Owlet Q2 2026 Earnings Report

Owlet EPS Results

• Actual EPS: -$0.05
• Consensus EPS: -$0.09
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

Owlet Revenue Results

• Actual Revenue: $33.87 million
• Expected Revenue: $31.71 million
• Beat/Miss: Beat by +$2.16 million
• YoY Revenue Growth: N/A

Owlet Announcement Details

• Quarter: Q2 2026
• Date: 8/11/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, August 11, 2026
• 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 Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q2 results included revenue of $33.9 million, up 29.9% year over year, while adjusted EBITDA excluding the tariff refund reached a record $2.9 million.
• Positive Sentiment: Owlet360 momentum continued, with 130,000 paying subscribers, $3.2 million in subscription revenue, and Dream Sock subscription penetration rising to 36% in the U.S.; web-based checkout and point-of-purchase enrollment could improve conversion and subscription margins over time.
• Positive Sentiment: International revenue increased 214% year over year to $5.7 million, while U.S. sell-through excluding Prime Day rose 20%; management also expects Amazon’s FDA-clearance enforcement for vital-sign monitors to provide a longer-term competitive advantage.
• Negative Sentiment: Management expects Q3 revenue to decline sequentially and year over year because of aggressive competitor discounting ahead of Amazon’s August 10 deadline and a difficult comparison with last year’s product launches; broader promotional events also indicate more cautious consumer spending.
• Neutral Sentiment: Full-year revenue guidance was reaffirmed at $118 million-$122 million, while adjusted EBITDA guidance increased to $10.75 million-$12.75 million and gross-margin guidance to 53%-55%, with the upgrades driven entirely by one-time tariff refunds rather than improved underlying expectations.

Presentation

[Operator]

I will now hand the conference over to Jay Gentzkow, Investor Relations. Jay, please go ahead.

[Jay Gentzkow, Vice President of Investor Relations at Owlet]

Good afternoon, everyone, and thank you for joining us. Earlier today, Owlet released financial results for the second quarter ended June 30, 2026. I am pleased to be joined today by Kurt Workman, Owlet's President, CEO, and Co-Founder, and Amanda Twede Crawford, Owlet's CFO. 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 Presentation section of our Investor Relations website at investors.owletcare.com.

[Jay Gentzkow, Vice President of Investor Relations at Owlet]

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 12 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 would like to refer you to our safe harbor disclaimer on slide three of the presentation.

[Jay Gentzkow, Vice President of Investor Relations at Owlet]

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, as updated in the company's quarterly reports on Form 10-Q and other filings with the SEC. 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 is my pleasure to hand it off to Kurt.

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

Thanks, Jay, and good afternoon, everyone. Thank you for joining us. Before we get to our record Q2 results, I want to step back and discuss where we are taking this business, the platform we are building to support the parenting journey, and the opportunity we see over the coming years. Every day, Owlet is evolving more and more into a data and services platform for the earliest years of a child's life. Our products capture meaningful and unique information about a baby's sleep and health, turning that data into insights, guidance, and peace of mind for parents. Our vision is to bring together the best of what parents use today into a single Owlet experience: sleep, health monitoring, camera, and telehealth, for a fraction of what separate apps and devices cost today.

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

Over time, we want all of our customers to get the best of what Owlet's platform has to offer. Because engaging with Owlet increasingly means engaging with the service, not just the device. That leads to how we're thinking about the opportunity, and I want to keep our objectives simple. First, firmly position Owlet as a data and services platform through subscription. Second, win roughly one million new customers per year.

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

And third, keep those families with us for at least two years. Put those together and it points towards a recurring base over time of over one million subscribers. This is the evolution from a one-time hardware-centric sale into a durable multi-year subscription relationship, and it's what the entire company is now organized around. Let me give some more color to each. First, firmly position Owlet as a data and services platform through subscription.

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

Subscription is how we're positioning Owlet from a device families buy into a platform they rely on. We've clearly validated the subscription opportunity since launch early last year. Today, over 30% of new U.S. customers subscribe to Owlet360 in the first year. This is an ideal category for a multi-year relationship since the intensity of parenting lasts for years, not just months. Our goal is to make subscription the obvious choice.

