Owlet, Inc.

Good afternoon. Thank you for attending today's Owlette Q1 earnings call. My name is Tania and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I will now like to pass the conference over to our host, Mike Cavanaugh, Investor Relations of ICR Westwick. Please go ahead.

Good afternoon and thank you for joining us today. Earlier today, Owlet Incorporated released financial results for the quarter ended March 31, 2022. The release is currently available on the company's website at investors.owletcare.com. Kurt Workman, Owlet's co-founder and chief executive officer, and Kate Skolnick, chief financial officer, will host this afternoon's call. Before we get started, I would like to remind everyone that certain matters discussed in today's conference call and or answers that may be given to questions asked are forward-looking statements that are subject to risks and uncertainties relating to future events and or the future financial performance of the company. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in the company's most recent public filings with the U.S. Securities and Exchange Commission, including its annual report filed March 25, 2022, and other reports filed with the SEC, which can be found on its website at investors.outletcare.com or on the SEC's website at www.sec.gov. The information provided in this conference call speaks only as of today's live call. OWLET disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections, or other forward-looking statements, whether because of new information, future events, or otherwise. Please note that OWLET will refer to certain non-GAAP financial information on today's call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in the company's earnings press release, which is also available on the company's quarter results page of its website. I will now turn the call over to Kurt.

