Owlet, Inc. (OWLT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights a positive outlook with record-high subscription revenue, improved gross margins, and strong international growth. Despite increased expenses, the company shows a strategic focus on high ROI initiatives and profitable growth. While operating losses widened, the adjusted EBITDA was at the higher end of guidance. The Q&A session provided clarity on cost management and strategic focus areas, with a strong emphasis on subscription and international expansion. Overall, the positive financial performance and strategic direction suggest a likely positive stock price movement in the short term.
Key Financial Performance
Q1 Total Revenue $22.5 million, up 6.4% year-over-year. The increase was despite a one-time inventory rightsizing at a large retail partner, which negatively impacted sell-in revenue.
Subscription Revenue $2.7 million in Q1, a record high, with a gross margin of 67.4%. This reflects sequential growth and highlights the success of the subscription model.
Overall Gross Margin 54.5% in Q1, up 80 basis points year-over-year. This includes a 480 basis point impact from the cost of tariffs.
Total Operating Expenses $17.7 million in Q1, compared to $14 million in the prior year. The increase was primarily driven by higher compensation costs, including stock-based compensation, and the impact of headcount additions.
Operating Loss $5.5 million in Q1, compared to $2.7 million in the same period last year. This reflects increased operating expenses.
Net Loss $3.3 million in Q1, reflecting the overall financial performance and increased expenses.
Adjusted EBITDA Negative $1.5 million in Q1, at the high end of the guidance range of negative $2.5 million to $1.5 million. The decline was primarily due to tariff cost impacts.
Cash and Cash Equivalents $35.5 million as of March 31, 2026, in line with the fourth quarter of 2025. Total liquidity, including undrawn credit, was $39.4 million.
International Revenue Grew 22% year-over-year in Q1, with sell-through showing 37% year-over-year growth. This reflects strong momentum in international markets.
Domestic Sell-Through Units for Sock and Duo Grew 10.5% year-over-year in Q1, led by a 45% increase in Duo and a 3% increase in Dream Sock. Owlet dollars grew 11% while the overall baby monitoring category declined 19%.
Monthly Recurring Revenue (MRR) $1 million at the end of Q1, highlighting the compounding value of the subscriber base.
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Operating Highlights
Owlet360 Subscription and Telehealth: Owlet is prioritizing the Owlet360 subscription and telehealth opportunity, aiming to convert one-time users into 4-year subscribers. New features and AI integrations for Dream Sock and camera subscription features are being launched to enhance value. International expansion of subscriptions is also planned.
Dream Sock and Duo: Domestic sell-through units for Sock and Duo grew 10.5% year-over-year, with Duo increasing by 45% and Dream Sock by 3%. Owlet was the only brand in the category to grow during a general market decline.
Owlet OnCall Telehealth: Owlet OnCall telehealth is being launched, allowing parents to communicate directly with pediatricians via the app. This initiative is expected to provide deeper value to parents and create a new revenue stream.
Core Market Focus: Owlet is focusing on high-value opportunities in existing core markets, deferring planned entries into India, Hong Kong, and Singapore. U.S. market penetration is at 11%, with significant growth potential in Europe and other regions.
International Growth: International revenue grew 22% year-over-year in Q1, with strong sell-through in markets like the Czech Republic, U.K., Germany, France, and Australia. Europe presents a massive growth opportunity due to higher birth rates.
Operational Efficiency: Owlet is pausing new global clearances, delaying country launches, and eliminating planned headcount additions to optimize spending and drive profitable growth. Lower ROI projects outside the core 0-24 month segment are being deferred.
Financial Discipline: Revenue guidance for 2026 has been adjusted to $118-$122 million, focusing on high-margin opportunities. Adjusted EBITDA guidance has been raised to $7-$9 million, representing 250%-350% growth year-over-year.
Subscription-First Approach: Owlet is transitioning from hardware-centric sales to a subscription-first model, aligning product roadmaps, marketing, and partnerships to increase subscription penetration.