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

So we're expanding where parents can enroll, moving beyond in-app sign up and toward the point of sale and testing offers and bundles that make enrolling in subscription at purchase a no-brainer. Another lever in subscription value proposition is inside Owlet360 itself. Every new feature we add to sleep insights, camera intelligence, and telehealth enables us to partner with families for longer and is designed to extend our lifetime value.

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

Second, win roughly one million new customers per year. This year alone, Owlet will sell to 600,000 to 700,000 new customers. Owlet's competitive moat gives us a dominant and secure position in our category. We're the first and only FDA-cleared baby monitor on the market. We're consistently the market leader in dollars spent in the category, and we've built a brand that parents deeply trust in a pediatric health and wellness market that's still early. Given the size of our funnel, the consideration for Owlet is already massive. Each year, we see roughly four million unique visitors to owletcare.com and over one million baby registry additions.

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

The opportunity isn't to invent demand, it's to convert more of the demand that already exists into new customers. Millions of parents are already considering Owlet, and our job is to move more of them from consideration to purchase.

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

Subscription is what makes this possible. Because a subscriber's lifetime value is designed to extend well beyond the initial sale, we're creating offerings that increase overall value, save families money upfront, and still grows the economics of each customer over time. That is a winning funnel to drive conversion and LTV simultaneously. And finally, keeping families with us for at least two years. Today, the average subscriber length of use is about one year. Our goal is to continue to make Owlet more valuable the longer a family uses it, carrying them past the newborn window when safety is top of mind into years one and two, when sleep, health, and wellness take focus. Owlet360 subscription is the vehicle, a digital translator that turns real-time data from our products into insights for parents.

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

Many already use the camera well beyond 24 months, so delivering the best of Owlet to every family naturally extends lifetime value. Underneath it all is what we believe is the largest pediatric health data set in the world. That foundation enables us to build increasingly personalized experiences across sleep, health, and wellness, using AI to turn data into meaningful insights and guidance throughout the parenting journey. That's a very hard thing to walk away from. Our long-term objective is to build toward a recurring base of more than one million subscribers by expanding our customer base, increasing subscription adoption, and extending subscriber relationships. Turning to the second quarter update on slide seven, where we set records on many metrics. A record-breaking total revenue for the second quarter of $33.9 million, which represents 29.9% increase year-over-year.

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

In the second quarter, Owlet received approximately $4 million in tariff refunds following the U.S. Supreme Court's February decision invalidating tariffs imposed under the IEEPA. Of that $4 million, we recognized a one-time $3.5 million benefit to COGS and a one-time $3.75 million benefit to adjusted EBITDA, with the remaining balance going to inventory. Q2 gross margin, excluding the tariff refund, was 54%, expanding 270 basis points versus Q2 2025. Including the tariff refund, gross margins were 64.4% in Q2. Adjusted EBITDA excluding the one-time tariff refund was also a record for Owlet, $2.9 million, a $2.4 million increase compared to prior year. Including tariff refunds, adjusted EBITDA was $6.7 million. Owlet360 subscription continues to thrive. We ended Q2 with 130,000 paying subscribers, generating $3.2 million in revenue, up $2.4 million year-over-year.

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

Subscription MRR increased sequentially, surpassing $1.1 million to end Q2, and penetration rate for Dream Sock in the U.S. increased to 36%. I'm really proud of the team's execution in Q2 and excited about our category leadership, which continues to deepen. I want to address that with a recent development in our category that highlights our competitive differentiation.

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

As you remember, in September of last year, the FDA issued a safety communication warning consumers against using over-the-counter infant monitors making unsubstantiated claims without having been reviewed for safety and effectiveness. In early June, we received a letter from Amazon and we're confident other companies in the baby monitor category did as well. The letter notified sellers of baby monitoring products that measure and monitor vital signs that any such product lacking FDA clearance would be deactivated on Amazon's platform effective August 10, 2026, which was yesterday.

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

For Owlet, no additional action was required. Dream Sock has been and continues to be FDA cleared, and Amazon already had our clearance documentation on file. To our knowledge, no other baby monitor on the market today has secured the same clearance. If Amazon continues to enforce this requirement, we believe it could provide a longer-term competitive benefit for Owlet, as any company wishing to measure and monitor vital signs would need to go through the same rigor we underwent to secure FDA clearance in order to sell on Amazon's platform.

