Good afternoon. Thank you for attending today's Owlet Q2 '25 Earnings Conference Call. My name is Tamia, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Jay Gentzkow, Investor Relations. You may proceed.

Good afternoon, everyone, and thank you for joining us. Earlier today, Owlet released financial results for the second quarter ended June 30, 2025. I'm pleased to be joined today by Kurt Workman, Owlet's CEO and Co-Founder; President, Jonathan Harris; and CFO, Amanda Twede Crawford. Before we begin, please note that our financial results, press release and presentation slides referred to on this call are available under the Events and Presentations section of our Investor Relations website at investors.owletcare.com. This call is also being webcast live with a link at the same website. The webcast and accompanying slides will be available for replay for 12 months following this call. The content of today's call is the property of Owlet. It cannot be reproduced or transcribed without our prior consent. Before we begin, I'd like to refer you to our safe harbor disclaimer on Slide 3 of the presentation. Today's discussion will contain forward-looking statements based on the company's current views and expectations as of today's date. These statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, but are not limited to, those described in our most recent filings with the SEC and in the Risk Factors section of our annual report on Form 10-K as updated in the company's quarterly reports on Form 10-Q and other filings with the SEC. Please note that the company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. With that, it's my pleasure to turn the call over to Kurt.

Thank you very much, Jay. Hello, everyone, and thank you for joining our second quarter 2025 financial results call today. I'm proud to report Q2 was another exceptional quarter for Owlet. Revenue exceeded our expectations at $26.1 million in the quarter, growing 26% year-over-year, contributing to our largest first half revenue performance in company history. Strong topline growth led to gross margins expanding year-over-year for a ninth consecutive quarter, and we recorded our fifth consecutive quarter of adjusted EBITDA profitability. We've continued to make great progress throughout the first half of 2025 and are focused on driving further gains through our strategic focus areas for growth. We're confident in our continued momentum into the back half of the year and therefore, are again raising full year guidance. Underpinning our performance was, again, the unmatched dedication of the Owlet team and our passionate community. We are building on Owlet's transformation as a comprehensive pediatric health platform, and we believe we are just scratching the surface of Owlet's potential. I'm extremely proud of our execution to deliver on this opportunity and our mission. Before we jump into the second quarter results, I want to take a moment to highlight an exciting and important leadership update. As of October 1, I'll be transitioning out of the CEO role and into a new position as Executive Chairman of the Board. This move will allow me to focus more deeply on the things I'm most passionate about, expanding access to Owlet's mission and helping guide the company's long-term strategy as we continue to grow. Starting October 1, Jonathan will become the new CEO of Owlet. This is a meaningful moment for Owlet and one I'm incredibly excited about. I founded Owlet over 12 years ago with a simple but powerful belief that every baby deserves…

Thanks, Kurt. I could not be more thrilled at this opportunity to lead Owlet in this next chapter. On behalf of Owlet's Board and all of the Owleez, we'd like to thank Kurt for his passion and dedication to this company. Simply put, there would not be an Owlet without him. He has been the driving force in our mission to bring safety and peace of mind to new parents, and we are fortunate that he will continue to play a critical role as Executive Chairman. We are at an exciting time with the significant opportunity to deliver on the amazing potential of this business to be the leading pediatric health platform in the world, and I'm honored to help drive this mission forward as Owlet's CEO. Thank you. Okay. Now on to the financial results from the second quarter. Looking at Slide 5, it was another outstanding quarter for Owlet, exceeding our expectations across all metrics. Revenue was $26.1 million in Q2, up 25.9% compared to the second quarter 2024. Gross margins expanded 180 basis points to 51.3%, representing our ninth consecutive quarter of year-over-year gross margin expansion. Gross margins included the impact from tariffs in Q2, which Amanda will go into in more detail. Adjusted EBITDA was $0.3 million, our fifth consecutive quarter of adjusted EBITDA profitability. Finally, we are raising our full year 2025 guidance to reflect both our outperformance in the second quarter and the confidence in our outlook. Amanda will provide more detail on our updated guidance. We are excited to maintain the momentum of our business into the back half of the year. Turning to our strategic focus areas for growth. We continue to make really strong progress on driving continued global adoption of Dream Sock, transitioning Owlet into a service through the Owlet360…

