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OI

Owlet, Inc. (OWLT)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarter: Revenue $32.0M (+44.6% YoY), gross margin 50.6% (–150bps YoY), operating income $1.2M (first-ever quarterly operating profit), net income $4.1M, and adjusted EBITDA $1.6M; strength driven by Dream Sock/Dream Duo and the new DreamSight camera load-ins .
  • Broad beats vs S&P consensus: revenue (+$5.2M, +19%), normalized EPS (+$0.23), gross margin (+339bps), and EBIT (beat by $3.0M) — a clean upside on core P&L metrics despite tariff headwinds *.
  • Guidance raised: FY25 revenue to $103–$106M (from $97–$100M), GM narrowed to 48–50%, and adjusted EBITDA $1.25–$2.0M; Q4 includes full-quarter tariff impact of ~500bps on margin .
  • Strategic catalysts: FDA-cleared Dream Sock amid FDA warning on unauthorized monitors, >85,000 Owlet360 subscribers, 171% international growth, CHKD hospital consignment launch, and EHR/RPM integration via Rhapsody; follow-on equity ($32M) and warrant exchange simplify capital structure and increase flexibility .

What Went Well and What Went Wrong

What Went Well

  • Record revenue, gross profit, operating income, and adjusted EBITDA; “best in Owlet history” with broad-based growth and momentum from FDA-cleared Dream Sock and the differentiated Dream platform .
  • Strategic progress: >85,000 Owlet360 paying subscribers; attach rate surpassed 25%; international revenue +171% YoY; launch of DreamSight (onboard AI) and foundational steps in healthcare channels (CHKD, Rapid City RPM/Owlet Connect) .
  • Market positioning: only FDA-cleared OTC infant monitor; management views FDA’s September warning against unauthorized devices as a strong validation and competitive advantage into holiday season .

What Went Wrong

  • Gross margin compression YoY (50.6% vs 52.2%, –150bps) and specific Q3 tariff impact of ~280bps; Q4 guided to ~500bps margin headwind from 19–20% tariffs on Thailand/Vietnam .
  • Increased leverage on working capital and credit lines: line of credit rose to $18.6M by Q3 (from $14.9M in Q2); accounts receivable expanded to $28.6M, reflecting distributor load-ins and growth .
  • Other expense volatility: warrant liability mark-to-market can swing GAAP net income (positive $4.3M in Q3 vs large negative in Q2), complicating GAAP comparability and investor read-through .

Financial Results

Quarterly P&L vs prior periods

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$21.1 $26.1 $32.0
Gross Margin %53.7% 51.3% 50.6%
Operating Income ($USD Millions)$(2.7) $(1.9) $1.2
Net Income ($USD Millions)$3.0 $(37.6) $4.1
Adjusted EBITDA ($USD Millions)$0.0 $0.3 $1.6
Basic EPS ($USD, Common)$0.11 $(2.37) $0.17
Adjusted EPS ($USD, Non-GAAP)$(0.07) $(0.05) $0.03

Notes:

  • YoY Q3 revenue +44.6% (to $32.0M); gross margin –150bps YoY to 50.6%; operating income turned positive vs $(4.8)M in Q3’24; adjusted EBITDA +$1.0M YoY .

Actual vs S&P Global Consensus (Q3 2025)

MetricConsensusActual
Revenue ($USD)$26.82M*$32.00M
EPS Normalized ($USD)$(0.197)*$0.03
Gross Margin %47.25%*50.6%
EBIT ($USD)$(1.83)M*$1.20M
EBITDA ($USD, S&P def.)$0.93M*$1.27M*

Values marked with * retrieved from S&P Global.

KPIs (Q3 2025)

KPIQ3 2025
Owlet360 Paying Subscribers>85,000
Subscription Attach Rate (Dream Sock)>25%
International Revenue Growth (YoY)+171%
Domestic Sell-through (YoY)+42%
Amazon Prime Day Units (YoY)+72%
Market Share (Dollar share baby monitors)40% (record)
DreamSock NPS77; blended product NPS 71

Guidance Changes

MetricPeriodPrevious Guidance (as of Q2 2025)Current Guidance (Q3 2025)Change
RevenueFY 2025$97M–$100M $103M–$106M Raised
Gross Margin %FY 202546%–50% 48%–50% Narrowed upward midpoint
Adjusted EBITDAFY 2025“Adjusted EBITDA profitable” $1.25M–$2.0M Quantified, Raised
Tariff Impact (GM headwind)Q4 2025N/A~500bps impact from 19–20% tariffs New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Technology initiativesPlatform transition to pediatric health; subscription momentum (48k subs Q1, 66k Q2) DreamSight launched with onboard AI; camera-based subscription features planned; pilot generative AI insights in early 2026 Accelerating feature roadmap and data/AI integration
Supply chain/tariffsTariffs noted as partial offset to GM in Q1; GM +930bps YoY Q3 tariff impact ~280bps; Q4 full-quarter 19–20% tariffs ~500bps GM headwind Headwinds increasing into Q4
Regulatory/legalFDA/CE clearances emphasized; CHKD partnership noted FDA safety communication (Sept 16) criticized unauthorized monitors; Owlet only FDA-cleared OTC monitor Regulatory clarity bolstering positioning
Product performanceDream Sock/Dream Duo drive growth DreamSight launch; domestic sell-through +42%; registry adds +30% YoY; Prime Day +72% units Strong product-cycle and retail momentum
Regional trendsInternational cadence lighter in Q2 (sell-in timing) International revenue +171% YoY; India CDSCO approval, early 2026 launch Reaccelerating, expanding footprint
R&D executionOngoing product dev; platform evolution Near-term R&D investments prioritized post follow-on offering Increased investment capacity
Healthcare channelsEarly CHKD/consignment; hospital relationships forming CHKD go-live Nov 7; RPM integration via Rapid City; Owlet Connect going live First deployments; pipeline building
Security/PrivacyNot highlighted in Q1/Q2DreamSight earns first SGS Cybersecurity Mark; EU RED compliance Strengthened security credentials