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

Following the letter, we observed aggressive discounting by several competitors, including products that we understand are subject to the new requirement ahead of the August 10 deadline. This pattern continued through Prime Day and after. As a result, Owlet's units sold during Prime Day were down 8% versus last year's event, underperforming our expectations.

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

Despite losing some units to the competition during Prime Day, we were still number one in baby monitoring and in the baby safety category.

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

We don't yet have full visibility into competitor pricing behavior post August 10 deadline, but we anticipate Amazon's enforcement to be a long-term tailwind for the business. Continuing with the quarterly review, consistent with last quarter, I'd like to provide updates on our two core growth drivers, driving adoption of Dream Sock and Dream Duo in our core global markets and expanding the subscription platform with Owlet360 and Owlet OnCall. In the U.S., when adjusting for the shift in Prime Day, total sell-through units grew by 12%, including a 16.5% increase in Dream Sock and a 16% increase in Duo. Excluding Prime Day, Q2 total sell-through units grew by 20% year-over-year, with Dream Sock and Duo growth of 21% and 29% respectively.

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

This gives us confidence that general sell-through is growing at a healthy rate, but Prime Day dynamics weighed on the quarter, as mentioned above. Owlet Dream Sock also remains a registry priority for expecting parents with year-over-year registry additions growing 40%. Finally, international was a standout in the quarter with revenue growing 214% year-over-year. Recall that last year we had an expected timing shift in orders from Q2 to Q3, driven by the Dream Sight camera and Duo launch and the associated load-in to our distributors positioning Q2 2025 as a favorable year-over-year comparable. However, we also saw significant global momentum in the quarter.

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

Excluding the Q3 2025 quarter that benefited from the significant load-in for the new camera, Q2 2026 was the highest international revenue quarter in Owlet history at $5.7 million. This is further supported by strong international sell-through.

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

Total sell-through unit growth was 38% year-over-year, and Prime Day sell-through outside of the U.S. grew over 100% year-over-year. Turning to Owlet360 and Owlet OnCall, we made real progress on the subscription platform this quarter. We launched Owlet360 subscription in a number of new non-English speaking international markets, now reaching an additional 5% to 10% of our user base that previously could not subscribe. We also began testing web pay, moving subscription enrollment and billing onto our own web-based checkout. We will be rolling web pay out in Q3 and expect over time to improve our subscription margins by reducing the third-party payment fees we pay on in-app purchases, and it gives us more flexibility to enroll subscribers right at the point of purchase.

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

Related, we began rolling out upfront subscription, the ability to sign up for Owlet360 at the moment of purchase rather than later in the app. It's already live on our own owletcare.com, and will be going live with Babylist soon. We also expect to offer subscription bundles to retail partners in the second half. Our goal is to continually optimize the LTV per customer. Turning to Owlet OnCall. This remains a deliberate test-and-learn year to explore how Owlet can best bring our unique position in the category to pediatric telehealth. We launched with around 5% of users with access to OnCall service, and now in Q3, we have begun to carefully expand access more broadly. Where we are taking Owlet OnCall is toward a more seamless and proactive experience that can help parents connect with clinical resources when appropriate.

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

We are being intentional here, learning from real usage before we expand and begin to automate the offering. We will share more as we go, as we continue to believe this year's learning set up for a meaningful new revenue stream as we move into next year. It is an exciting time to be part of Owlet. We are executing across our strategic growth areas, and it is showing up in our results. Record revenue, standout international growth, and ongoing Owlet360 momentum. We believe our biggest opportunity from here is growing subscribers, and that is exactly where we are focusing the company. I will now turn the call over to Amanda, and walk through our Q2 financials. Amanda, take it away.

[Amanda Twede Crawford, CFO at Owlet]

Thanks, Kurt. Turning to our second quarter 2026 financial performance on slide 11. Unless noted otherwise, I will be comparing Q2 2026 to the results of Q2 2025. Q2 total revenue was a record of $33.9 million, up 29.9% year-over-year. Growth was broad based with strength in Dream Sock and Dream Duo, and strong international performance and continued momentum in subscription.