AI and Data-Driven Pediatric Health: Owlet is leveraging its pediatric health data set, FDA-cleared hardware, and parent relationships to deliver personalized infant care and establish itself as a leading pediatric health platform.
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Risk or Challenges
Leadership Transition: The recent leadership transition, with Kurt Workman stepping back into the CEO role, could pose challenges in maintaining continuity and stability during a critical growth phase.
Subscription Model Shift: The shift from a hardware-centric sales model to a subscription-first approach requires significant execution focus and could face challenges in customer adoption and retention.
Geographic Expansion Delays: Planned entries into India, Hong Kong, and Singapore have been deferred, potentially limiting growth opportunities in these high-potential markets.
Operational Efficiency Measures: Pausing new global clearances, delaying country launches, and eliminating planned headcount additions could strain resources and impact the ability to scale efficiently.
Revenue Guidance Adjustment: Revenue guidance for 2026 has been revised downward, reflecting a deliberate exit from lower-margin revenue streams and a more conservative sell-through outlook, which could impact overall growth.
Tariff Costs: Tariff costs continue to impact gross margins, with a 15% tariff rate estimated for the remainder of the year, creating financial pressure.
Inventory Rightsizing: A one-time inventory rightsizing at a large retail partner negatively impacted Q1 sell-in revenue, highlighting potential vulnerabilities in retail partnerships.
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Guidance & Outlook
Owlet360 subscription and telehealth opportunity: Owlet is prioritizing the Owlet360 subscription and telehealth opportunity, aiming to convert its established user base into long-term subscribers. The company plans to launch new features and AI integrations for Dream Sock, introduce new camera subscription features, and expand subscription access internationally. This shift from hardware-centric sales to a multiyear subscription model is expected to transform the business profile and strengthen Owlet's role in pediatric health.
Focus on core markets: Owlet is concentrating on high-value opportunities within its existing core markets, particularly in the U.S. and Europe, where there is significant growth potential. The company is deferring planned entries into India, Hong Kong, and Singapore to focus on established markets with higher near-term return potential.
Operational efficiency and financial discipline: Owlet is emphasizing operational efficiency and financial discipline to drive profitable growth. This includes pausing new global clearances, delaying country launches, eliminating planned headcount additions, and deferring lower ROI projects. The goal is to align the cost structure to scale efficiently and reinvest strategically.
Revenue guidance for 2026: Owlet has updated its full-year 2026 revenue guidance to a range of $118 million to $122 million, representing 12% to 15% year-over-year growth. This adjustment reflects the decision to exit lower-margin revenue streams in noncore geographies and adopt a more conservative view on sell-through for the remainder of the year.
Adjusted EBITDA guidance for 2026: The company has raised its full-year 2026 adjusted EBITDA guidance to a range of $7 million to $9 million, representing 250% to 350% growth year-over-year. This increase is attributed to a disciplined approach to profitability and operational efficiency.
Gross margin expectations for 2026: Owlet expects gross margins in the range of 50% to 52% for the full year 2026, with a dynamic tariff situation being closely monitored.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Gross margin expanded year-over-year despite tariff headwinds. Can you discuss the operational improvements and mix benefits that helped offset these pressures?
A:The higher relative proportion of subscription revenue, which was about 67% for the quarter, and favorable product mix (Sock versus camera) contributed to the gross margin expansion.
Q:OpEx increased year-over-year, largely tied to the G&A line. Where do you see the biggest opportunities to improve leverage going forward?
A:The company is reducing planned headcount investments due to the rapid changes in AI, deprioritizing entry into new geographies to cut upfront costs, and focusing on higher ROI initiatives within the 0 to 24-month core market. This allows for increased investment in high-growth areas while reducing overall OpEx.
Q:How are you thinking about monetization for OnCall initially? Is the focus more on engagement and retention within Owlet360, or do you expect it to become a direct revenue contributor sooner?
