8-K: Owlet Announces Strong Preliminary Q4 2023 Results, Revenue Jumps 75% Year-Over-Year

Owlet, Inc. reports a significant increase in revenue and improved profitability in its preliminary unaudited fourth quarter 2023 results, with net revenue up 75% year-over-year.

Summary

• Owlet, Inc. has released preliminary unaudited financial results for the fourth quarter of 2023, showing substantial year-over-year improvements.
• Gross sales are expected to be approximately $32.9 million, a 114% increase compared to the same period last year.
• Net revenue is projected to be around $21.0 million, reflecting a 75% year-over-year growth.
• The gross margin is estimated at 47%, a significant increase of over 1,900 basis points from 27.8% in the previous year.
• The net loss is expected to be approximately $6.9 million, a 65% reduction from the $19.5 million loss in the fourth quarter of 2022.
• Adjusted EBITDA loss is projected to be about $0.7 million, a 95% improvement from the $15.2 million loss in the same quarter of the previous year.
• The company attributes the strong sales performance to FDA approvals and a successful holiday promotional period.
• Non-recurring items related to the US channel transition to Amazon 1P negatively impacted the gross margin and adjusted EBITDA, but these are now resolved.
• Excluding these non-recurring items, the gross margin would have been just over 50% and adjusted EBITDA would have been positive for the quarter.

Sentiment

Score: 8

Explanation: The document conveys a very positive sentiment due to the significant improvements in revenue, gross margin, and profitability. The company's management is optimistic about future growth, and the resolution of the Amazon 1P transition is a positive sign. However, the preliminary nature of the results and the risks mentioned prevent a perfect score.

Positives

• Owlet experienced a substantial increase in gross sales, up 114% year-over-year.
• Net revenue saw a significant rise of 75% compared to the same quarter last year.
• The company's gross margin improved dramatically, increasing by over 1,900 basis points.
• Net loss was reduced by 65% year-over-year, indicating improved profitability.
• Adjusted EBITDA loss decreased by 95% year-over-year, showing a significant move towards profitability.
• The company's sales were boosted by FDA approvals and a successful holiday promotional period.
• The transition of the US channel to Amazon 1P is now complete, and the company is realizing the full financial and operational benefits.

Negatives

• Non-recurring items associated with the transition of the US channel to Amazon 1P negatively impacted the Q4 gross margin and adjusted EBITDA.
• The preliminary results are unaudited and subject to change upon completion of financial closing procedures and the audit of financial statements.

Risks

• The preliminary financial results are subject to change as financial closing procedures are not yet complete.
• The company's actual results may differ materially from the preliminary estimates due to final adjustments and management's review.
• The company faces risks related to regulatory approvals, competition, and the ability to manage growth.
• Owlet's ability to obtain additional financing and comply with debt covenants is a risk.
• The company's performance is subject to economic conditions, consumer spending, and other factors beyond its control.

Future Outlook

Owlet anticipates continued momentum in 2024 as they commercialize new medical devices, expand distribution into healthcare, and integrate with insurance providers for BabySat. The company believes the combination of operating leverage and new growth from FDA clearances will propel Owlet to a new level.

Management Comments

• We delivered on our promise to gain FDA clearances, improve operations, reduce costs, and bring the business near Adjusted EBITDA break even in the fourth quarter of 2023, said Kurt Workman, Co-Founder and Chief Executive Officer.
• We had incredibly strong sales performance on the back of FDA approvals nearly doubling sell-through during our holiday promotional period over 2022.
• Owlet is in the best operating health and product position in our company's history and believe the combination of the operating leverage and new growth from FDA clearances will propel Owlet to a new level.
• Its worth noting that Q4 gross margin & adjusted EBITDA loss were negatively impacted by non-recurring items associated with the transition of the US channel to Amazon 1P. Excluding these items, gross margin would have been just north of 50% and Adjusted EBITDA would have been positive for the quarter.
• This channel transition is behind us and we are realizing the full financial and operation benefits from this transition now.
• Im proud of the immense progress our team has made in re-shaping the company in 2023.

Industry Context

The announcement reflects a positive trend in the digital health and infant monitoring sector, where companies are increasingly focusing on FDA approvals and expanding distribution channels. Owlet's move to integrate with insurance providers for BabySat is also a significant step in the industry.

Comparison to Industry Standards

• Owlet's 75% year-over-year net revenue growth significantly outpaces the average growth rate in the consumer health tech sector, which typically sees growth in the range of 10-30% annually.
• The improvement in gross margin to 47% is a substantial increase, placing Owlet in a competitive position compared to companies like Masimo and iRhythm Technologies, which have gross margins in the 50-70% range.
• The reduction in net loss and adjusted EBITDA loss indicates a strong turnaround, which is a positive sign compared to other early-stage health tech companies that often struggle with profitability.
• The transition to Amazon 1P is a strategic move that aligns with industry trends of leveraging major e-commerce platforms for distribution, similar to how companies like Fitbit and Garmin have expanded their reach.

Stakeholder Impact

• Shareholders will likely react positively to the strong financial results and improved profitability.
• Employees may feel more secure due to the company's improved financial health and positive outlook.
• Customers may benefit from the company's expanded product offerings and integration with insurance providers.
• Suppliers may see increased demand for their products as Owlet's sales grow.

Next Steps

• Owlet will report its full fourth quarter and year-end 2023 financial results on March 7, 2024.
• The company will host a conference call on March 7, 2024, to discuss the results and provide a business update.

Key Dates

Keywords

Owlet, Financial Results, Q4 2023, Gross Sales, Net Revenue, Gross Margin, Net Loss, Adjusted EBITDA, FDA Approvals, Infant Monitoring, Medical Devices