[Amanda Twede Crawford, CFO at Owlet]

Subscription revenue grew to a record $3.2 million, up $2.4 million year-over-year, as our Owlet360 base continued to expand. Q2 overall gross margin was 54%, excluding the tariff refund, up approximately 270 basis points versus the prior year. Including the one-time $3.5 million tariff refund allocated to COGS, Q2 overall gross margin was 64.4%. Subscription gross margin expanded again sequentially to 68.4%. Total operating expenses for the second quarter were $20.1 million, compared to $15.1 million in the prior period, or approximately 59% of revenue.

[Amanda Twede Crawford, CFO at Owlet]

The year-over-year increase was primarily driven by higher marketing spend as Prime Day promotional timing shifted from Q3 to Q2, as well as severance costs, including stock-based compensation. We remain committed to raising our level of operational efficiency and financial discipline through the balance of 2026. Excluding the tariff refund, we experienced an operating loss of $1.8 million. Including the tariff refund, we saw operating income of $1.7 million. Adjusted EBITDA, excluding the one-time tariff refund, was a record $2.9 million, compared to $0.5 million in the prior year.

[Amanda Twede Crawford, CFO at Owlet]

Including the tariff refund, adjusted EBITDA was $6.7 million. I want to note that our financial statements will include routine immaterial revisions to prior year amounts across certain line items, including revenue and operating expenses. I want to emphasize that these immaterial adjustments have no impact on our cash balance or cash flows.

[Amanda Twede Crawford, CFO at Owlet]

Complete details will be provided in our upcoming Form 10-Q filing. During the quarter, we entered into a new $25 million asset-based revolving credit facility with Wells Fargo that refinances and replaces both our prior asset-based facility and term loan. The new facility significantly reduces our cost of capital, lowering our interest rate margin to SOFR plus 2% to 2.25%, down from SOFR plus 7.5% to 8.5% under the prior asset-based facility. A reduction of at least 525 basis points. We expect this to meaningfully lower our annual interest expense going forward, including no minimum interest requirement. These improved terms reduce our cost of capital and provide additional flexibility to continue investing in our strategic priorities while maintaining a disciplined approach to capital allocation.

[Amanda Twede Crawford, CFO at Owlet]

Turning to our balance sheet, cash and cash equivalents, excluding restricted cash, were at $30.9 million as of June 30, 2026, versus $35.5 million in the prior quarter, March 31, 2026. The change in cash was primarily due to $2.7 million in debt payoffs, CapEx investments, and working capital timing. Combined with $7.5 million of availability under our new credit facility, total available liquidity was approximately $38.5 million. Turning to our guidance. We are pleased with our first half performance, including a strong second quarter. At the same time, we are taking a deliberately measured view of the second half, given the aggressive competitor discounting prior to the August 10 Amazon deadline, and not having full visibility into competitor behavior post-deadline. In addition, we are observing some broader macro signals we want to be cautious about.

[Amanda Twede Crawford, CFO at Owlet]

Prime Day's baby monitor category was down versus last year, with consumers appearing to spend more cautiously and prioritizing everyday essentials. This is in line with what we've recently observed, with the category being roughly flat or down versus prior year for the last several large Amazon promotional events. For those reasons, rather than extrapolate our second quarter outperformance across the year, we believe it is prudent to absorb that near-term pressure within our existing range. For the full year 2026, we are reaffirming our revenue outlook of $118 million to $122 million.

[Amanda Twede Crawford, CFO at Owlet]

For Q3, we expect to decline both sequentially and versus Q3 2025, reflecting that deep competitor discounting discussed, together with a challenging comparison against last year's Dream Sight, Camera, and Dream Duo launch. For Q4, we have two large events, and given our caution regarding the promotional event dynamics, we are maintaining our Q4 forecast.

[Amanda Twede Crawford, CFO at Owlet]

On gross margin, we are raising our full year outlook to a range of 53% to 55%, from 50% to 52%, which reflects only the one-time $3.5 million reduction in COGS in the second quarter as a result of the tariff refund. The tariff rate assumed in our second half guidance is 12.5%. We are not forecasting additional tariff refunds for 2026, nor repayment risk of the Q2 tariff refunds at this time. Finally, we are raising our full year adjusted EBITDA outlook to a range of $10.75 million to $12.75 million, from $7 million to $9 million. This increase reflects only the one-time $3.75 million tariff refund recognized in the second quarter. Excluding the tariff refund, our underlying expectations for the year are essentially unchanged as we remain focused on driving operational efficiency and profitable growth. With that, we will now take your questions.

