Earnings call transcript Q2 2023

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Operator

Good afternoon. And thank you for attending the Owlet Second Quarter 2023 Earnings Call. My name is Alisa, and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions]

to Investor conference Relations. like host, to now Cavanaugh, Mike would pass over the our I Please proceed.

Mike Cavanaugh

for call. June and Kate Officer; us currently Kurt Owlet will results Workman, today. Officer, afternoon available Scolnick, Earlier quarter Good thank website this and host today, Chief Incorporated you on the Owlet’s released Financial at release Co-Founder XXXX. and The XX, for company’s joining the afternoon’s is ended www.investors.owletcare.com. financial Executive Chief

that statements about management make a operating reminder, the As forward-looking statements of call this including and plans. considered the will are and some on future financial statements, results company’s

management’s statements are date. as actual materially cause to of Such could be to represent subject different from uncertainties Any expectations that or projected. achievements and today’s performance those risks statements such

on result place revise future update new to on these statements not any not further for a and or events this does company’s otherwise. should refer undue matter. guidance as the of undertake whether forward-looking to company We the Please SEC obligation filings or information, forward-looking statements, reliance

to With over turn will Workman, Owlet’s Executive now Kurt? the call and that, Officer. Co-Founder I Chief Kurt

Kurt Workman

XXXX afternoon. Thanks, for QX for thank earnings call. joining And Owlet’s us you Mike. Good

revisit our in Before we into from the details, our last dive update objectives let’s March.

objectives clearances XXXX the and Our from main FDA for have driving obtaining start, clear been towards profitability.

forward to I marks fronts. both on step that am significant share thrilled a QX

our milestone device We BabySat towards FDA company. crucial device, in ourselves journey achieved as have clearance our consumer for defining a a medical monitoring

closer goal profitability. Additionally, yet bringing our resulted EBITDA another our in our significant of discipline us in focus adjusted has relentless reduction loss, financial on to

improvement rate a In our this, per decreased by marketing and resulted XX% year-over-year by in year-over-year. In QX, we within adjusted our EBITDA reduced year-over-year. approximately basis, this loss a XX% XX% acquisition in cost on QX, expenses run operating

million, up as for continue from up for sequentially Revenue sequentially efficiency QX in QX. million, these $XX.X results, million $XX.X $XX.X Gross QX our strong billings products. year-over-year from to sell-through XX% million demand in up see were channel for we $XX.X Complementing was consumer was XX% QX.

demand XX% benefits key in in a over seasonal we [ph] retail and from in had adds CVR and XX,XXX registry saw QX supported We with increase Mother’s were for partners. some QX. promotions Registry Day

are QX. awareness through We globally on to organic focus success over we views, driving XX In raising million consideration saw continuing QX, and our video and XX% XX with from impressions up organic million activities. great

to quarter brand several Our highs. health, continue satisfaction Promoter products Score ratings and with improve every all-times Net customer with

quarters. have the customer every our returns contacts for addition, service last quarter reduced and In three

We expect this trend to improved QX. margins continue and and drive further growth in

third as the we our row, channel. right-size For inventory in in sell-in our has sell-through levels outpaced the to continue a quarter

teams company profitability our to the of work of and XXXX. simultaneously drive end our goal propelling Our towards is sell-through reduce growth costs by

confident able growing feel our reduce have stabilize able -- been basis, on market been expanding that focused We expenses to successfully to medical our are we now make and and have footprint. that share we consumer cost

our is the prescription BabySat their BabySat technology that our from doctor. pulse-oximetry our monitor home extends of who prescription wireless FDA signifies babies breakthrough major it product by for clearance a The a through need for most portfolio. use to

thousands dedication families for proud of of BabySat to am team’s clinical clearance culmination of of sock is our I who and work. and most. it need clearance and dozens years first a receive FDA safety of the of studies, of pages the documentation diligence

Physicians has requests been country have astounding. The of from across and to immediate Owlet with seen home. extend providers demand DME and monitoring inbound partner have channels requested we the to parents, the

monitoring. to to clinical benefit year children wireless the of grade who on the focused from the millions be end can now will before We home BabySat of give access commercializing

recognition brand to the prescription BabySat bring the in provider. with BabySat and those who website parents, online medical our among condition with DME from core with strength physician to get children will through to We access enabling market, their have with starting partnership our an

will goal for DME instance provider additional of by partnerships and take-home We country. with monitor the the expand adding becoming across efforts then our the

