Owlet, Inc. (OWLT) is a pioneering force in the smart infant monitoring industry, offering cutting-edge products and innovative solutions that are transforming the way parents care for their children. With a rich history spanning over a decade, Owlet has emerged as a trusted brand, known for its commitment to improving infant health and empowering families.
Company History and Evolution
Owlet was founded in 2013 by Kurt Workman, Zac Cottrell, and Jordan Monroe with the mission of empowering parents with the right information at the right time to give them more peace of mind and help them find more joy in the journey of parenting. The company's flagship product, the Owlet Smart Sock, was designed to track a baby's heart rate and oxygen levels and provide real-time alerts to parents. In 2015, Owlet launched the Smart Sock on Kickstarter and quickly surpassed its funding goal, showcasing strong demand for the product.
Over the next several years, Owlet continued to improve and refine the Smart Sock, expanding its functionality and making it available through major retail channels. However, the company faced challenges in 2021 when the U.S. Food and Drug Administration (FDA) inquired about the regulatory status of the Smart Sock, asserting that it may be classified as a medical device. This led Owlet to cease distribution of the Smart Sock in certain markets while it worked to address the FDA's concerns.
In 2023, Owlet received its first FDA clearance for its BabySat product, a prescription-only pulse oximeter for infants. This milestone represented a significant step forward in Owlet's mission to elevate the standard of care for infants and deliver medical-grade monitoring solutions to families.
Owlet's breakthrough came in 2024 when it obtained CE Medical certification for its Dream Sock product, enabling it to sell the medically-certified monitor across Europe. This expansion, combined with continued growth in the U.S. market, contributed to Owlet achieving record revenue and gross margin performance for the full year 2024. The company also made progress in expanding distribution of BabySat through partnerships with durable medical equipment providers and Medicaid programs.
Financial Performance and Outlook
Owlet's financial performance in recent years has been marked by both challenges and impressive strides. The company experienced significant operating losses in 2022 and 2023, with net losses of $79.3 million and $32.9 million, respectively. These losses were largely driven by increased operating expenses related to research and development, sales and marketing, and general and administrative costs as Owlet invested in its growth and innovation.
Financials
However, the tides began to turn in 2024, as Owlet reported a remarkable turnaround in its financial results. The company achieved record revenue of $78.1 million in 2024, representing a 45% year-over-year increase. Gross margins also expanded significantly, reaching 50% for the full year, up from 38.5% in 2023. This impressive margin expansion was driven by a combination of favorable product mix, reduced return rates, and improved fixed cost absorption.
Owlet's adjusted EBITDA, a key metric of profitability, also improved substantially in 2024, reaching negative $2 million, a $14.3 million improvement compared to 2023. This positive momentum carried into the fourth quarter of 2024, with the company reporting positive adjusted EBITDA of $0.5 million, marking its third consecutive quarter of positive adjusted EBITDA.
For the three months ended September 30, 2024, Owlet reported revenues of $22.1 million, a significant increase from $9.2 million in the same period the prior year, representing a year-over-year growth of 141%. This growth was primarily driven by higher sales of Dream Sock products, reflecting increased consumer demand across all sales channels. The company's gross margin also improved from 36.3% to 52.2% during this period, due to the higher revenues and lower direct product and fulfillment costs.
In terms of geographic distribution, Owlet's revenue for Q3 2024 was primarily derived from the United States, accounting for 84% of total revenue. The United Kingdom contributed 6%, while other international markets accounted for the remaining 10%.
Liquidity
As of Q3 2024, Owlet reported cash and cash equivalents of $21.5 million. The company's financial position was further strengthened in September 2024 when it entered into a $15 million asset-based revolving credit facility and a $15 million term loan facility. As of Q3 2024, Owlet had drawn $7.5 million on the term loan facility and $9.88 million on the revolving credit facility.
The company's liquidity ratios as of Q3 2024 were as follows:
- Debt/Equity Ratio: -0.60
- Current Ratio: 1.25
- Quick Ratio: 0.97
Looking ahead, Owlet has provided financial guidance for 2025, targeting revenue in the range of $88 million to $92 million, representing growth of 13% to 18% compared to 2024. The company expects gross margins in the range of 50% to 52% for 2025, demonstrating expansion over 2024. Owlet is also aiming to achieve full-year adjusted EBITDA profitability in 2025, a significant milestone in its path to sustainable profitability.
Innovative Product Offerings and Growth Strategies
At the heart of Owlet's success is its robust product portfolio, which continues to evolve and address the changing needs of parents and infants. The company operates in a single operating segment focused on its digital parenting platform. Owlet's primary products are the Smart Sock and Dream Sock, which aim to provide parents with real-time data and insights to help them feel calmer and more confident.
The Smart Sock is a wearable baby monitor that tracks a baby's heart rate, oxygen levels, sleep quality, and other vital signs, and sends this information to a mobile app. However, due to regulatory concerns, Owlet has ceased selling the Smart Sock in some markets, such as Canada, where regulators asserted it required medical device certification.