[Operator]

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonna Kim with TD Cowen. Your line is open. Please go ahead.

[Julia Shalansky, Analyst at TD Cowen]

Thank you, and good afternoon. This is Julia Shalansky on for Jonna Kim. We have two questions this afternoon. First, we would love to hear what has been the sell-through trends quarter to date, and how is the gap between sell-in and sell-through at this point? Second, could you update us on the attachment rates for subscription, and what does retention look like as you continue to observe new cohorts? Thank you.

[Amanda Twede Crawford, CFO at Owlet]

Yeah. Thanks for joining, Julia. Just a quick clarification on that question. Are you asking about Q3 quarter to date sell-in specifically, or sell-through?

[Julia Shalansky, Analyst at TD Cowen]

Yes. That is correct.

[Amanda Twede Crawford, CFO at Owlet]

Yeah.

[Julia Shalansky, Analyst at TD Cowen]

Yes, 3Q quarter to date. Thanks.

[Amanda Twede Crawford, CFO at Owlet]

Okay. First, I'll take the other question while I pull up the data regarding Q3 sell-through. From an attach perspective, so far what we're seeing with the subscription offering is that around 30% of parents are ultimately subscribing within that first year. We've shared, as far as retention goes, that we're seeing an average life of about 12 months for our subscribers. Just a reminder that we launched about 18 months ago, so we're just starting to see the cohorts mature.

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

I think what I would add to that too is that we're now seeing nearly 30% of new users in the trial period elect the annual plan, which is really exciting for us from an LTV perspective. We're seeing decent renewal rates on that plan, which is exciting. 36% of our whole Sock customer base now has subscription, and we're just getting started. If you think about the Cam feature rollout this second half, really exciting. That's more than half of our user base, and we're just starting on those features and AI capabilities. They use the camera twice as long as they use the Sock. It's half of the customer base using it twice as long. It just represents a really big opportunity. Telehealth is expanding. That's an exciting new position for us.

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

The integration with AI and new AI features that are going into sleep and health and overall parenting guidance is creating a stickier and stickier product. I think the second half, you'll see more and more value released to the consumer. So we're really excited about where we're at, and there's a lot of potential moving forward.

[Julia Shalansky, Analyst at TD Cowen]

Yeah. Thank you so much.

[Amanda Twede Crawford, CFO at Owlet]

Regarding sell-through compared to last year, it's a little bit nuanced, especially if you're going back. I know that Jonna publishes the Nielsen data. There's just a reminder that Prime Day shifted from Q3 to Q2 this year, so making year-over-year comparisons at this point is a little bit muddy in the quarter, just because Prime Day last year was such a large quarter to date relative proportion of the quarter.

[Operator]

Your next question comes from the line of Steve Litman with William Blair. Your line is open. Please go ahead.

[Steve Litman, Analyst at William Blair]

Thank you, and congratulations on the quarter. Kurt, I'm wondering, as telehealth continues to expand and you rapidly grow that opportunity, how will this merge into Owlet360 ultimately and be an additional driver of that subscription model? I know they're separate now, but how are you thinking about that over the longer term?

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

Yeah, that's a great question. I think when we think about telehealth, we think about it in tiers. There's an element of telehealth in Owlet360 today, obviously not connected to a doctor, but that gives parents additional health trends and health information. It allows them to share information with their doctor, so we're building out the AI capabilities and automated features within Owlet360.

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

There will be another tier that gives access to physicians. Right now, it's Owlet OnCall. That will morph and evolve as we test and learn this year. That's the purpose of this year, to make that more accessible, more affordable, and ultimately something that we want a majority of our users to be able to have access to. When you look at the challenges with care for a newborn, so much of that is just a communication gap.

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

When you chat with a pediatrician today without any data or context, you tell them that your baby's congested, you're worried about their breathing, 100% of those visits turn into an ER visit if it's after hours or an extra pediatrician visit. Now that we have FDA-cleared data at home that physicians can actually review and make decisions based on, we think it just totally changes the paradigm for at-home care and creates a new level of care, which is continued monitoring, routine data collection, and a check-in with the doctor from the comfort of your home. You're not exposing baby to more sickness. There will be multiple tiers of telehealth. You'll see Owlet360, and likely an Owlet360 plus the telehealth offering.