Furthermore, we in of expansion new CE up Medical approval. global opportunities which QX, successfully opens our ahead for submitted clearance upon into markets schedule

Our cleared currently U.K. the a CE a over-the-counter Smart use. to Medical Sock with monitor replace device as clearance for will our medically Europe in allow us and sold home consumer

clinical continent reach unique to of added and expanding include This will providers channels across baby with every further Europe. the distribution our credibility, enhance our pharmacy efforts through partnerships to key

over-the-counter forward to also pulse are that software-as-a-medical-device Dream for include our pontifications the rate and health enhance the Finally, FDA saturation. gaining on to with Sock clearance looking submission oxygen we will for a capabilities

currently in with We process questions process am come FDA are of the to questions FDA working -- evidence team up. compelling company’s and respond are All the that respond the clinical the to of to been submission. tirelessly or our that I the support spend. in and review at backdrop reducing any Owlet clarifications the has properly to overall to in proud provide any working

clearance our on With new cons OTC trusted capabilities. new -- with targeted leading brand. device as of FDA, Owlet clearance our and trusted Europe pending FDA medical communities BabySat, of top the approval top we markets global consumer will of Owlet Opening a CE in Medical device on establish and building

of two have business, grow for like expansion, focus Owlet. members clearance the the to team. and and world’s can is FDA Medical the anticipation fantastic ahead As opportunity first In into stabilize turned continuing to opportunity our of making added products new channel CE we us we we full with this our alongside sure

a the Myriad Women’s be of of consumer serves Genetics, both President and Owlet’s pump is unique history, device Gonzales, medical Madela, as provider she breast joining sales Board Health will in Directors. division. who the and where at first the largest Melissa sales both The Melissa has world’s

consumer intends structured experience across deals Melissa with passionate to many mission to also invaluable and retailers Owlet be She’s our our including improve key has companies is Dimes worked supply and of also the Her to health on closely DME care Walmart. infants. our the Board company. Target of partner. Melissa past, about the with will the safety with and of March which of health in is and

am Owlet be building and trusted brands excited consumers. as our that to I Jonathan also Additionally, top experience will Revenue joining a President Harris of announce Officer. Chief Jonathan has decade by

help of passion building GoPro and global filtration in opportunities smart led sales from revenue consumer very market over system a brands the to global home Jonathan’s FDA will $X medical. navigate that the large strategic through Molekule, in sold ahead and was at Jonathan for recently global early days consumer the most CEO cleared. was both billion us both and partnerships

multiple These In highs. progress and brand achievements in the our conclusion, quarter at at our our include, fronts. we remains health products made all-time towards profitability for with all-time clearance significant on Net highs Score FDA of Promoter goal

and have XX% marketing spend costs acquisition stabilized early and for of We XXXX levels. reduced by

Our has sell-through channel the and grown in is over to year last normalize. inventory channel beginning QX

decreased full has business, $XX million spend the track across the spending excluding putting operating compensation to on us in for no stock-based expenses, year. corporate Our adjusted more than

CE our forward towards Medical for achieved FDA path BabySat FDA-OTC and a clear We clearance our device submission approval have clearance. with regulatory first

members to by growth top and goals. our towards We who end we help on operating of have the future our achieve stabilized remain will profitability operating key And have XXXX. expenses us team added

We between made we creating on organization are foundation profitable efficient we are are our hospital the products the adoption the growth as of for we that we towards we home. a have confident pursuing will are the and progress that FDA an clearances excited building to the us accelerate and believe about We strong forward. sustainable the platform be gap and the move bridges position and

goals, products services on hands confident their focused will make value that to our through operational we continuing while deliver customers strategy shareholders. to We on our and As executing hold lives. and impact a journey, we our and parent achieving our remain are this meaningful long-term

Thank you to in on updating coming progress time quarters. We Kate, your forward our continued to and you over the you. for support. look

Kate Scolnick

our in good Kurt a and you, of everyone. Thank number highlights his afternoon, financial overview. covered

items some financial and with few some additional a color repeat will provide I So commentary.

