Company Performance - Owlet, Inc. reported a quarterly loss of $0.05 per share, significantly better than the Zacks Consensus Estimate of a loss of $0.21, representing an earnings surprise of +76.19% [1] - The company posted revenues of $26.1 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 19.51% and up from $20.7 million a year ago [2] - Over the last four quarters, Owlet has surpassed consensus EPS estimates three times and topped revenue estimates two times [2] Stock Movement and Outlook - Owlet shares have increased approximately 59.6% since the beginning of the year, outperforming the S&P 500's gain of 7.9% [3] - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is -$0.24 on revenues of $23.45 million, and for the current fiscal year, it is -$1.03 on revenues of $93.02 million [7] Industry Context - The Technology Services industry, to which Owlet belongs, is currently ranked in the top 38% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Owlet's performance [5][6]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $26,100,000, representing a 25.9% increase year over year, contributing to the largest first half revenue performance in company history [5][14][27] - Gross margins expanded by 180 basis points to 51.3%, marking the ninth consecutive quarter of year-over-year gross margin expansion [14][28] - Adjusted EBITDA was $300,000, indicating the fifth consecutive quarter of adjusted EBITDA profitability [5][14][31] - Net loss for Q2 was $37,600,000, primarily due to a non-cash mark to market adjustment related to common stock warrant liability [29][30] Business Line Data and Key Metrics Changes - Domestic sell-through growth for DreamSoc was 37% year over year, with a 54% increase in total DreamSoc additions to registries [16][20] - International revenue decreased to $1,800,000 from $4,800,000 year over year, attributed to a timing shift of open orders to Q3 [20][21] - The Outlet 360 subscription surpassed 66,000 paying subscribers, showing strong growth in monthly recurring revenue and retention rates [22][63] Market Data and Key Metrics Changes - Owlette maintained market leadership in the baby monitor category, increasing its share of total dollars spent on baby monitors compared to the prior year [17] - The overall category for baby monitors is experiencing the highest consumer spending in five years [17] - International sell-through units in the UK increased by 144%, while France and Germany saw increases of over 200% and 100% year over year, respectively [21] Company Strategy and Development Direction - The company is focused on transforming into a comprehensive pediatric health platform, emphasizing the expansion of the Outlet 360 subscription and increasing customer lifetime value [6][24] - Plans to roll out telehealth services by the end of the year, enhancing the integration of health data with healthcare providers [24][58] - The company is exploring alternative manufacturing locations to mitigate the impact of increased tariffs [70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued momentum into the second half of the year and raised full-year guidance based on strong Q2 performance [6][32] - The leadership transition is expected to further accelerate growth, with Jonathan Harris taking over as CEO [7][12] - Management acknowledged the fluidity of the macroeconomic environment, particularly regarding tariff policies, which could impact future guidance [32] Other Important Information - The company announced an agreement to exchange Series A and Series B warrants for common stock, simplifying its capital structure [30][73] - The company received recognition for innovation in baby care, winning awards for its DreamSoc product [19][20] Q&A Session Summary Question: Can you quantify the tariff cost impact on cost of goods sold? - The impact was about $500,000 in Q2, with expectations of a 5% impact on gross margin in Q4 due to increased tariffs [36][37] Question: What is the progress on the healthcare side with DME vendors? - Revenue from healthcare remains inconsequential, but adoption of Medicaid plans is increasing, and integration with CHKD is progressing [42] Question: What is the process for bringing another hospital on board? - The process involves committee approvals and integration into existing remote patient monitoring platforms [68] Question: Is there a strategy to bring manufacturing to the US or another country with lower tariffs? - The company is actively exploring other manufacturing sites to diversify sourcing and minimize tariff impacts [70]

Financial Performance - Owlet's Q2 2025 revenue reached $26.1 million, representing a 25.9% year-over-year growth[10, 26] - The gross margin for Q2 2025 was 51.3%, an expansion of 180 basis points year-over-year[10, 26] - Adjusted EBITDA for Q2 2025 was $0.3 million, showing a $0.2 million improvement compared to Q2 2024[10, 32] - Total operating expenses for Q2 2025 were $15.3 million, with OpEx as a percentage of revenue at 58.7%, compared to 60.4% in Q2 2024[32] Business Highlights - Owlet experienced a strong 26% year-over-year revenue growth[11] - The company achieved its 9th consecutive quarter of gross margin expansion year-over-year[11] - Owlet marked its 5th consecutive quarter of adjusted EBITDA profitability[11] - Owlet360 subscription service has over 66,000 paying subscribers[11, 17] Dream Sock Performance - Domestic Dream Sock sell-through increased by 37% year-over-year[14] - Dream Sock registry additions grew by 54% year-over-year[14] - Total sell-through units on U.S Amazon Prime Day sales increased 72% year-over-year[14] - Total sell-through units on U.K Amazon Prime Day sales increased 144% year-over-year[14] Updated Guidance - The company updated its FY 2025 revenue guidance to $97 million - $100 million, projecting a 24-28% growth year-over-year[34] - The gross margin guidance for FY 2025 remains at 46% - 50%, including new, increased tariff costs[34] - The company fully expects to be positive in Adj EBITDA, including new, increased tariff costs[34]

[Executive Summary and Strategic Updates](index=1&type=section&id=1.%20Executive%20Summary%20and%20Strategic%20Updates) Owlet reported strong Q2 2025 financial results, announced a CEO transition, and raised its full-year 2025 financial outlook, expecting adjusted EBITDA profitability [Q2 2025 Financial Highlights](index=1&type=section&id=1.1.%20Q2%202025%20Financial%20Highlights) Owlet reported strong financial results for Q2 2025, outperforming expectations with significant revenue growth, gross margin expansion, and improved adjusted EBITDA. The Owlet360 subscription service continued its positive trend, surpassing 66,000 paying subscribers Q2 2025 Key Financial Metrics (YoY Change) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | Basis Points Change | | :--------------- | :----------------- | :----------------- | :--------- | :------------------ | | Revenue | $26.1 | $20.7 | 25.9% | - | | Gross Margin | 51.3% | 49.5% | - | +180 bps | | Net Loss | $(37.6) | $(1.1) | - | - | | Adjusted EBITDA | $0.3 | $0.1 | +$0.2 | - | - Owlet360 subscription service surpassed **66,000 paying subscribers**, showing steady growth in monthly recurring revenue, attach rate, retention rate, and consumer satisfaction[2](index=2&type=chunk) [CEO Transition Plan](index=1&type=section&id=1.2.%20CEO%20Transition%20Plan) Owlet announced that Jonathan Harris, current President, will succeed Kurt Workman as Chief Executive Officer, effective October 1, 2025. Kurt Workman will transition to Executive Chairman of the Board, focusing on long-term strategy and expanding access to Owlet's mission - Jonathan Harris, current President, will become CEO of Owlet, effective October 1, 2025[3](index=3&type=chunk) - Co-Founder Kurt Workman will transition from CEO to Executive Chairman of the Board of Directors[3](index=3&type=chunk) - Jonathan Harris is credited with leading global go-to-market strategies post-FDA/CE clearances, spearheading international growth, establishing Owlet360 subscription, and driving organizational streamlining[6](index=6&type=chunk) [Updated 2025 Financial Outlook](index=2&type=section&id=1.3.