Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Owlet Inc (OWLT, Financial) achieved $20.7 million in net revenue for Q2 2024, up 58% year over year.
- Gross margins improved to 50%, up over 1,000 basis points from the previous year.
- The company reported a positive adjusted EBITDA for Q2 2024.
- Owlet Inc (OWLT) successfully launched FDA-cleared devices in both consumer and medical channels.
- The July Amazon Prime event was the strongest in company history, with Dream Sock sell-through up 61% year over year in units and revenue up 68% year over year.
Negative Points
- Elevated transportation costs related to global disruptions impacted cost of goods sold.
- Potential cost of goods sold headwinds from increasing sea and air transportation costs could affect future profitability.
- Q3 and Q4 profitability may be impacted by sales and marketing investments and clinical and regulatory expenses.
- The company is operating at a very lean level in terms of working capital and inventory, which may necessitate higher airfreight costs.
- Returns and allowance reserves were $1.1 million, approximately 4.1% of gross billings, indicating some level of product returns.
Q & A Highlights
Q: How are we tracking the exposure Owlet is gaining across media channels and ensuring effective ROI on that spend?
A: We hired a PR agency in Q4 2023 to aggressively reach out to various press outlets. We monitor site traffic and social media engagement, particularly on TikTok and Facebook. The feedback has been very positive, indicating growing parental awareness and engagement globally. - Jonathan Harris, President, Chief Revenue Officer
Q: Are we still partnering with nonprofit organizations focused on SIDS and other conditions?
A: Yes, we continue to drive awareness through our partners. However, the broader parental community is also seeking insights on baby health and sleep, which is driving demand. - Jonathan Harris, President, Chief Revenue Officer
Q: Should we expect positive adjusted EBITDA to start increasing sequentially as we move through the rest of the year?
A: We expect Q3 to be stronger due to holiday load-in. However, potential cost of goods sold headwinds and sales and marketing investments could impact adjusted EBITDA. We aim to break even in the second half of this year and move towards profitability in 2025. - Amanda Crawford, Chief Financial Officer
Q: What are the assumptions for freight costs and their impact on gross margins?
A: We anticipate some air freight costs to meet holiday demand, which could impact margins. We are proactively managing inventory to mitigate these costs. - Amanda Crawford, Chief Financial Officer
Q: Where are we in terms of returns as a percent of gross revenue?
A: Returns for this quarter were 4.1% of gross billings, below our average rate. We expect a reduction in returns overall, indicating a healthier business. - Amanda Crawford, Chief Financial Officer
Q: What is the potential for Owlet Sock to become a mandatory item for babies leaving the hospital?
A: The FDA clearance was a significant milestone. We are building infrastructure for insurance reimbursement and demonstrating outcomes to expand coverage. The goal is to make Owlet Sock a standard item like car seats and thermometers. - Kurt Workman, Chief Executive Officer, Co-Founder, Director
Q: Who is driving the adoption of Owlet Sock in the medical community?
A: We have strong brand awareness among parents and proactive interest from pediatricians and children's hospitals. We are building the infrastructure to support this demand. - Kurt Workman, Chief Executive Officer, Co-Founder, Director
Q: What is the potential for Owlet Sock to be covered by national health systems internationally?
A: We are seeing strong demand internationally, with significant revenue growth. We are in early discussions with leading pediatric research hospitals and expect these clearances to open more doors. - Jonathan Harris, President, Chief Revenue Officer
Q: How will this year's progress with FDA and other clearances translate into revenue growth in 2025?
A: While we haven't provided specific guidance for 2025, our current market share, global footprint, and new products like BabySat and subscription services indicate considerable runway for sustainable growth. - Jonathan Harris, President, Chief Revenue Officer
Q: Is the focus going forward on top-line or bottom-line growth?
A: Both. Our top priority is building a sustainable and profitable business by accelerating revenue growth, expanding margins, and maintaining operational efficiency. - Amanda Crawford, Chief Financial Officer
Q: What is your plan to get people to notice the Sock going forward?
A: We will continue to deliver strong business results and build awareness through IR efforts and social channels. Our key milestones and operational achievements will drive sustainable growth and profitability. - Kurt Workman, Chief Executive Officer, Co-Founder, Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