sequentially. QX in primarily Gross billings. reserve $X.X reserves allowance the This in $X.X were XXXX compares $XX.X $XX.X $X.X quarter activity QX second Day. QX were XXXX July, promotions Amazon to and Prime gross with sequentially discounts million, for million, million, XX.X% of of gross million Product from were Returns billings billings. associated promotional up in of X.X% and of million,

first Total of quarter a and from Dream revenues revenues Dream the were Total were sales in XXXX. $XX.X XXXX of million of the second driven by $XX.X in primarily sequential Sock Duo. million, quarter increase

gross to margins of of XXXX. of XX.X% gross in XX%. were resulting mix. variance period QX mix stable QX, improvements variance Cost purchase adjustments $X.X in sequentially, product gross improvement margins Sequentially, This and revenues a year-over-year due costs. product in inventory price The margin prior in and margins efficiency, purchase margin compares in primarily focus to price XX.X% with was improvements were million lower in on operational costs,

reduce of discounts. warehouse margin as time remain and through to the over in levels the our gross rates with goal Moving XX% we managing returning forward, we our to to PPV committed range inventory lowering in margins driving production XX% our improvement and and return optimizations shipping,

the compensation sequential which the $XX.X first XX% from stock-based decline in a were million, quarter of expenses $X.X in was million including Operating million, of $XX.X quarter.

raised in expenses expenses transaction primarily the expenses transaction $X.X were first The and was to from was and decrease $X.X related spend. to employee-related QX operating credit $XXX,XXX costs Excluding and in operating due of half marketing capital expenses of stock-based million Within compensation million. costs, million QX. costs in $X.X QX QX, the in operating net in year-over-year

sequentially. the and the net $XX Operating million was the $XX.X in with compared and $X.X was $X.X quarter quarter loss million, in million, million loss

million, Adjusted and EBITDA EBITDA in million of sequentially loss million QX $XX.X was XXXX. for QX to loss $X.X $X.X QX adjusted for compared

later leverage Our we we improvements has our to adjusted towards breakeven on areas in work management expense efficiency continue identify multi-quarter to will delivered this focus year. EBITDA as operational and

reverse move approximately XXXX. approved had focused to We company on into as of listing our we stated use Stock a July. cash Exchange and capital half XXXX, Turning costs in $XX to as in remain X:XX sheet. our its compliance June the continued XX, June equivalents New million. split our of stock And and with York the and were of quarter manage plan completed this goals second balance Cash

specific for providing from refrain guidance again will the we year. ahead, Looking

driving within ramping business profitability. our and For efficiently device the breakeven inventory control, XXXX and products, in clearances, the are therefore, our Medical our operational sell-through opportunities, core towards managing focused strides supporting and and commercialization product making for of activities BabySat core and we retail our achieving selling that will in maximize are our in that future balance on areas plan

your open Operator, for time you today. please Thank questions. for call the

Operator

Cowen. TD with Our question Absolutely. first line the Instructions] of Rhyee from [Operator comes Charles

now line Your open. is

Lucas Romanski

to This Lucas earning are Hi. you impact I about XQ, guys to we curious obviously, whether be us give would performance? saw see channels, be what what some Can BABY impacted I it’s for the seeing or Charles. there, is full ask would -- in channels various your performance, just XQ, but performance strong on really in online detail channel that great? wanted saw what bankruptcy saw you buybuy your specific for retail from you

Kurt Workman

question. BABY appreciate certainly had the bankrupt buybuy Yeah. on an this has us going impact year. I

got think impacted through bankruptcy. when adjusted buybuy we I news. QX BABY our the revenue was the We the expectations obviously

buybuy still now. pretty inventory inventory is in Part understand through That’s and BABY thing much to QX. that, selling the we gone all are liquidating away of

customers impact the into finding QX see to that of start those new channels, will in and I -- we QX. think, So

Early up some picking of that the demand. Amazon is show signs

We registry BABY are buybuy inside that really the that of had getting filling and with the are gap companies like channel. seeing Babylist the aggressive

and on. positive Target see that retailer other the year then that’s lift think I that’s to more goes we is the expect So as

how are sure conversations make all are starting new see at channels demand and that we various aware about channels. highest that through do So get level three focused to the are this retailers we and come through we very the we having with

BABY’s of inventory. buybuy their Now all through the

So great questions.