%20Updated%202025%20Financial%20Outlook) Owlet increased its full-year 2025 financial guidance, expecting higher revenue and gross margins, and anticipates achieving adjusted EBITDA profitability for the full year Updated Full Year 2025 Financial Outlook | Metric | Range | YoY Growth | | :----------------- | :--------------------- | :--------- | | Revenue | $97 million to $100 million | 24% to 28% | | Gross Margins | 46% to 50% | - | - The Company now fully expects to be **adjusted EBITDA profitable** for the full year 2025[12](index=12&type=chunk) [Detailed Financial Performance](index=2&type=section&id=2.%20Detailed%20Financial%20Performance) This section details Q2 and year-to-date 2025 financial performance, highlighting revenue growth, gross margin expansion, and significant net losses primarily due to warrant liability adjustments [Second Quarter Ended June 30, 2025](index=2&type=section&id=2.1.%20Second%20Quarter%20Ended%20June%2030,%202025) For Q2 2025, Owlet reported a 25.9% increase in revenue, primarily driven by Dream Sock and Dream Duo sales. Gross margin expanded by 180 basis points due to favorable product mix and cost efficiencies. Operating expenses increased, leading to a slight improvement in operating loss. However, net loss significantly widened to $37.6 million, largely due to a $34.8 million non-cash common stock warrant liability adjustment Q2 2025 Financial Performance (YoY Comparison) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | Revenue | $26.1 | $20.7 | +25.9% | | Cost of Revenue | $12.7 | $10.4 | +22.1% | | Gross Margin | 51.3% | 49.5% | +180 bps | | Operating Expenses | $15.3 | $12.5 | +22.4% | | Operating Loss | $(1.9) | $(2.2) | +$0.3 | | Net Loss | $(37.6) | $(1.1) | - | | Adjusted EBITDA | $0.3 | $0.1 | +$0.2 | | Net Loss per Share (GAAP) | $(2.37) | $(0.30) | - | | Adjusted Net Loss per Share | $(0.05) | $0.00 | - | - The significant increase in net loss was primarily due to a **$34.8 million non-cash, mark-to-market common stock warrant liability adjustment**[10](index=10&type=chunk) [Six Months Ended June 30, 2025](index=8&type=section&id=2.2.%20Six%20Months%20Ended%20June%2030,%202025) For the first six months of 2025, Owlet's revenue increased by 33.3% year-over-year. While operating loss improved, the net loss significantly widened to $34.6 million, primarily due to a common stock warrant liability adjustment, contrasting with a net income in the prior year period Six Months Ended June 30, 2025 Financial Performance (YoY Comparison) | Metric | 6M 2025 (Millions) | 6M 2024 (Millions) | YoY Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | Revenues | $47.2 | $35.4 | +33.3% | | Gross Profit | $24.7 | $16.8 | +47.0% | | Operating Loss | $(4.6) | $(8.0) | +$3.4 | | Net Income (Loss) | $(34.6) | $2.1 | - | | Adjusted EBITDA | $0.3 | $(3.0) | +$3.3 | | Net Loss per Share (GAAP) | $(2.26) | $(0.08) | - | | Adjusted Net Loss per Share | $(0.12) | $(0.38) | +$0.26 | - The net loss for the six months ended June 30, 2025, was significantly impacted by a **$(28.1) million common stock warrant liability adjustment**, compared to a **$10.2 million positive adjustment** in the prior year[32](index=32&type=chunk)[33](index=33&type=chunk) [Financial Statements and Reconciliations](index=6&type=section&id=3.%20Financial%20Statements%20and%20Reconciliations) This section presents condensed consolidated financial statements, including balance sheets, cash flows, and statements of operations, along with reconciliations of GAAP to non-GAAP financial measures [Condensed Consolidated Balance Sheets](index=6&type=section&id=3.1.%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2025, shows an increase in total assets, primarily driven by higher accounts receivable. Total liabilities also increased significantly, largely due to a substantial rise in common stock warrant liabilities and the line of credit Condensed Consolidated Balance Sheet Highlights (Millions) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Total current assets | $60.7 | $46.1 | | Total assets | $63.5 | $49.5 | | Total current liabilities | $52.8 | $36.4 | | Common stock warrant liabilities | $51.7 | $25.3 | | Total liabilities | $108.0 | $66.3 | | Total stockholders' deficit | $(59.2) | $(29.8) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=3.2.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, Owlet experienced net cash outflows from operating and investing activities, which were more than offset by net cash inflows from financing activities, resulting in a positive net change in cash Condensed Consolidated Statements of Cash Flows (Millions) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(8.2) | $(6.7) | | Net cash used in investing activities | $(0.2) | $(0.1) | | Net cash provided by financing activities | $9.9 | $5.6 | | Net change in cash, cash equivalents, and restricted cash | $1.5 | $(1.2) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=8&type=section&id=3.3.%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The income statement details revenue growth for both the quarter and six-month period. Despite improved operating loss, the net loss was significantly impacted by a large non-cash common stock warrant liability adjustment, leading to a substantial net loss for both periods Condensed Consolidated Statements of Operations (Millions, except per share) | Item | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------------------- | :------ | :------ | :------ | :------ | | Revenues | $26.1 | $20.7 | $47.2 | $35.4 | | Gross profit | $13.4 | $10.3 | $24.7 | $16.8 | | Operating loss | $(1.9) | $(2.2) | $(4.6) | $(8.0) | | Common stock warrant liability adjustment | $(34.8) | $1.0 | $(28.1) | $10.2 | | Net income (loss) | $(37.6) | $(1.1) | $(34.6) | $2.1 | | Net loss per share attributable to common stockholders, basic and diluted | $(2.37) | $(0.30) | $(2.26) | $(0.08) | [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=3.4.%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section provides a reconciliation from GAAP net income (loss) to non-GAAP measures such as EBITDA, Adjusted EBITDA, and Adjusted Net Income (Loss), highlighting adjustments for non-cash items like common stock warrant liability and stock-based compensation, which significantly impact reported GAAP figures GAAP to Non-GAAP Reconciliation Highlights (Millions, except per share) | Item | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :---------------------------------------- | :------ | :------ | :------ | :------ | | GAAP net income (loss) | $(37.6) | $(1.1) | $(34.6) | $2.1 | | Non-GAAP EBITDA | $(36.5) | $(1.0) | $(32.4) | $2.5 | | Non-GAAP Adjusted EBITDA | $0.3 | $0.1 | $0.3 | $(3.0) | | Non-GAAP adjusted net income (loss) | $(0.8) | $0.0 | $(1.9) | $(3.4) | | Non-GAAP adjusted net income (loss) per share | $(0.05) | $0.00 | $(0.12) | $(0.38) | - Key adjustments include common stock warrant liability adjustment (**$34.8M in Q2 2025**, **$(1.0)M in Q2 2024**) and stock-based compensation (**$1.6M in Q2 2025**, **$2.1M in Q2 2024**)[33](index=33&type=chunk) [Corporate Information and Disclosures](index=2&type=section&id=4.%20Corporate%20Information%20and%20Disclosures) This section covers forward-looking statements, non-GAAP financial measure disclosures, conference call details, company overview, and contact information [Forward-Looking Statements](index=2&type=section&id=4.1.%20Forward-Looking%20Statements) This section serves as a cautionary disclosure, highlighting that the press release contains forward-looking statements subject to various risks and uncertainties. These statements are based on current expectations and may differ materially from actual results due to factors such as regulatory pathways, competition, financing, and economic conditions. The company disclaims any obligation to update these statements - Forward-looking statements are based on expectations at the time they are made and are susceptible to risks, uncertainties, and other factors[14](index=14&type=chunk) - Key risk factors include regulatory pathways (FDA), competition, ability to obtain financing, implement strategic initiatives, protect intellectual property, maintain relationships, and adapt to economic conditions[14](index=14&type=chunk) - The Company assumes no obligation to update any forward-looking statements after the date of the press release, except as required by law[15](index=15&type=chunk) [Disclosure Regarding Non-GAAP Financial Measures](index=4&type=section&id=4.2.