[Steve Litman, Analyst at William Blair]

That's helpful. Just following up on the international strength, where are you seeing the most momentum today, and what do you see as the most ripe opportunities internationally looking out over the next few years?

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

I'm really excited about Europe. Europe continues to grow. It's really very close to the pace that we set in the U.S., if you look at year-by-year growth and penetration. Germany is expanding really well. Everybody told us when we went into France, it would take a few years, and then you'd kind of see it spike. That's exactly what's happening. We're seeing incredible growth in France. Eastern Europe is actually doing really well. The Czech Republic and the countries around there actually have the highest penetration in terms of percent of parents that use monitoring. It's very similar to the U.S. now, so that's really taken off. Those are probably the areas that we're most excited about, and some of the longer-term markets like the U.K. and Australia and the Nordics continue to grow really well for us.

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

There's more babies born in Europe than the United States, and I just can't imagine a world where, as we say this all the time for the United States, every baby will have access to some sort of health sensing technology when they leave the hospital. That's going to be just as true for Europe as it is for the U.S.

[Steve Litman, Analyst at William Blair]

Great. Thanks, Kurt.

[Operator]

Your next question comes from the line of Owen Rickert with Northland Capital Markets. Your line is open. Please go ahead.

[Owen Rickert, Analyst at Northland Capital Markets]

Hey, guys. Thanks for taking my questions here, and congrats on a pretty awesome quarter. First for me, can you describe that AI parenting co-pilot offering for us? What does the product roadmap look like there? How are you thinking about monetization? I guess, is this a feature within Owlet360? Is it separate or something else? Just anything there would be great.

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

Yeah. I think the unique thing about Owlet is we're pulling together the most comprehensive and contextualized data set of infant health that's ever existed. So we've got, obviously, the largest set of biometrics. We're bringing in access through the telehealth to health records and health interaction, parent logging and parent context, other device data, cross-device data between the Sock, the camera, other devices potentially in the future.

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

That becomes a very rich data set that has a lot of context about your baby, and the more parents use it, the more context it has to help guide them. I can't imagine a world where Owlet has all of this rich context, and I'm going to ChatGPT for answers about my baby, if that makes sense. It's going to evolve over time. We're going to take the low-hanging fruits in AI and implement those quickly.

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

We have right now an AI morning report that takes all of your baby's sleep data, and just like a sleep coach would, it prepares a summary and gives recommendations for your child for that next day. It's really powerful. 85% of parents who use it engage with that daily and report that that's a really strong, powerful feature. That's just one example of taking this contextualized data set and integrating it. We see it as a component of Owlet360. Owlet360 may increase in price over time as we're able to grow the value. We essentially want everybody on Owlet360, and we want them to have an incredible experience that's very sticky over time, that goes well beyond that first year.

[Owen Rickert, Analyst at Northland Capital Markets]

Got it. Super helpful. Secondly for me, you mentioned Babylist as an upcoming channel for that upfront subscription enrollment. Are there any other retail or registry partners in the pipeline? How important is the D2C channel versus third-party retail to the long-term subscription conversion strategy?

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

Yeah. Babylist is unique because it's a gifting platform. That's the registry platform. So people are going on to get Owlet Duos. We generally see higher order values on Babylist than we see on our other platforms because gift-givers are at a different stage of life. So we're selling annual memberships to 360. We'll bundle those memberships to Owlet360 with the product so that parents have, or grandparents can gift that to their kids. You'll see that roll out across all of our retail channels, smart bundles like that, 360 being sold. It gives us a lot of flexibility in creating really smart offerings based on the consumer segment.

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

I think you'll see that continue to expand across all retail and especially on our website, and we'll get smarter and smarter about optimizing that kind of lift percentage versus LTV to drive growth for the business. We want to meet parents where they're at. Registry is a big part of the parenting journey. Parents shop across all those retail channels, so that's where we want subscription to be. We want parents to think of Owlet as a service, not just as a product, and I think we're seeing that more and more come to reality.

[Owen Rickert, Analyst at Northland Capital Markets]

Awesome. Thanks, guys.

[Operator]

Your next question comes from the line of Ben Haynor with Lake Street Capital Markets. Your line is open. Please go ahead.