Lucas Romanski

Curious be we go-to-market any there? that later to should in through healthcare given are it would to of with any be that then the opposed or of understand I about hear the strategy, year. channels to marketing commercially can just in expenses as changes terms And product, there if to that in terms retail. Great. there anything launch detail take now think guys you associated your BabySat, sold Okay. Is looking

Kurt Workman

BabySat our with but me clearance, the milestone other Yeah. Well, let has start the getting our had just products. is for announcement huge only channels rippling a and not effect a company, into

has that announcement. I think increased the significantly consumer with confidence

increase metrics consideration and that of awareness result our as seeing are a We announcement.

and side consumer the on just opportunity with are even we positive, excited really that’s So the BabySat. about

partner pretty and country DME channels to have are the have reach. our going so been brand demand from home astounding, we monitoring across the we providers, our Owlet to parents, and requested has immediate leveraging to The by start inbound physicians request and the seen with extend to

There’s visit our BabySat have parents every medical those X of be families. There’s the going that available million for parents website have portion condition and and good who those Owlet’s offer a year. a to to child there

year. that year. are throughout channel the BabySat -- take opportunities of move developing to plan the an inbound the really into to new the end before launching have will as our approach we reimbursement, from more about we exciting And with advantage insurance the DMEs. providers, our these on new area on the expansion talk of It’s But we

margins to that, both a lot here the She’s that with revenue. really She’s there’s response more we we the will other opportunity from the interesting of big anticipated a think opportunity DMEs working note are also our we beginning. addition the we healthcare to I just consumer The grow based with I And than in be that Board. initial in even but had, great think Melissa and healthcare. is experience grow a got worked thing may and had have is on

Lucas Romanski

terms Okay. guys time. guidance -- guys path half, understand aren’t OpEx Should about reaching EBITDA profitability at then we reductions through get giving this should base on in the in of in point profitability? Great. think adjusted to But XQ. And OpEx you back top of about guys think profitability you the in about think we as reduced you further being to million growth $X.X or this current revenue how by OpEx you we I

Kate Scolnick

to employee that say expenses like This about would of that it would here. rate track we we I’d optimization the to remain and excluding is stock-based is of would rate range, be way tightly continuing marketing to have, There’s The spend. compensation. terms manage I in around run plan Yeah. right we that from a probably expenses and think are it’s like on run where costs additional some probably but basis, the to

Lucas Romanski

Those are questions you. have. Thank the Okay. all I Great.

Operator

you. Thank

America. the of line Lutz Our from next question comes of Allen with Bank

is line open. Your now

Hanna Lee

Hi. on Hanna This Allen. question. the is taking for for Thanks

for year? the you promotional Just second the anticipate do environment, given macro half guys of the a general higher environment

Kurt Workman

Yeah. question. Thanks for the

key kind the take will We of of advantage of some promotional events.

of Day, Black and channels. are our You of then for towards year, using have Cyber dollars. the and full end as their nice parents Prime sell-through Monday kind the FSA Friday, HSA increase That’s another

So that part half is strategy. second our of

discounts are We past due the the deeper anticipating in not macro environment. to going have in than we

at we we this discounted fact, Day, In Day, Prime say, actually I would -- actually less. Prime

focus We on bigger profitability. have a a more

I improvement. seeing And the that’s company paying are think as margin off we gross in for

We are seeing sell-through growth.

our We positive do will getting those And all that. are cost to continue are down. and we

of must to our have and past. really that most to forward created don’t we leader going have Owlet’s getting something business promotional the grow anticipate have think is continue that I than we more in the currency move are and and the market so this solution we a is in and a

might In the see fact, opposite. you

Hanna Lee

Got And are terms a it. share Can on expansion? That call, updates you XQ of Thanks. what the European here regulatory on in you you potential was mentioned international just helpful. thinking any submission.

Kurt Workman

Yeah. Absolutely.

and our submit CE Medical said of get XQ in would in did CE we ahead we So schedule. we the to Med Mark call, Europe that submission

getting with are one We notification features for Dream allow product that to our global we the health that in our approval submission. on. will confident very us are FDA with It -- Sock have

new lot to There’s want is provider the them. Mark and a different in opportunity that CE there in for Europe Owlet channels will up a groups us. big open Europe, of for we up that Med will recommend pharmacy And open

-- Mark will what I is So that our Med in it will open new CE use think other can also you we channels drive is countries. adoption also will it products The Europe, up but there. in significant see of

will expand well. able as continue So also we we to open new the when geographies world, to that up to -- will use around be we

