Owlet Q2 Earnings Call Highlights

Record Q2 performance: Revenue rose 29.9% year over year to $33.9 million, while subscription revenue reached $3.2 million and Owlet360 subscribers totaled 130,000. Excluding a one-time $4 million tariff refund, adjusted EBITDA still increased to a record $2.9 million.

Subscription and international growth remain priorities: Dream Sock subscription penetration reached 36% in the U.S., and international revenue surged 214% year over year to $5.7 million. Owlet is expanding web-based enrollment, retail subscription bundles and its Owlet OnCall telehealth service.

Outlook was reaffirmed but near-term sales face pressure: The company maintained full-year revenue guidance of $118 million to $122 million and raised margin and adjusted EBITDA guidance largely because of the tariff refund. Management expects third-quarter revenue to decline sequentially and year over year amid competitor discounting and tough comparisons.

Owlet NYSE: OWLT reported record second-quarter revenue as growth in its connected baby-monitoring products, international markets and subscription business helped offset promotional pressure in the category. Revenue for the quarter ended June 30 rose 29.9% year over year to $33.9 million, according to CFO Amanda Twede Crawford. Subscription revenue reached $3.2 million, up $2.4 million from a year earlier, while the company ended the quarter with 130,000 paying Owlet360 subscribers. Monthly recurring revenue exceeded $1.1 million at quarter-end.

The company said it received about $4 million in tariff refunds during the quarter following a U.S. Supreme Court decision in February that invalidated tariffs imposed under the International Emergency Economic Powers Act. Owlet recognized a one-time $3.5 million benefit to cost of goods sold and a $3.75 million benefit to adjusted EBITDA, with the remaining amount reflected in inventory. Excluding the tariff refund, gross margin was 54%, up about 270 basis points from the prior-year quarter, while adjusted EBITDA was a record $2.9 million, compared with $0.5 million a year earlier. Including the refund, gross margin was 64.4% and adjusted EBITDA was $6.7 million. The company reported an operating loss of $1.8 million excluding the refund and operating income of $1.7 million including it.

President, CEO and Co-Founder Kurt Workman said Owlet is seeking to evolve from a hardware-focused company into a data and services platform spanning sleep, health monitoring, cameras and telehealth. The company’s long-term objectives are to attract roughly 1 million new customers annually, increase subscription adoption and retain families for at least two years, ultimately building a recurring base of more than 1 million subscribers. More than 30% of new U.S. customers subscribe to Owlet360 in their first year, Workman said. Dream Sock subscription penetration in the U.S. increased to 36% during the second quarter. The average subscriber currently uses the service for about 12 months, although management said the subscription offering launched about 18 months ago and customer cohorts are still maturing. Workman said nearly 30% of new users in the trial period are choosing an annual plan, and the company is seeing what he described as “decent renewal rates.” Owlet plans to expand subscription enrollment from in-app purchases to the point of sale, including through product bundles and retail partners. The company began testing web-based payment and enrollment during the quarter and expects a broader rollout in the third quarter. Crawford said app-store fees represent about 30% of subscription revenue during a subscriber’s fir...