%20Disclosure%20Regarding%20Non-GAAP%20Financial%20Measures) Owlet provides non-GAAP financial measures (EBITDA, Adjusted EBITDA, Adjusted Net Income/Loss) to offer a meaningful perspective of its underlying operating performance, benchmarking, and trend analysis. These measures exclude items not correlated to core operations but should not be considered alternatives to GAAP measures - Non-GAAP financial measures are used as internal measures of business operating performance and for benchmarking against peers[17](index=17&type=chunk) - EBITDA is defined as net income (loss) adjusted for income tax, interest, depreciation, amortization, and impairment of intangible assets[19](index=19&type=chunk) - Adjusted EBITDA further adjusts for common stock warrant liability, stock-based compensation, transaction costs, and legal matters[19](index=19&type=chunk) - These non-GAAP measures are not recognized under GAAP and should not be construed as substitutes for GAAP financial measures[22](index=22&type=chunk) [Conference Call and Webcast Information](index=5&type=section&id=4.3.%20Conference%20Call%20and%20Webcast%20Information) Details for accessing the conference call and webcast hosted by Owlet on August 7, 2025, to discuss the financial results and provide a business update - Conference call and webcast held on **August 7, 2025**, at **4:30 p.m. ET**[24](index=24&type=chunk) - Access via domestic (**833-470-1428**) or international (**404-975-4839**) numbers with Access Code **579904**, or online at investors.owletcare.com[25](index=25&type=chunk) [About Owlet, Inc.](index=5&type=section&id=4.4.%20About%20Owlet,%20Inc.) Owlet, Inc. is a pioneer in smart infant monitoring, offering an FDA-authorized digital health platform with medical and consumer pediatric wearables and an integrated camera. The company aims to transform parenting by providing real-time data and insights to safeguard infant health, optimize wellness, and ensure peaceful sleep, leveraging data from over 2 million parents worldwide - Owlet is a pioneer of smart infant monitoring, offering an **FDA-authorized digital health infant monitoring platform**[26](index=26&type=chunk) - Products include medical and consumer pediatric wearables and an integrated HD visual and audio camera, providing real-time data and insights to parents[26](index=26&type=chunk) - Over **2 million parents worldwide** have used Owlet's platform, contributing to one of the largest collections of consumer infant health and sleep data[27](index=27&type=chunk) [Contacts](index=9&type=section&id=4.5.%20Contacts) Contact information for investor relations and media inquiries - Investor Relations contact: **ir@owletcare.com**[34](index=34&type=chunk) - Media contact: **pr@owletcare.com**[34](index=34&type=chunk)

Core Insights - Owlet, Inc. (NYSE: OWLT) is identified as an undercovered stock that is demonstrating growth potential [1] Company Overview - The company has been recognized for its innovative products aimed at improving infant health, particularly in neonatal intensive care units (NICU) [1]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $21.1 million, representing a 43% increase compared to Q1 2024 [11][27] - Gross margin improved to 53.7%, an increase of 930 basis points year over year, marking the eighth consecutive quarter of year-over-year gross margin expansion [12][27] - Adjusted EBITDA was breakeven, an improvement of $3.1 million year over year, indicating the fourth consecutive quarter of breakeven or better adjusted EBITDA [12][29] - Operating loss decreased to $2.7 million from $5.7 million in the same period last year [28] Business Line Data and Key Metrics Changes - The DreamSoc and Dream Duo products showed strong performance, with domestic sell-through growth of 40% year over year [18] - International revenue growth for DreamSoc was up 104% year over year, with notable increases in France and Germany [19] Market Data and Key Metrics Changes - Baby registries showed a 63% year-over-year increase in DreamSoc, indicating strong market demand [18] - Brand health remains strong with a Net Promoter Score (NPS) of 73 at the end of Q1 [19] Company Strategy and Development Direction - The company is transitioning from a hardware-focused business to a comprehensive pediatric health platform through the Owlet 360 subscription service [13][59] - New distribution partnerships, such as with the Children's Hospital of the King's Daughters, are aimed at expanding market reach and enhancing product visibility [7][22] - The company is focusing on international expansion and healthcare channels to drive durable profitable growth [13][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic macro environment, despite uncertainties related to tariffs [13][30] - The company raised its 2025 revenue guidance to a range of $91 million to $95 million, reflecting strong Q1 performance and positive outlook for the remainder of the year [31] Other Important Information - The company has minimized its manufacturing exposure to China by transitioning production to Vietnam and Thailand [15][16] - The Owlet 360 subscription service has gained over 48,000 paying subscribers since its launch, indicating strong market acceptance [20] Q&A Session Summary Question: Can you explain the partnership with the Children's Hospital of the King's Daughters? - The partnership allows babies to leave the hospital with an Owlet infant health monitor, integrating Owlet data into remote patient monitoring workflows [35] Question: What is the outlook for the Owlet 360 subscription service? - Customer feedback has been overwhelmingly positive, with subscriber numbers increasing from 25,000 to over 50,000 in a few months [38] Question: How should revenue growth be expected throughout the year? - Sequential growth is expected each quarter, with Q4 anticipated to be the largest due to the holiday season [40] Question: What is the overall marketing strategy for 2025? - The strategy focuses on FDA and CE medical clearances and enhancing communication with parents through various channels [44] Question: Are there any shifts in consumer behavior due to macroeconomic conditions? - Currently, there are no significant shifts observed, and the company remains cautiously optimistic [46] Question: How is the company positioned against competitors affected by tariffs? - The company sees potential opportunities to capture additional market share as many competitors face tariff impacts [54]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $21.1 million, representing a 43% increase year over year compared to Q1 2024 [11][27] - Gross margin improved to 53.7%, an increase of 930 basis points year over year, marking the eighth consecutive quarter of gross margin expansion [12][27] - Adjusted EBITDA was breakeven, an improvement of $3.1 million year over year, indicating the fourth consecutive quarter of breakeven or better adjusted EBITDA [12][29] - Operating loss decreased to $2.7 million from $5.7 million in the same period last year [28] Business Line Data and Key Metrics Changes - The DreamSoc and Dream Duo products showed strong performance, with domestic sell-through growth of 40% year over year [18] - The Owlet three sixty subscription service gained over 48,000 paying subscribers shortly after its launch, indicating strong market adoption [20] Market Data and Key Metrics Changes - International revenue growth was up 104% year over year, with notable performance in France and Germany [19] - Baby registries showed a 63% year over year increase in DreamSoc, reflecting strong consumer interest [18] Company Strategy and Development Direction - The company is transitioning from a hardware-focused business to a comprehensive pediatric health platform, emphasizing the Owlet three sixty subscription service [13][60] - New distribution partnerships, such as with the Children's Hospital of the King's Daughters, are aimed at expanding market reach and enhancing product visibility [7][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic uncertainties, including tariff impacts, and highlighted the company's strong positioning to capture market share [13][15] - The updated 2025 revenue guidance was raised to a range of $91 million to $95 million, reflecting the strong start to the year and ongoing momentum [30][31] Other Important Information - The company has minimized its manufacturing exposure to China by transitioning production to Vietnam and Thailand [15] - The company is actively assessing the impact of new tariffs on its operations and has included