavering commitment to quality, and passionate team will continue to drive success for Owlet. Thank you again for your trust and partnership.

Participants

Executives

• Jonathan Harris, President and Chief Revenue Officer
• Kate Scolnick, CFO
• Kurt Workman, Co-Founder and CEO
• Mike Cavanaugh, Head of Investor Relations

Analysts

• Charles Rhyee, Managing Director at TD Cowen