Management Commentary

  • “Q3 was another outstanding quarter, we believe the best in Owlet history… quarterly records for revenue, gross profit, operating income, and adjusted EBITDA,” — Jonathan Harris, President & CEO .
  • “We are proud to stand alone as the first FDA-cleared over-the-counter infant monitoring device… this regulatory clarity can help increase value proposition and create a significant competitive advantage,” — Jonathan Harris .
  • “In October, we… completed a warrant exchange and follow-on equity offering… strengthening the business and positioning us to pursue long-term growth opportunities,” — Jonathan Harris .
  • “Q3 operating income was a record… first quarter of positive operating profit… Net income was also positive… Q3 adjusted EBITDA was $1.6M… sixth consecutive quarter of adjusted EBITDA profitability,” — Amanda Crawford, CFO .
  • “We are narrowing our 2025 expectation range for gross margin to 48%–50%… Q4 as the first full quarter of increased tariff cost impacts of 20% (Vietnam) and 19% (Thailand), ~500bps to margin,” — Amanda Crawford .

Q&A Highlights

  • Health system partnerships: CHKD RPM integration “very successful” and serving as pilot for other systems; more conversations underway .
  • International growth drivers: Q3 international strength tied to DreamSight launch sell-in and momentum; expect continued growth across Europe and new clearances (e.g., India) .
  • Clinical platform value: Rapid City/Owlet Connect enables neonatologists real-time Babysat data post-discharge; architecture allows faster scaling across hospital systems .
  • Subscription retention/engagement: Not disclosing churn yet; strong engagement with owlet360; camera features and AI to expand in 2026 .

Estimates Context

  • Q3 revenue beat: $32.0M actual vs $26.82M consensus (+$5.18M, +19%) — driven by DreamSight launch and retail/distributor load-ins, plus subscription growth and international momentum *.
  • Q3 normalized EPS beat: $0.03 actual vs $(0.197) consensus; clean upside on profitability with first operating profit and positive net income *.
  • Q3 gross margin beat: 50.6% actual vs 47.25% consensus, despite a ~280bps tariff impact in the quarter *.
  • Q3 EBIT beat: $1.2M actual vs $(1.83)M consensus; strong operating leverage with opex at 47% of revenue vs 74% in Q3’24 *.
  • Implication: Street models likely to raise FY25 revenue and margin assumptions within guidance ranges and reflect higher operating profitability; Q4 models should incorporate ~500bps tariff headwind and holiday season retail dynamics .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Execution drives inflection: First-ever operating profit and positive net income amid record revenue/gross profit — a durable step toward profitable growth .
  • Guidance raised and quantified: FY25 revenue moved to $103–$106M and adjusted EBITDA $1.25–$2.0M; margin range tightened despite tariff headwinds, signaling confidence .
  • Strategic moat strengthening: Only FDA-cleared OTC infant monitor and SGS cybersecurity recognition for DreamSight enhance brand trust and competitive positioning .
  • Subscription optionality building: >85k subs, >25% attach rate; camera-based features and generative AI pilots expand monetization vectors in 2026 .
  • Healthcare commercialization: First hospital consignment and EHR/RPM integrations (Rhapsody, Rapid City) unlock reimbursed use cases and data flows for clinical adoption .
  • Watch working capital and tariffs: Elevated receivables/credit line usage reflect growth and sell-in; Q4 margin will reflect full tariff step-up (19–20%) — incorporate into near-term models .
  • Near-term trading setup: Strong beat/raise quarter and regulatory validation into holiday season are positive catalysts; monitor Q4 tariff drag and consumer environment commentary in intra-quarter updates .

Additional detail and reconciliations:

  • Q3 YoY comparisons: Revenue $32.0M vs $22.1M (+44.6%); GM 50.6% vs 52.2% (–150bps); operating income $1.2M vs $(4.8)M; net income $4.1M vs $(5.6)M; adjusted EBITDA $1.6M vs $0.6M (+$1.0M) .
  • Non-GAAP definitions and reconciliations provided by the company (adjusted EBITDA, adjusted net income, adjusted EPS) .
  • Balance sheet and cash flows: Cash $23.8M; line of credit $18.6M; receivables $28.6M at Q3; YTD operating cash outflow $(10.3)M; financing inflow $14.2M YTD .

Values marked with * retrieved from S&P Global.