these considerations in its financial outlook [31] Q&A Session Summary Question: Can you explain the partnership with the Children's Hospital of the King's Daughters? - The partnership allows babies to leave the hospital with an Owlet infant health monitor, integrating Owlet data into remote patient monitoring workflows [36] Question: What is the feedback on the Owlet three sixty subscription service? - Feedback has been overwhelmingly positive, with parents appreciating access to insights about their baby's health and sleep [38] Question: How should revenue cadence be expected throughout the year? - Sequential growth is expected each quarter, with Q4 anticipated to be the largest due to the holiday season [42] Question: Can you provide insight into the overall marketing strategy for 2025? - The marketing strategy focuses on FDA and CE medical clearances and enhancing communication with parents through various channels [46] Question: Are there any shifts in consumer behavior due to macroeconomic challenges? - Currently, there are no significant shifts observed, and the company remains cautiously optimistic [48] Question: How is the awareness of the Owlet three sixty subscription being raised? - In-app messaging, email, and SMS are being utilized to increase awareness among new parents [50] Question: Do you see any competitive advantages due to tariffs affecting competitors? - Yes, many competitors are exposed to high tariffs, which presents an opportunity for Owlet to capture additional market share [55]

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section outlines forward-looking statements, emphasizing their inherent risks and uncertainties, and lists key factors that could materially affect the company's actual results - Forward-looking statements are predictions based on current expectations and projections, subject to significant risks and uncertainties[15](index=15&type=chunk)[16](index=16&type=chunk) - Key risk factors include limited operating history, recurring operating losses and negative cash flows, growth management challenges, potential regulatory requirements, reliance on limited retailers and single manufacturers, intellectual property protection, IT system failures/cyberattacks, legal/regulatory proceedings, product liability claims, international market risks, brand reputation, and the need for additional capital[15](index=15&type=chunk)[19](index=19&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Owlet, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, equity changes, cash flows, and detailed explanatory notes [Condensed Consolidated Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28Unaudited%29) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | -------------: | ----------------: | ---------: | ---------: | | Total Assets | $51,397 | $49,515 | $1,882 | 3.80% | | Total Liabilities | $63,397 | $66,329 | $(2,932) | -4.42% | | Total Mezzanine Equity | $13,806 | $12,937 | $869 | 6.72% | | Total Stockholders' Deficit | $(25,806) | $(29,751) | $3,945 | -13.26% | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29%20%28Unaudited%29) Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :------------------------------------------------- | --------------------------------: | --------------------------------: | ---------: | ---------: | | Revenues | $21,104 | $14,750 | $6,354 | 43.08% | | Gross profit | $11,326 | $6,547 | $4,779 | 73.00% | | Operating loss | $(2,671) | $(5,746) | $3,075 | -53.52% | | Net income and comprehensive income | $3,025 | $3,274 | $(249) | -7.61% | | Net income attributable to common stockholders | $1,748 | $1,285 | $463 | 36.03% | | Net income per share attributable to common stockholders, basic | $0.11 | $0.15 | $(0.04) | -26.67% | | Weighted-average shares outstanding, basic | 15,383,287 | 8,740,059 | 6,643,228 | 75.99% | [Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders' Deficit (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Mezzanine%20Equity%20and%20Stockholders%27%20Deficit%20%28Unaudited%29) - Mezzanine equity increased from **$12,937 thousand** at December 31, 2024, to **$13,806 thousand** at March 31, 2025, primarily due to accretion on convertible preferred stock and redeemable common stock[26](index=26&type=chunk) - Stockholders' deficit improved from **$(29,751) thousand** to **$(25,806) thousand**, driven by net income of **$3,025 thousand** and stock-based compensation, partially offset by accretion on preferred and redeemable common stock[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | --------------------------------: | --------------------------------: | ---------: | ---------: | | Net cash used in operating activities | $(5,925) | $(3,356) | $(2,569) | 76.54% | | Net cash used in investing activities | $(110) | $(37) | $(73) | 197.30% | | Net cash provided by financing activities | $2,014 | $5,233 | $(3,219) | -61.51% | | Net change in cash, cash equivalents, and restricted cash | $(4,021) | $1,840 | $(5,861) | -318.53% | | Cash, cash equivalents, and restricted cash at end of period | $16,610 | $18,397 | $(1,787) | -9.71% | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, risks, and specific financial accounts [Note 1. Basis of Presentation](index=12&type=section&id=Note%201.%20Basis%20of%20Presentation) This note details the basis of financial statement preparation, highlights going concern risks from recurring losses, outlines management's mitigation actions, and discusses customer concentration and cash flow revisions - The company has experienced recurring operating losses and negative cash flows from operations since inception, resulting in an accumulated deficit of **$265,170 thousand** as of March 31, 2025, raising substantial doubt about its ability to continue as a going concern[36](index=36&type=chunk)[37](index=37&type=chunk) - Management's actions to address going concern risks include issuing common stock for net proceeds of **$10,590 thousand** (September 2024), selling preferred stock and warrants for **$9,250 thousand** (February 2024), and securing a **$15,000 thousand** WTI Loan Facility and a **$15,000 thousand** ABL Line of Credit (September 2024)[39](index=39&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) Customer Concentration by Net Accounts Receivable | Customer Group | March 31, 2025 | December 31, 2024 | | :--------------- | -------------: | ----------------: | | Three largest customers | 63 % | 63 % | Customer Concentration by Total Net Revenue (Three Months Ended March 31) | Customer | 2025 | 2024 | | :--------- | ---: | ---: | | Customer 1 | 37 % | 25 % | | Customer 2 | 14 % | 20 % | | Customer 3 | 6 % | 12 % | - The company revised its unaudited condensed consolidated statements of cash flows for the interim period ended March 31, 2024, to correct immaterial overstatements in short-term borrowings and payments, and classification errors between operating and investing activities, with no impact on net income or total cash flow[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 2. Certain Balance Sheet Accounts](index=17&type=section&id=Note%202.%20Certain%20Balance%20Sheet%20Accounts) This note breaks down specific balance sheet accounts, including restricted cash, allowance for losses, inventory, property and equipment, and intangible assets with associated expenses Restricted Cash (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------------------------------------------------------- | -------------: | ----------------: | | Cash and cash equivalents | $16,310 | $18,397 | | Restricted cash | $300 | $0 | | Total cash, cash equivalents, and restricted cash | $16,610 | $18,397 | Allowance for Credit and Other Losses (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------- | --------------------------------: | --------------------------------: | | Beginning balance | $653 | $3,322 | | Charges to expense | $95 | $(388) | | Charges to revenue | $63 | $56 | | Write-offs | $0 | $(2,490) | | Ending balance | $811 | $500 | Inventory Details (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :----------- | -------------: | ----------------: | | Raw materials | $140 | $100 | | Finished goods | $11,673 | $10,423 | | Total inventory | $11,813 | $10,523 | Intangible Assets, Net (in thousands) | Category | March 31, 2025 (Net) | December 31, 2024 (Net) | | :---------------------- | -------------------: | --------------------: | | Trademarks and patents | $338 | $331 | | Internally developed software | $711 | $644 | | Total intangible assets | $1,049 | $975 | Estimated Future Amortization Expenses of Intangible Assets (in thousands) | Period | Amount | | :------------------------ | -------: | | Remaining nine months of 2025 | $262 | | 2026 | $347 | | 2027 | $255 | | 2028 | $47 | | 2029 | $27 | | Thereafter | $45 | | Total future amortization expenses | $983 | [Note 3. Deferred Revenues](index=20&type=section&id=Note%203.