The Dream Sock, a similar wearable product, has become Owlet's flagship offering. In November 2023, Owlet obtained marketing authorization from the FDA for the Dream Sock's "Health Notifications" features. The company also secured CE Mark certification for the Dream Sock under the EU Medical Devices Regulation in March 2024 and UKCA certification in the UK in May 2024, allowing it to market and sell the product in those jurisdictions.
In addition to the Dream Sock, Owlet has received FDA clearance for its prescription-only pediatric monitor called BabySat. This product is a pulse oximeter designed for use in the home environment to measure and display a baby's oxygen saturation and pulse rate. The successful commercialization of BabySat will require Owlet to implement new processes and procedures to market and sell medical devices, which differs from its direct-to-consumer model for the Dream Sock.
Owlet launched its innovative Owlet 360 subscription service in 2024, marking a critical transition from a hardware-focused business to a comprehensive pediatric health platform. Owlet 360 leverages the company's extensive data on infant health and sleep patterns to provide parents with personalized insights and actionable information to better manage their child's care. This subscription-based service has already gained significant traction, with over 25,000 paying subscribers in the first month, exceeding the company's initial expectations.
Owlet's growth strategies are centered around three key focus areas: driving continued global adoption of the Dream Sock, expanding its medical and healthcare distribution channels for the BabySat, and transitioning the business towards a recurring revenue model through the Owlet 360 subscription service.
In the domestic market, Owlet is working to increase Dream Sock adoption rates, which currently stand at around 10% nationwide. By leveraging its strong brand recognition and word-of-mouth marketing, the company aims to drive adoption in larger states, mirroring the success it has seen in certain smaller, price-sensitive markets.
Internationally, Owlet is poised for continued growth, having secured CE Medical certification for the Dream Sock in 2024. With Europe's birth rate slightly exceeding that of the US, the company believes there is significant untapped potential in global markets, which accounted for 45% of revenue growth in the fourth quarter of 2024.
In the healthcare sector, Owlet is making progress in expanding the commercialization of its BabySat monitor, targeting the large and accretive medical market for higher-risk infants. The company has onboarded new durable medical equipment (DME) partners and is working to expand commercial insurance coverage and Medicaid reimbursement for the BabySat, which it believes could become a long-term growth driver.
Risks and Challenges
While Owlet's outlook appears promising, the company is not without its risks and challenges. One significant risk is the regulatory environment surrounding its products, particularly the potential for governmental authorities or notified bodies to require additional marketing authorizations or certifications for the company's offerings. Failure to obtain such approvals could result in regulatory enforcement actions or the inability to sell certain products in certain jurisdictions.
Additionally, Owlet faces competition from both established players and potential new entrants in the smart infant monitoring market. The company's ability to maintain its competitive edge and market-leading position will be crucial to its long-term success.
Owlet has also been involved in legal disputes, including securities class action lawsuits related to the company's disclosures regarding the FDA's classification of its Smart Sock. In November 2021, two putative class action complaints were filed against Owlet in the U.S. District Court for the Central District of California, alleging violations of the Securities Exchange Act of 1934 against Owlet and certain of its officers and directors. While the company has been vigorously defending these cases, the costs and resource strain associated with such litigation could pose a risk to its financial performance.
Industry Trends and Market Outlook
The smart baby monitor market is expected to experience robust growth in the coming years. Industry analysts project a compound annual growth rate (CAGR) of around 15% from 2023 to 2028. This growth is primarily driven by increasing demand for connected devices and a growing focus on infant health and safety among parents and caregivers.
As a pioneer in the smart infant monitoring space, Owlet is well-positioned to capitalize on these favorable industry trends. The company's innovative product offerings, combined with its expanding global footprint and transition towards a recurring revenue model, align well with the evolving needs of modern parents and the broader shift towards connected, data-driven childcare solutions.
Conclusion
Owlet's journey has been one of remarkable innovation, resilience, and a relentless pursuit to revolutionize the way parents care for their children. The company's transition from a hardware-focused business to a comprehensive pediatric health platform, exemplified by the launch of Owlet 360, positions it for long-term growth and sustainable profitability.
Despite the challenges it has faced, Owlet's recent financial performance, with record revenue, expanding margins, and improving profitability, suggests that the company is well on its way to realizing its full potential. The company's ability to exceed its own guidance for 2024 across all key metrics demonstrates its strong execution and the growing market demand for its products.
As Owlet continues to drive global adoption, expand its healthcare footprint, and leverage its data-driven subscription service, the future looks bright for this pioneering smart infant monitoring leader. With a clear strategy focused on innovation, market expansion, and financial discipline, Owlet is well-positioned to capitalize on the growing smart baby monitor market and deliver long-term value to both parents and shareholders alike.