Owlet Inc (OWLT) (Q1 2024) Earnings Call Transcript Highlights: Strong Growth and Strategic Advances

• Revenue Growth: Q1 revenue up over 37% year-over-year.

• Gross Margin: Increased to 44.4% from 38.7% in Q1 of the previous year.

• Net Income: $3.3 million for Q1 2024, improved from a net loss of $11.9 million in Q1 2023.

• Adjusted EBITDA: Loss reduced by approximately 46% to $3.1 million.

• Operating Expenses: Decreased by 19% year-over-year to $12.3 million.

• Cash and Cash Equivalents: Ended Q1 with $18.4 million.

• Warning! GuruFocus has detected 5 Warning Signs with OWLT.

Release Date: May 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Owlet Inc (NYSE:OWLT) reported strong double-digit revenue and sell-through growth, with gross margin expansion and significant operating cost savings.

• The company successfully launched its go-to-market channels for medical device sales and integrated its first telehealth partnerships, enhancing its healthcare business.

• Owlet Inc (NYSE:OWLT) received FDA clearances and a CE medical authorization in Europe, establishing the company as a leader in safe and effective health monitoring.

• The company launched a new subscription service, leveraging a vast data set to offer personalized health and sleep guidance for parents.

• Owlet Inc (NYSE:OWLT) demonstrated strong financial performance with a net income of approximately $3.3 million for the quarter, a significant improvement over the previous year's net income loss.

Negative Points

• Despite improvements, Owlet Inc (NYSE:OWLT) still reported an adjusted EBITDA loss of approximately $3.1 million, although this was an improvement from the previous year.

• The company faces challenges in fully penetrating the market, with only about 8% of annual births currently using Owlet's products.

• Owlet Inc (NYSE:OWLT) is still in the early stages of growth for its Dream Sock product and medical sales channels, indicating potential future challenges in scaling these operations.

• The company experienced some cost of goods expense impact from elevated transportation costs due to global disruptions in inventory routing.

• Owlet Inc (NYSE:OWLT) refrained from providing specific quarterly revenue guidance, which may indicate uncertainty about future financial performance.

Q & A Highlights

Q: Can you discuss the quarter itself and the gross billing growth of 50%? How does this compare to levels prior to the FDA warning letter? A: Kurt Workman, CEO of Owlet Inc, responded that while Q1 is not fully back to the levels seen with the SMART Sock, the company is close and seeing strong demand and growth. He believes they will surpass previous levels soon.

Q: Could you talk about the DME partnership with AdaptHealth and whether physicians can access the product? A: Jonathan Harris, President and Chief Revenue Officer, confirmed that the partnership with AdaptHealth was fully operational from the beginning of Q1. He highlighted the early stages of healthcare reimbursement and insurance reimbursement as driving factors, expressing optimism about the direction and feedback so far.

Q: Are there existing reimbursement codes for the data set, or are you waiting for new codes to be created? A: Jonathan Harris clarified that there are existing reimbursement codes, and the company is currently focused on bringing more insurance partners on board.

Q: How should we think about net revenue in Q2 relative to Q1, especially considering promotions like Mother's Day and Prime Day? A: Kathryn Scolnick, CFO, explained that promotions typically reserve based on timing, affecting sequential growth from Q1 to Q2. She anticipates a healthy run rate from Q1 to Q2 due to these factors.

Q: With Masimo also receiving FDA approval for an over-the-counter monitoring product, how do you view this development? A: Kurt Workman sees Masimo's entry as validation of the category and believes it signifies a growing market. He emphasized Owlet's leadership in the category, extensive distribution, and strong brand awareness as key advantages.

Q: Can you provide insights into your investor outreach efforts and how you're engaging investors in Owlet stock? A: Kathryn Scolnick mentioned focusing on delivering strong operational results and communicating execution on growth objectives. She highlighted increasing Owlet's presence at conferences and other investor events as part of their strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.