%20Deferred%20Revenues) This note explains deferred revenues from mobile applications and subscription services, recognized over 1 to 27 months, and details changes in the deferred revenue balance Changes in Deferred Revenues (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | --------------------------------: | --------------------------------: | | Beginning balance | $1,544 | $1,302 | | Deferral of revenues | $743 | $521 | | Recognition of deferred revenues | $(702) | $(543) | | Ending balance | $1,585 | $1,280 | - Revenue recognized from beginning deferred revenue balance was **$574 thousand** in Q1 2025 and **$477 thousand** in Q1 2024[62](index=62&type=chunk) [Note 4. Debt and Other Financing Arrangements](index=21&type=section&id=Note%204.%20Debt%20and%20Other%20Financing%20Arrangements) This note details the company's debt, including WTI Loan Facility and ABL Line of Credit, outlining terms, interest rates, covenants, collateral, and future maturities Total Debt (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------- | -------------: | ----------------: | | Term loan facility payable to WTI, net | $5,088 | $4,819 | | Line of credit | $8,498 | $6,263 | | Financed insurance premium | $313 | $615 | | Total debt | $13,899 | $11,697 | | Less: current portion | $(10,053) | $(7,366) | | Total long-term debt, net | $3,846 | $4,331 | - The WTI Loan Facility, initiated in September 2024, provides up to **$15,000 thousand**, with **$7,500 thousand** drawn initially[66](index=66&type=chunk)[67](index=67&type=chunk) - The company elected not to draw the remaining **$2,500 thousand** of the first tranche, resulting in the forfeiture of **62,500** unvested shares of redeemable common stock[68](index=68&type=chunk) - The ABL Line of Credit, also established in September 2024, has a maximum principal of **$15,000 thousand** (increasing to **$20,000 thousand** on September 11, 2025)[79](index=79&type=chunk) - As of March 31, 2025, **$8,498 thousand** was outstanding, with **$46 thousand** remaining borrowing base availability[84](index=84&type=chunk) - The company was in compliance with all covenants under both the WTI Loan Facility and the ABL Line of Credit as of March 31, 2025[73](index=73&type=chunk)[82](index=82&type=chunk) Future Aggregate Maturities (in thousands) | Period | Amount | | :------------------------ | -------: | | Remaining nine months of 2025 | $801 | | 2026 | $3,146 | | 2027 | $3,550 | | 2028 | $420 | | Total | $7,917 | [Note 5. Commitments and Contingencies](index=24&type=section&id=Note%205.%20Commitments%20and%20Contingencies) This note outlines purchase obligations and details ongoing legal proceedings, including class action lawsuits and derivative complaints, reporting on settlement agreements reached - The company has a purchase obligation of **$5,313 thousand** remaining as of March 31, 2025, for cloud platform services, to be paid over a 48-month period starting June 2024[87](index=87&type=chunk) - Settlements in the Butala class action for Section 10(b) Claims (**$3,500 thousand**) and Section 14(a) Claims (**$1,750 thousand**) were agreed upon, totaling **$5,250 thousand**, recognized as general and administrative expense in 2024[93](index=93&type=chunk) - A settlement agreement for the Vargas derivative action resulted in **$675 thousand** of general and administrative expense recognized in Q1 2025[96](index=96&type=chunk) [Note 6. Stock-based Compensation](index=28&type=section&id=Note%206.%20Stock-based%20Compensation) This note describes the company's stock compensation plans (options, RSAs, RSUs, PSUs) and details the recognized stock-based compensation expense across operating categories Total Stock-based Compensation (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------ | --------------------------------: | --------------------------------: | | General and administrative | $779 | $1,283 | | Sales and marketing | $455 | $344 | | Research and development | $423 | $600 | | Total stock-based compensation | $1,657 | $2,227 | - During Q1 2025, **$27 thousand** of stock-based compensation was capitalized for internally developed software, compared to none in Q1 2024[100](index=100&type=chunk) - As of March 31, 2025, unrecognized stock-based compensation costs totaled **$5,815 thousand** for RSUs (weighted-average period of **1.2 years**) and **$101 thousand** for PSUs (weighted-average period of **0.8 years**)[102](index=102&type=chunk) [Note 7. Common Stock Issuance, Redeemable Common Stock, Common Stock Warrants, and Convertible Preferred Stock](index=29&type=section&id=Note%207.%20Common%20Stock%20Issuance%2C%20Redeemable%20Common%20Stock%2C%20Common%20Stock%20Warrants%2C%20and%20Convertible%20Preferred%20Stock) This note details the company's equity and warrant activities, including common stock offerings, preferred stock placements, conversions, and accounting for redeemable common stock - In September 2024, the company issued **3,135,136 shares** of common stock, generating net proceeds of **$10,590 thousand**, and issued Titan Warrants to purchase **125,405 shares** as underwriting compensation[104](index=104&type=chunk)[106](index=106&type=chunk) - In February 2024, the company sold **9,250 shares** of Series B convertible preferred stock and warrants to purchase **1,799,021 shares** of common stock for a gross purchase price of **$9,250 thousand**[110](index=110&type=chunk) - As of March 31, 2025, the redemption value for Series A convertible preferred stock is **$11,479 thousand** and for Series B convertible preferred stock is **$9,250 thousand**[109](index=109&type=chunk)[115](index=115&type=chunk) - **750,000 shares** of redeemable common stock were issued to WTI in September 2024, of which **62,500 shares** were forfeited due to the company not drawing on the remaining first tranche of the WTI Loan Facility[108](index=108&type=chunk)[68](index=68&type=chunk) Common Stock Warrants Activity (Shares Issuable) | Warrant Type | December 31, 2024 | New Warrants | Shares Purchased by Exercise | March 31, 2025 | | :----------------------------- | ----------------: | -----------: | ---------------------------: | -------------: | | SBG Public Warrants | 821,428 | — | — | 821,428 | | SBG Private Placement Warrants | 471,428 | — | — | 471,428 | | Series A Warrants | 7,871,712 | — | — | 7,871,712 | | Series B Warrants | 1,799,021 | — | — | 1,799,021 | | SVB Warrants | 10,714 | — | — | 10,714 | | Titan Warrants | 125,405 | — | — | 125,405 | | Total | 11,099,708 | — | — | 11,099,708 | [Note 8. Fair Value Measurements](index=34&type=section&id=Note%208.%20Fair%20Value%20Measurements) This note details fair value measurements of assets and liabilities across the fair value hierarchy, focusing on common stock warrant valuation using the Black-Scholes model Fair Value Measurements (in thousands) - March 31, 2025 | Category | Level 1 | Level 2 | Level 3 | Balance | | :-------------------------- | ------: | ------: | --------: | --------: | | **Assets:** | | | | | | Money market funds | $9,104 | $— | $— | $9,104 | | **Liabilities:** | | | | | | SBG Public Warrants | $— | $— | $1 | $1 | | SBG Private Placement Warrants | $— | $— | $1 | $1 | | Series A Warrants | $— | $— | $15,263 | $15,263 | | Series B Warrants | $— | $— | $3,391 | $3,391 | | Total liabilities | $— | $— | $18,656 | $18,656 | Fair Value Measurements (in thousands) - December 31, 2024 | Category | Level 1 | Level 2 | Level 3 | Balance | | :-------------------------- | ------: | ------: | --------: | --------: | | **Assets:** | | | | | | Money market funds | $8,223 | $— | $— | $8,223 | | **Liabilities:** | | | | | | SBG Public Warrants | $— | $— | $5 | $5 | | SBG Private Placement Warrants | $— | $— | $2 | $2 | | Series A Warrants | $— | $— | $20,750 | $20,750 | | Series B Warrants | $— | $— | $4,586 | $4,586 | | Total liabilities | $— | $— | $25,343 | $25,343 | - The fair value of common stock warrant liabilities decreased by **$6,687 thousand** from December 31, 2024, to March 31, 2025, primarily due to a smaller decrease in the fair value of outstanding warrants[130](index=130&type=chunk) [Note 9. Net Income (Loss) Per Share](index=37&type=section&id=Note%209.