A:The focus is on testing, learning, and improving the customer experience this year. OnCall is seen as a transformational opportunity, enabling customers to chat with doctors using Owlet data. It is expected to become a meaningful contributor in future years.
Q:What changed in your latest guidance versus the prior guide on the top line? What is assumed in your guidance regarding subscription growth? How does your marketing strategy change for the year?
A:The 2026 revenue outlook reflects a focus on profitable growth by removing lower-margin, high-burden revenue tied to noncore geographies and new channels. The guidance also raises the EBITDA outlook to $7-9 million. Subscription growth is strong, with 35% of Dream Sock customers in the U.S. using Owlet360. Marketing strategy remains focused on the critical health and sleep data set, with AI expected to drive growth in the coming years.
Q:Can you provide an update on annual retention data for the original cohort and how it compares to initial assumptions?
A:Retention has improved sequentially since launch, with monthly churn in the single-digit range. Subscriptions have exceeded internal benchmarks, and the goal is to extend usage across multiple years and children. New features like telehealth and camera enhancements are expected to further improve retention.
Q:What is the status of the 4 new hospital partnerships following the CHKD launch? What does the average ramp look like for hospitals in terms of monitors deployed per month?
A:BabySat revenue nearly doubled in Q1 year-over-year, though it remains a small part of the business. Hospital partnerships are progressing but take time to scale. Updates will be provided when the program reaches a significant scale.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the average ramp for hospital partnerships and the exact scale of BabySat deployments, stating that updates would be shared when the program reaches a significant level of scale.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Clips
Dream Sight
Dream Sock
Europe
LTV family
Number
access
app
approach
camera
core market
customer relationship
efficiency
evolution
expansion
family child
focus
hardware
health
launch
marketing
penetration
potential
priority
product
resource
sell
subscriber base
subscription feature
subscription model
subscription value
telehealth
user
value opportunity
value proposition
OWLT Transcript
Owlet, Inc. (OWLT) Q1 2026 Earnings Call Transcript
Positive5-8
The earnings call highlights a positive outlook with record-high subscription revenue, improved gross margins, and strong international growth. Despite increased expenses, the company shows a strategic focus on high ROI initiatives and profitable growth. While operating losses widened, the adjusted EBITDA was at the higher end of guidance. The Q&A session provided clarity on cost management and strategic focus areas, with a strong emphasis on subscription and international expansion. Overall, the positive financial performance and strategic direction suggest a likely positive stock price movement in the short term.
Pro Real Estate Investment Trust (PRV.UN:CA) Q4 2025 Earnings Call Transcript
Positive3-5
The earnings call indicates strong financial performance with a 14.3% increase in FFO, reduced leverage, and strategic acquisitions. Management's focus on expanding in key markets and maintaining stable leasing spreads adds to the positive outlook. Although some responses were vague, the overall sentiment and financial metrics suggest a positive impact on stock price.
Owlet, Inc. (OWLT) Q4 2025 Earnings Call Transcript
Positive3-5
The earnings call highlights strong revenue growth, record high gross margins, and improved EBITDA, indicating operational efficiency. Positive sentiments arise from planned AI-driven product enhancements and international expansion. Although Q1 guidance is lower due to seasonality, the full-year outlook remains robust. The Q&A session reveals optimism in subscription growth and international expansion, despite management's reluctance to provide specific churn metrics. Given these factors, the stock price is likely to experience a positive movement, driven by strong financial performance and strategic growth initiatives.
Owlet, Inc. (OWLT) Q3 2025 Earnings Call Transcript
Positive11-13
The earnings call highlights strong financial performance with record revenue and profit, despite tariff challenges. Positive guidance and strategic initiatives, such as international expansion and healthcare partnerships, bolster growth prospects. The Q&A reveals confidence in ongoing partnerships and market expansion, though some details, like subscriber retention, remain vague. Overall, the strong earnings and optimistic guidance, coupled with strategic partnerships, suggest a positive stock price movement.
OWLT Report
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