Operator

questions There Instructions] [Operator are no you. at this time. Thank further registered

with I’d So to pass to Cavanaugh back Relations. Mike Investor the call like

Mike Cavanaugh

appreciate we do have discussion for some much, would while come Thanks would of -- out very we it. them some a left. time investors from questions that like I Alisa. share and put have Kurt, to this and Kate we have in bit little maybe

second first do you of FDA timing do approval? the question, the regarding So we -- what expect

Kurt Workman

clearance that is really into of step questions allotted answering QX, team that a The a big FDA. frame technology within Yeah. I strong of core the I indicator the time say BabySat think the I coming forward. and is of think, first quality job doing clearance a our is great would with

on We are time.

very been responsive has our FDA to question.

really FDA’s that So moving dependent we in are really to or communication Ultimately, is like our forward But review being are timing go looking up. questions that is not technology. whether and very mute? did come we are through feel good and process the the additional on we Mike, there’s confident responsive. on and you

Mike Cavanaugh

Yeah.

think I did. I

with business? with the approval on anticipated, Sorry. have the FDA on anticipate hand that and affect FDA follow-up And what will curve that do you approvals then the that in others

Kurt Workman

to catalyst standard If approvals are how and of breast monitoring the going the see thermometers home. monitoring we the see and car every health and in and category practice seats, digital establishing think we future to a we baby these pumps to to is have similar key access FDA as

it say have we bluntly, it believe will of impact. kind category-wide to just So a long-term

product the to features in our as offered well. clearance FDA us allows increase

kind products to close will clearance will drive to So and diagnostic going better Parents the Owlet monitors they from additional The continue of have credibility will our data at get is differentiate home. integrate will to better. to the loop allow our also for FDA and baby features. product to us access

So reach we the FDA family we have and sustainable will primary and been are position gaining FDA long-term that clearances leadership to every in investment a market BabySat. next the the commercializing about create believe a excited really approvals

for of mom literally bulky went showed Remember, She we and first interviews sock like who of said of such to a she little design difference that we me. home we make a customer monitors the into a crib using wires the and this crying. big did, one with hospital will started huge went her is one this these

there’s millions access And that, -- access don’t a approvals a really give on of families We greater like that to FDA will feel become monitoring top today. of to have families. that lot catalyst of will

Mike Cavanaugh

that. little anything Thanks Great. also And a then plan else you on this share Kurt, are about. getting Is a just bit BabySat and go-to-market like there did of that go-to-market for the about investors? the we would with you to talked you lot about since questions, address

Kurt Workman

is wired, Yeah. I get practice to kind parents would most they the they just say, -- either home common these bulky, the with it’s size, which wearable, the the Owlet’s monitors are so there a today a nothing, hundredth it’s of sounded, today, wireless, connected. all cost, because lot get data they it’s are is literally of that intrusive, are have alarms are tenth

parents, to announced a a product, see here we big have access transition us, of parents this we as to that want they have health and to pretty it’s children a BabySat obvious condition. but have especially kind who obvious So happening

website them a -- there. with a it have with if website and the opportunity through fulfilled access with expect to in starting of giving be they our prescription, lot partnership our DMEs So we are we direct will

with that’s home they monitor Owlet Providers to with sending a nothing intrusive. decide have opportunity extend they monitoring and replace out home and new between intrusive or also access monitoring reached them have sending parent today, to to see as an home also

the and we So year. with create and every the awesome big will X parents million that’s parents starting our visiting work channel the another DMEs to with strategy, the are website a that really and providers go-to-market

Mike Cavanaugh

to for questions. it do so call queue. the final remarks. to I questions you Thanks, please I don’t Kurt will any see Kurt. Over That’s final other great. question over in for turn right, final All supplemental now. remarks. the That’s investor Anybody Kurt. a has Otherwise, for the

Kurt Workman

Yeah. Okay.

things thank a before want the have one joined call each think I to Just wrapping express to you up, today. I heartfelt you of who

a this us. on lot to presence journey means Your

pediatric it our progress excited little promising. strides ahead genuinely us bringing that is about are are of care we vision for We and incredibly Owlet future the are and the to road to looks closer our meaningful care, that comes making for when proudly the better world driving ones.

your for time in So thanks once Owlet. belief again and

Operator

today’s your you concludes This for Thank participation. call.

You may disconnect lines. now your

Owlet (OWLT) 14 Aug 232023 Q2 Earnings call transcript