Thank you, Mike, and good afternoon to all of those joining us today. First, I want to note the overwhelming support from hundreds of thousands of parents over the past several months. They have been the voice of Owlet's mission to empower parents with the tools, technology, and information that they need to deliver care at home. It's clear that new parents want solutions to help them navigate the incredibly challenging and rewarding stage of early parenthood. We cannot imagine a world in the future where every family doesn't have access to basic health sensing technology to monitor their baby at home. We're more dedicated than ever to achieving that vision. Our monitoring system will become the foundation for what we call the Connected Nurseries Ecosystem, a suite of products and services that will work together to help parents keep their baby safe, healthy, and happy. Outlet is making significant investments toward this vision in 2022 in products like Smart Crib, our Next Generation Camera, a membership program, and expanded Outlet accessories. which will fundamentally change the opportunity to build a longer-term relationship with each customer and expand our LTV in 2023. Additionally, we believe that investments towards regulatory clearances, where needed, will accelerate market adoption and penetration, helping make Owlet the technology platform for every parent. Owlet delivered $21.5 million in revenue during the first quarter, primarily driven by loading in and rebuilding our inventory position with our retail partners. While the DreamSock launched on OutlookCare.com and in some retailers in January following CES, the full rollout of DreamSock happened throughout the quarter, with different retailers stocking their shelves each month of the quarter. Notably, Target did not reset in-store, and Amazon was not at full capacity until the end of March. Many of our key levers of growth were just starting to build throughout the quarter, including baby registries, consumer reviews, and search rankings. As a result, we saw sell-through levels increase throughout the quarter, but we believe we will realize our full sell-through potential as we continue to build our registries, reviews, and rankings. The best way to characterize Q1 2022 is that we focus on regaining our footing and positioning back in the market and work to reestablish ourselves as the best monitoring solution for parents. While we're navigating the short-term headwinds of bringing our core products back online, it's clear that the long-term potential of our DreamSoc and DreamDuo is strong. We're seeing consistent increasing satisfaction ratings, both in our net promoter surveys and our Amazon listings, signaling that customer satisfaction is coming back on track with previous SmartSoc levels. We're also expanding our retail footprint and international presence significantly. We have a robust roadmap of new features and products, and as we continue to build our green platform, we intend to add medical device regulatory clearances that we believe could dramatically accelerate adoption. I'd like to give an update on these four areas of growth, starting with our DreamSoc and Duo penetration in the U.S. We've seen sell-through of the DreamSoc and Duo grow double-digit month-over-month for the past three months. And the products have already been named Best Baby Monitor and Baby Gift from the likes of BabyList, Glamour, Spy, and GearBrain. By the end of the quarter, 100% of our retail channels and doors were back online with Dream products. In the second quarter of the year, we're now focused on growing sell-through. Allard has continued its strong organic referral with 56% of customers sharing about the product through word of mouth. In a recent survey, 93% of parents reported peace of mind with the DreamSoc, which is on par with the metrics we saw around SmartSoc. We've continued to introduce new Dream product features to parents, improving the baseline net promoter score every month, with Amazon reviews for our DreamSoc and Duo climbing to 4.1, 4.3 stars already. Some of the most notable features and enhancements include an even smarter sleep algorithm that's 10 times more responsive and 11% more accurate than when it was first released. At the end of March, we rolled out an app update that included the display of average oxygen in the Dream app to help give parents a more complete view and understanding of baby sleep. DreamSoc and DreamDuo users will also get access to a brand-new feature around predictive sleep in the third quarter. It's a completely personalized sleep tool that helps parents take the guesswork out of getting their baby the rest they need. Parents will receive personalized prompts when their baby needs to go to sleep based on baby's age, time slept in their prior nap, and how long it's been since they slept. This new feature is automated for parents and adapts with baby as parents build routines and schedules. By continuing to add more features to the Dream platform, Owlet is becoming an ingrained part of the parenting journey. We see consistent app engagements every day, and we're exploring additional revenue opportunities like membership that would further enhance this. The second key growth area we're focusing on as a business is expanding our ecosystem with our robust product roadmap and several commercial launches approaching. First, our new sleepwear accessories, the Owlet Dream Sleeper and Dream Sleeper with the Swaddle, will debut later this year. In a survey of Owlet customers, 73% said they would purchase a sleeper from Owlet. In Q3 of this year, the Owlet Cam 2 will launch globally, bolstering the existing 1080p HD video with next-generation artificial intelligence and machine learning to accurately decipher sounds from the nursery and detect when babies cry so parents know when their baby needs them. We'll also use that data to store important video clips throughout the day so that you never miss a moment. Also, part of our product roadmap for the Owlet Connected Nursery ecosystem is our Smart Crib, Our team is making phenomenal progress on the development of the Owlet Smart Crib, which will be an anchor for the ecosystem. We recently brought parents into our office and presented Owlet Crib prototypes alongside other infant bed options currently on the market. And 70% of parents there said they preferred the Owlet Crib over the various other Smart Crib choices we presented. Lastly, we continue in research and development of the outlet pregnancy band, the wearable monitor for expectant mothers. After a successful beta test last year and following continued conversations with FDA, we have a stronger understanding of the opportunity, consumer fit, and market needs. As a result, we are working toward an FDA-cleared medical device rather than a consumer wellness version so we can offer a more robust feature set that we believe will provide the best experience for expectant moms. The wearable pregnancy monitor is just one of the medical devices our team is working on as a third key area of growth for our business. In the U.S., we continue in conversations with FDA as we work toward medical device submissions for both a prescription-only version of the SOC for use with sick babies under the care of a physician and an over-the-counter version of the SOC's heart rate and oxygen notification features for healthy children. We have a strong healthcare team leading these efforts with experience from top healthcare companies like Philips, GE, and Kaiser Permanente. We continue to meet with FDA regarding our submissions, and we believe we're on track to submit for the prescription-only version of the SOC in the summer and the over-the-counter SOC notifications following that. Outside of the U.S., we are pleased with our progress toward filing for the UKCA and CE MedMarkts in the U.K. and Europe. as well as our Health Canada filing, as we recently obtained both our ISO 1345 and MVSAP certifications. Our fourth area of growth is international expansion. 2021 was a banner year for Allett as we expanded sales of our core products into nearly a dozen countries in Europe. This year, we plan to focus on increasing penetration in those markets. Our overall international revenue grew by over 100% year over year, accounting for 13% of our total revenue in the first quarter of 2022. Some highlights from our international efforts include significant retail expansion in the U.K. with carrots, foods, and curries, and doubling the number of SKUs carried by John Lewis. We are now in major pharmacies, consumer electronics, and department stores, in addition to baby retailers across Europe. The SmartSoc was rated a top baby monitor by Les Parisiennes, a top French newspaper, as well as best baby monitor gift in The Independent, a large daily newspaper in the U.K., We are very pleased with this international growth and are eager to continue expanding and growing in these markets. Nearly every day, we hear from parents around the globe sharing their Owlet experience. Our mission is to get Owlet technology to every baby and every family, and international expansion is an integral part of our mission. Also, part of this is our advocacy and charitable work, where we partner with dozens of parent-led nonprofit organizations to provide Owlet products to families in need. In March, in collaboration with many of these nonprofit groups, we were able to donate 650 outlet monitors to Ukrainian refugees that had fled to parts of Europe. I'm grateful to work with so many like-minded groups with the same mission of delivering peace of mind. We believe these key four areas are huge opportunities for outlet both in 2022 and beyond. We're setting the foundation for an ecosystem this year, which we believe will open up significant long-term opportunities. We recently added several new team members to further support and lead outlet. Albert Lee joined in April as Chief Legal Officer, bringing with him more than two decades of healthcare and FDA regulatory expertise from medical product companies like Abbott and Zimmer. Following his tenure with Mattel and PricewaterhouseCoopers, Nate Yu came on board in the first quarter as our Senior Vice President and Chief Accounting Officer. Finally, we added Matthias Kozak as General Manager of our new APAC region. Matthias has extensive international experience from top brands like Adidas and Maui Gym. Thank you for your continued support of Owlet and our mission. I look forward to sharing more updates in our future calls. I'll now turn this call over to Kate.