[Ben Haynor, Analyst at Lake Street Capital Markets]

Good afternoon. Thanks for taking the questions. First off for me, just thinking about the international subscription opportunities, I guess, are there any bigger countries that you are missing right now? I know you mentioned additional international subscribers were up 5% to 10%, the availability, I guess it was there. Maybe if you could just talk about that a little bit.

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

Yeah, we just completed the majority of our language translation and rollout for subscription across the majority of our biggest markets and biggest countries. We feel like we are there in terms of availability. Most of that rolled out at the end of the quarter. We should see some of those benefits in Q3 and beyond.

[Ben Haynor, Analyst at Lake Street Capital Markets]

Okay. Fair enough. Then just curious on how much of guidance embeds, or what subscriber count, call it at year-end, does guidance embed or range, anything that would be that you can output there would be?

[Amanda Twede Crawford, CFO at Owlet]

Yeah, we're not sharing a specific range as far as subscriber count goes. But what we are considering is how we've been trending this year, and we built that into our guidance in terms of subscribers. So said a different way, if you look at the run rate and how many additional adds we've been seeing, essentially that's what we're modeling in our guide through the end of the year.

[Ben Haynor, Analyst at Lake Street Capital Markets]

Okay. Fair enough. Then lastly, on the web pay, does that take kind of the gross margin on subscriptions from kind of the 70% that you're able to get with or a little bit less out of the App Stores to mid to high 90s, or what's the difference there? Is it just credit card fees and that's it, or is there more to it?

[Amanda Twede Crawford, CFO at Owlet]

Yeah. Essentially with the App Store, for the first 12 months of a subscriber's life, we pay about 30% in fees. So what the web pay allows for is for us to bypass those fees. There's some small immaterial credit card, typical charges that are much more affordable in comparison. Then we have a small amount of software amortization for development costs, but it truly is something that would be significant to the margin. But I do have to remind, though, that a lot of our customers have already signed up through the App Store, so it'll take time for that subscriber mix to change from an App Store purchase to web pay. So this is something that'll improve over time.

[Ben Haynor, Analyst at Lake Street Capital Markets]

Okay. That's helpful. That's all I have. Thanks for taking the questions, and congrats on the progress.

[Operator]

The next question comes from the line of Ilya Zubkov with Freedom Broker. Your line is open. Please go ahead.

[Ilya Zubkov, Analyst at Freedom Broker]

Hi, Kurt. Hi, Amanda. Thank you for the great quarter. I have one question left, and you have touched upon that quite slightly, and it's about web pay. Web pay and upfront subscription at the point of purchase both went live this quarter and got one line each in the presentation deck you put. From where I sit, those look like the most economically significant things you announced. Is that a fair read, or how are the early results tracking in that place?

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

Yeah, that's a great point and a great call-out, actually. It is significant. It may not be significant on this year's P&L because of what Amanda's shared. It's going to take some time for the blend of our customer base to move toward direct web pay with Owlet. But it's significant for a few reasons over time. It expands our margin. It also allows us to essentially get the credit card at the point of purchase. As people enroll in Owlet360, they're pulling out their credit card once, not twice. It has the ability to not only help us lift the overall percentage of our users that get Owlet360, but increases the margin on Owlet360, which is substantial, and definitely substantial over time. So that's right.

[Ilya Zubkov, Analyst at Freedom Broker]

Thank you. That is it from me.

[Operator]

There are no further questions at this time. I will now turn the call back to Kurt for closing remarks.

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

Yeah. Thanks again, everyone, for joining us. Just to wrap up, I will leave you with the bigger picture. Owlet has multiple clear pathways for sustainable growth. Continuing to reach new families, expanding our recurring revenue through Owlet360, scaling into our existing international markets, and growing the pediatric telehealth opportunity. We are well-positioned for the road ahead, and we are excited about our momentum. Very grateful for the continued partnership as we set the standard in pediatric care technology. Thank you everybody for being with us today.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Jay Gentzkow, Vice President of Investor Relations
• Kurt Workman, President, CEO, and Co-Founder
• Amanda Twede Crawford, CFO

Analysts

• Julia Shalansky, Analyst at TD Cowen
• Steve Litman, Analyst at William Blair
• Owen Rickert, Analyst at Northland Capital Markets
• Ben Haynor, Analyst at Lake Street Capital Markets
• Ilya Zubkov, Analyst at Freedom Broker