%20Net%20Income%20%28Loss%29%20Per%20Share) This note presents basic and diluted net income (loss) per share calculations using the two-class method and identifies anti-dilutive securities excluded from diluted EPS Net Income Per Share Attributable to Common Stockholders (Basic) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------------------------------------------------- | --------------------------------: | --------------------------------: | | Allocated net income attributable to common stockholders | $1,748 | $1,285 | | Weighted average common shares outstanding, basic | 15,383,287 | 8,740,059 | | Net income per share attributable to common stockholders, basic | $0.11 | $0.15 | Net Income (Loss) Per Share Attributable to Common Stockholders (Diluted) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------------------------------------------------- | --------------------------------: | --------------------------------: | | Allocated net income (loss) attributable to common stockholders | $1,748 | $(4,863) | | Weighted average common shares outstanding, diluted | 15,383,287 | 9,617,825 | | Net income (loss) per share attributable to common stockholders, diluted | $0.11 | $(0.51) | Common Stock Equivalents Excluded from Diluted EPS (Anti-Dilutive Effect) | Security Type | March 31, 2025 | March 31, 2024 | | :-------------------- | -------------: | -------------: | | Stock options | 377,012 | 463,168 | | RSUs | 1,450,316 | 1,526,327 | | RSAs | 107,636 | — | | PSUs | 56,391 | 71,428 | | ESPP shares committed | 51,073 | 19,388 | | Common stock warrants | 11,099,708 | 3,102,591 | | Preferred stock | 2,872,668 | 5,200,802 | | Total | 16,014,804 | 10,383,704 | [Note 10. Segments](index=39&type=section&id=Note%2010.%20Segments) This note clarifies the company operates as a single segment with the CEO as decision maker, providing revenue and long-lived asset breakdowns by geographic area - The company operates as a single operating segment, with all significant operating decisions based on a consolidated analysis[139](index=139&type=chunk) Revenue by Geographic Area (in thousands) | Geographic Area | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------- | --------------------------------: | --------------------------------: | | United States | $17,333 | $12,901 | | United Kingdom | $1,207 | $856 | | Other | $2,564 | $993 | | Total revenues | $21,104 | $14,750 | Long-Lived Assets by Geographic Area (in thousands) | Geographic Area | March 31, 2025 | December 31, 2024 | | :---------------- | -------------: | ----------------: | | United States | $134 | $167 | | International | $74 | $73 | | Total long-lived assets, net | $208 | $240 | [Note 11. Revision of Previously Issued Quarterly Information (Unaudited)](index=39&type=section&id=Note%2011.%20Revision%20of%20Previously%20Issued%20Quarterly%20Information%20%28Unaudited%29) This note details revisions to the Q1 2024 unaudited condensed consolidated cash flow statements, correcting immaterial errors in borrowings, payments, and activity classifications without impacting net income or total cash flow Revisions to Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2024, in thousands) | Cash Flow Activity | As Reported | Adjustments | As Revised | | :-------------------------------- | ----------: | ----------: | ---------: | | Other, net (Operating Activities) | $(680) | $(17) | $(697) | | Net cash used in operating activities | $(3,339) | $(17) | $(3,356) | | Purchase of intangible assets (Investing Activities) | $(54) | $17 | $(37) | | Net cash used in investing activities | $(54) | $17 | $(37) | | Proceeds from short-term borrowings (Financing Activities) | $28,941 | $(21,688) | $7,253 | | Payments of short-term borrowings (Financing Activities) | $(31,392) | $21,688 | $(9,704) | | Net cash provided by financing activities | $5,233 | $— | $5,233 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, including mission overview, detailed operating results analysis, and a comprehensive discussion of liquidity and capital resources [Overview](index=41&type=section&id=Overview) - Owlet's mission is to empower parents with real-time data and insights through its digital parenting platform, aiming to provide peace of mind and support child health[149](index=149&type=chunk) [Components of Operating Results](index=41&type=section&id=Components%20of%20Operating%20Results) - Revenues are primarily derived from product sales and associated mobile applications, recognized upon transfer of control[150](index=150&type=chunk) - Cost of revenues includes product costs, manufacturing, shipping, depreciation, warranty, fulfillment, warehousing, hosting, and inventory reserves[151](index=151&type=chunk) - Operating expenses are categorized into General and Administrative (salaries, legal, accounting, professional services, facilities, settlements), Sales and Marketing (salaries, commissions, third-party marketing), and Research and Development (salaries, product design, development, testing, clinical testing)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) This section analyzes the company's Q1 2025 financial performance versus Q1 2024, covering revenues, cost of revenues, gross profit, operating expenses, and other income/expense Key Financial Results (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | --------------------------------: | --------------------------------: | ---------: | ---------: | | Revenues | $21,104 | $14,750 | $6,354 | 43.1% | | Cost of revenues | $9,778 | $8,203 | $1,575 | 19.2% | | Gross profit | $11,326 | $6,547 | $4,779 | 73.0% | | Gross margin | 53.7% | 44.4% | 9.3% | 20.95% | | Operating loss | $(2,671) | $(5,746) | $3,075 | -53.5% | | Interest expense, net | $(991) | $(161) | $(830) | 515.5% | | Common stock warrant liability adjustment | $6,687 | $9,179 | $(2,492) | -27.1% | | Net income and comprehensive income | $3,025 | $3,274 | $(249) | -7.6% | | Net income attributable to common stockholders | $1,748 | $1,285 | $463 | 36.0% | - Revenue increase was primarily driven by higher sales of Dream Sock and Dream Duo products, reflecting increased consumer demand[161](index=161&type=chunk) - Gross margin improved due to higher revenue, favorable product mix, lower returns, improved fixed cost absorption, and lower direct product and fulfillment costs[162](index=162&type=chunk) - General and administrative expenses increased due to litigation settlements and higher compensation, partially offset by lower stock-based compensation[163](index=163&type=chunk) - Research and development expenses increased due to higher compensation, increased headcount, and greater investment in R&D[165](index=165&type=chunk) - Interest expense significantly increased due to interest and amortization of issuance costs related to the WTI Loan Facility and ABL Line of Credit, entered into in September 2024[166](index=166&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses funding sources, reiterates going concern warnings, outlines management's mitigation actions, and summarizes cash flow activities from operations, investing, and financing - As of March 31, 2025, the company had cash and cash equivalents of **$16,310 thousand**[168](index=168&type=chunk) - The company continues to face substantial doubt about its ability to continue as a going concern due to recurring operating losses, negative cash flows from operations, and a low cash balance relative to current obligations[206](index=206&type=chunk) - Management's actions to address liquidity include a September 2024 common stock offering (**$10,590 thousand** net proceeds), a February 2024 preferred stock and warrant sale (**$9,250 thousand** gross proceeds), and securing the WTI Loan Facility and ABL Line of Credit in September 2024[204](index=204&type=chunk)[205](index=205&type=chunk) - Failure to secure additional funding on acceptable terms may require modifying or abandoning planned development, or further operating cost reductions, which could materially adversely affect the business[208](index=208&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | --------------------------------: | --------------------------------: | | Net cash used in operating activities | $(5,925) | $(3,356) | | Net cash used in investing activities | $(110) | $(37) | | Net cash provided by financing activities | $2,014 | $5,233 | | Net change in cash, cash equivalents, and restricted cash | $(4,021) | $1,840 | - The increase in net cash used in operating activities was primarily driven by an increase in accounts receivable[211](index=211&type=chunk) - Net cash used in investing activities increased due to investments in various projects, primarily for the development of a new subscription app[212](index=212&type=chunk) - The decrease in net cash provided by financing activities was primarily due to the proceeds raised by the Series B preferred stock offering in February 2024, which occurred in the prior year period[213](index=213&type=chunk) [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes to the critical accounting policies and estimates disclosed in the company's Form 10-K, other than those explicitly disclosed in this report[214](index=214&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Owlet, Inc. is not required to provide quantitative and qualitative disclosures regarding market risk [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and procedures, concluding they were ineffective due to material weaknesses in internal control over financial reporting, and outlines remediation plans - The company's disclosure controls and procedures were not effective as of March 31, 2025, due to material weaknesses in internal control over financial reporting[218](index=218&type=chunk) - Material weaknesses include an ineffective control environment due to insufficient personnel with appropriate internal controls and accounting knowledge, inadequate segregation of duties for journal entries, ineffective controls over inventory accuracy and existence, completeness and accuracy of accrued liabilities, accounting for debt and equity arrangements (including convertible preferred stock, warrants, and stock-based compensation modifications), sales returns, accrued sales tax, and IT general controls[221](index=221&type=chunk)[223](index=223&type=chunk) - The remediation plan involves hiring additional accounting and financial reporting personnel, implementing new policies, procedures, and controls, and enhancing existing controls related to IT general controls, segregation of duties, inventory, accrued liabilities, and debt/equity arrangements[222](index=222&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) [PART II. OTHER INFORMATION](index=57&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) This section states the company is involved in various legal proceedings and refers to Note 5 for detailed descriptions and potential impacts on financial position [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the Form 10-K and 10-K/A for comprehensive risk factors that could materially affect the business, financial condition, or results [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales of equity securities occurred during the three months ended March 31, 2025 [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states no defaults upon senior securities occurred during the reporting period [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates mine safety disclosures are not applicable to the company [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) This section reports no other material information to disclose and no Rule 10b5-1 trading arrangement changes by directors, officers, or the company [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and Inline XBRL documents [Signatures](index=59&type=section&id=Signatures) This section contains the required signatures of the Principal Executive Officer and Principal Financial Officer, certifying the report's submission

[Q1 2025 Financial & Business Highlights](index=1&type=section&id=Q1%202025%20Financial%20%26%20Business%20Highlights) Owlet exceeded Q1 2025 expectations with over 43% revenue growth, improved gross margin, and breakeven adjusted EBITDA, driven by core products, international expansion, and new partnerships Q1 2025 Key Financial Highlights | Metric | Q1 2025 (in millions) | Change vs Q1 2024 | | :--- | :--- | :--- | | Revenue | $21.1 | ▲ 43.1% | | Gross Margin | 53.7% | ▲ 930 basis points | | Net Income | $3.0 | ▼ from $3.3 | | Adjusted EBITDA | $0.0 | ▲ $3.1 | - The company achieved its fourth consecutive quarter of **breakeven or better adjusted EBITDA**, demonstrating strong execution[3](index=3&type=chunk) - Growth was primarily driven by strong momentum in **Dream Sock and Dream Duo products**, international expansion, entry into medical channels, and the **Owlet360 subscription service** with over **48,000 paying subscribers**[3](index=3&type=chunk) - A new distribution partnership with Children's Hospital of The King's Daughters enables babies to leave the hospital with an Owlet device[3](index=3&type=chunk) [Q1 2025 Financial Performance Analysis](index=1&type=section&id=Q1%202025%20Financial%20Performance%20Analysis) Owlet achieved significant year-over-year financial improvement in Q1 2025, with revenue growing 43.1% to $21.1 million, gross margin expanding to 53.7%, and adjusted EBITDA reaching breakeven [Revenue and Gross Margin](index=1&type=section&id=Revenue%20and%20Gross%20Margin) Q1 revenue grew 43.1% to $21.1 million, driven by Dream Sock and Dream Duo sales, while gross margin expanded to 53.7% due to favorable product mix and cost reductions Revenue and Gross Margin Performance | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Revenue | $21.1 | $14.8 | ▲ 43.1% | | Cost of Revenue | $9.8 | $8.2 | ▲ 19.5% | | Gross Margin | 53.7% | 44.4% | ▲ 930 bps | - Gross margin improvement was attributed to higher revenue, a favorable product mix towards **Dream Sock**, decreasing return rates, and lower direct product and fulfillment costs[5](index=5&type=chunk) [Operating Expenses and Profitability](index=1&type=section&id=Operating%20Expenses%20and%20Profitability) Q1 2025 operating expenses increased to $14.0 million, yet operating loss narrowed to $2.7 million, with net income at $3.0 million (including a $6.7 million warrant gain) and adjusted EBITDA reaching breakeven Operating Expenses and Profitability Overview | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Operating Expenses | $14.0 | $12.3 | ▲ $1.7 | | Operating Loss | ($2.7) | ($5.7) | ▲ $3.0 | | Net Income | $3.0 | $3.3 | ▼ $0.3 | | Adjusted EBITDA | $0.0 | ($3.1) | ▲ $3.1 | - The rise in operating expenses was primarily driven by higher compensation, including accrued bonuses, and charges related to certain legal matters[7](index=7&type=chunk) [Earnings Per Share (EPS)](index=2&type=section&id=Earnings%20Per%20Share%20(EPS)) Q1 2025 basic and diluted EPS were $0.11, while adjusted net loss per share significantly improved to $0.07 from $0.39 in the prior year Earnings Per Share Summary | Metric | Q1 2025 (per share) | Q1 2024 (per share) | | :--- | :--- | :--- | | Basic EPS | $0.11 | $0.15 | | Diluted EPS | $0.11 | ($0.51) | | Adjusted Net Loss Per Share | ($0.07) | ($0.39) | [Updated 2025 Financial Outlook](index=2&type=section&id=Updated%202025%20Financial%20Outlook) Owlet updated its 2025 financial guidance, projecting full-year revenue of $91 million to $95 million, gross margins of 46% to 50%, and continued pursuit of adjusted EBITDA profitability Full Year 2025 Financial Guidance | Metric | Full Year 2025 Guidance | | :--- | :--- | | Revenue | $91 million to $95 million | | YoY Revenue Growth | 17% to 22% | | Gross Margins | 46% to 50% | | Adjusted EBITDA | Striving for profitability | [Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section provides Owlet's unaudited condensed consolidated financial statements for Q1 2025, including Balance Sheets, Statements of Operations, Cash Flows, and GAAP to Non-GAAP reconciliations [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $51.4 million, cash decreased to $16.3 million, total liabilities decreased to $63.4 million, and stockholders' deficit improved to ($25.8) million Condensed Consolidated Balance Sheets | Balance Sheet Item | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $16.3 | $20.2 | | Total current assets | $48.4 | $46.1 | | Total assets | $51.4 | $49.5 | | Total current liabilities | $40.7 | $36.4 | | Total liabilities | $63.4 | $66.3 | | Total stockholders' deficit | ($25.8) | ($29.8) | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 saw $21.1 million in revenue, $11.3 million gross profit, an operating loss of $2.7 million, and a net income of $3.0 million, boosted by a $6.7 million warrant liability adjustment Condensed Consolidated Statements of Operations | Income Statement Item | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Revenues | $21.1 | $14.8 | | Gross profit | $11.3 | $6.5 | | Operating loss | ($2.7) | ($5.7) | | Net income | $3.0 | $3.3 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw net cash used in operating activities increase to $5.9 million, with $2.0 million provided by financing activities, resulting in a net decrease of $4.0 million in cash and equivalents Condensed Consolidated Statements of Cash Flows | Cash Flow Item | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | ($5.9) | ($3.4) | | Net cash used in investing activities | ($0.1) | $0.0 | | Net cash provided by financing activities | $2.0 | $5.2 | | Net change in cash | ($4.0) | $1.8 | [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section reconciles Q1 2025 GAAP net income of $3.0 million to Non-GAAP measures, resulting in **Adjusted EBITDA of $0.0 million** and an **adjusted net loss of $1.1 million** after various adjustments Reconciliation to Adjusted EBITDA | Reconciliation to Adjusted EBITDA | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | GAAP net income | $3.0 | $3.3 | | Adjustments (Interest, Tax, D&A) | $1.1 | $0.3 | | Non-GAAP EBITDA | $4.1 | $3.5 | | Other Adjustments (Warrant, SBC, etc.) | ($4.1) | ($6.7) | | **Non-GAAP Adjusted EBITDA** | **$0.0** | **($3.1)** | Reconciliation to Adjusted Net Loss | Reconciliation to Adjusted Net Loss | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | GAAP net income | $3.0 | $3.3 | | Adjustments (Warrant, SBC, Legal, etc.) | ($4.1) | ($6.7) | | **Non-GAAP adjusted net loss** | **($1.1)** | **($3.4)** | [Disclosure Regarding Non-GAAP Financial Measures](index=3&type=section&id=Disclosure%20Regarding%20Non-GAAP%20Financial%20Measures) Owlet uses non-GAAP measures like EBITDA and adjusted net income (loss) for internal performance evaluation and peer benchmarking, providing a clearer view of core operating performance by excluding non-recurring items - Non-GAAP measures are utilized for internal performance assessment, peer benchmarking, and to highlight core business trends not always evident in GAAP figures[14](index=14&type=chunk) - Key non-GAAP definitions include: - **Adjusted EBITDA**: Net income adjusted for taxes, interest, D&A, warrant liability adjustments, stock-based compensation, transaction costs, and certain legal charges[17](index=17&type=chunk) - **Adjusted net income (loss)**: Net income adjusted for warrant liability adjustments, stock-based compensation, transaction costs, and certain legal charges[18](index=18&type=chunk)

Sales and Revenue Growth - Over 2 million Owlet devices have been sold worldwide, contributing to one of the largest data sets of infant health and sleep[31]. - In 2024, Owlet achieved a net loss improvement of $20.4 million compared to 2023, setting records for revenue, gross profit, gross margin, and adjusted EBITDA[41]. - Owlet's international revenue grew by 98% in 2024 compared to 2023, following the launch of Dream Sock in the European Union and the United Kingdom[39]. - The company experienced a 44.5% increase in revenue in 2024 compared to 2023, following the receipt of marketing authorization for BabySat and Dream Sock products[135]. Product Development and Innovation - The introduction of the Owlet360 subscription service aims to enhance the value delivered to families and increase customer lifetime value[45]. - The company aims to enhance its product offerings and customer experience through ongoing research and development, focusing on product quality, performance, and regulatory authorizations[56]. - New products and services, such as BabySat and Owlet360, are in development but may not achieve market acceptance, impacting revenue growth[163]. - The introduction of new products could adversely affect sales of existing products, leading to inventory management challenges[166]. Regulatory Compliance and Authorizations - The FDA marketing authorizations for Dream Sock and BabySat mark a significant moment for the pediatric category, reinforcing consumer and healthcare professional trust[38]. - Owlet received 510(k) clearance for its prescription-required pulse oximeter device, BabySat, in June 2023, allowing for spot-checking and continuous monitoring of well-perfused infants at home[60]. - In November 2023, Owlet obtained a de novo authorization for Dream Sock, which provides live health readings and alerts caregivers if readings fall outside preset ranges[60]. - Compliance with FDA regulations is critical; failure could lead to recalls or production halts, impacting product supply[200]. Market Strategy and Competition - Owlet's strategic focus includes expanding its global footprint and accessibility through partnerships with healthcare providers and retailers[36]. - Owlet's competitive landscape includes established players like VTech and Masimo, which have larger resources and market presence[52]. - The company anticipates increased competition as new technologies and distribution strategies emerge in the market[53]. - Increased competition from companies with greater resources could impair the company's ability to grow and maintain market share[169]. Financial Health and Risks - As of December 31, 2024, the company had an accumulated deficit of $268.2 million and cash and cash equivalents of $20.2 million[138]. - The company has incurred recurring operating losses and generated negative cash flows from operations since inception, raising substantial doubt about its ability to continue as a going concern[138]. - The company may need additional funding to support operations, but financing may not be available on acceptable terms, leading to potential dilution for existing stockholders[143]. - Financial difficulties faced by distributors and retail customers may lead to delays or defaults in payment, affecting cash flows and working capital[181]. Supply Chain and Manufacturing - The company relies on third-party suppliers for key components, including WiFi chips and microcontrollers, and follows strict quality guidelines for manufacturing[116][117]. - The company relies on a single manufacturer in Thailand for its Dream Sock, Smart Sock, and BabySat products, and a separate manufacturer in China for the Owlet Cam, which poses risks of supply chain disruptions[152]. - Manufacturing and quality control issues could arise during the scale-up of production, impacting the ability to meet market demand[155]. Legal and Compliance Issues - The company is involved in legal proceedings that could materially affect its financial condition and operations[172]. - The company has identified material weaknesses in internal controls over financial reporting, which could result in misstatements in financial statements[175]. - Non-compliance with subscription laws could lead to legal actions and financial penalties[201]. Data Privacy and Cybersecurity - The company’s operations are governed by numerous data privacy and security laws, which complicate compliance efforts[112]. - Cybersecurity threats are increasing, with potential impacts on business operations and reputation due to IT system failures[207]. International Operations and Regulations - International operations expose the company to various risks, including regulatory changes and political instability[204]. - The EU's General Product Safety Regulation requires manufacturers to document conformity assessments and report risks to national authorities[83]. - Medical devices marketed in the EU must be CE marked, and advertising must comply with EU legislation to avoid misleading claims[95]. Market Challenges and Consumer Behavior - The addressable market for the company's products may be smaller than estimated, potentially impacting future growth and financial performance[187]. - Significant marketing expenditures are required to acquire new customers, and failure to achieve anticipated returns could adversely affect financial results[189]. - The company's reputation and brand value are critical for success, and negative publicity could severely damage consumer confidence in its products[196].