Thanks, Jonathan, and good afternoon, everyone. I'll begin on Slide 10. Unless noted otherwise, I will be comparing second quarter 2025 results to the second quarter of 2024. We delivered another strong quarter in Q2, exceeding expectations across all key metrics. Revenue in the second quarter was $26.1 million, an increase of 25.9% compared to prior year. Revenue strength was primarily driven by stronger-than-expected sales of Dream Sock and Dream Duo. Gross margin in the second quarter was 51.3%, an increase of 180 basis points versus prior year, our ninth consecutive quarter of year-over-year gross margin expansion. Gross margin improvement primarily reflects strong product mix, improved fixed cost absorption, lower direct product and fulfillment costs, partially offset by the tariff impacts. The tariff situation remains fluid, and we are adapting and evaluating in real time. In the second quarter, gross margins were impacted by the 10% tariffs assessed in Thailand and Vietnam. With Vietnam tariffs now confirmed to increase to 20% and Thailand to 19%, we are modeling these impacts into the forecast. Total operating expenses in the second quarter were $15.3 million versus $12.5 million in the same period last year. As a percentage of revenue, Q2 operating expenses were 58.7% compared to 60.4% in Q2 2024 as we continue to drive strong operating leverage as we scale the business. Operating loss in the second quarter was $1.9 million compared to $2.2 million in the same period last year. Net loss in the second quarter was $37.6 million versus $1.1 million in the same period last year. The increase was primarily driven by a $34.8 million noncash mark-to-market adjustment related to our common stock warrant liability. Excluding this adjustment, our net loss would have been $2.8 million. We announced earlier today that we've come to an agreement with various…

[Operator Instructions] The first question comes from Charles Rhyee with TD Cowen.

Congrats on the quarter here. And also, obviously, Jon and Kurt, congrats on the new roles. A lot of hard work done here, so congrats. Maybe if I could start on -- Amanda, on the guidance here. Just trying to understand a little bit if you could help maybe quantify roughly what you think the tariff cost will be to cost of goods sold in particular? And I guess with 51% gross margins here in the second quarter, guiding 46% to 50%, maybe you can give us a sense on what that implies for the back half. I guess it would imply something more in the mid-40s. Is that the right way to think of it?

Yes. So when it comes to tariffs this quarter, the impact was less significant than we're expecting in Q3 and Q4 just because the tariffs were temporarily set at 10% and then increased to 19% for Thailand and 20% for Vietnam on August 1. So during Q2, we saw about a $500,000 impact to gross profit. When we push that forward looking ahead to Q4, we're expecting about a 5% impact on gross margin. And then Q3 will be kind of a blend between the 2 quarters just because we'll continue to have the 10% rate, which is in our inventory right now. And then as the [indiscernible] we'll see a little bit of an increase in Q3 as well.

Okay. That makes sense. And just remind me, like how many days of inventory are you typically carrying?

We target about 6 weeks.

Okay. And then maybe Kurt or Jonathan, maybe a progress on the health care side with DME vendors. And just if there's a -- if you can give us an estimate on how much maybe health care revenue contributed in the quarter?

Yes. Health care continues to be a slow progress for us. So we're continuing to drive on that. The revenue was inconsequential, but we have expanded. Adapt is currently accepting Medicaid plans in 29 states, so we are seeing an increase in our adoption of reimbursement. And we are making great progress on CHKD with the integration into Owlet Connect. So I think once that's fully up and stood up, I think we're going to continue to see additional hospitals, health care systems join onboard and continue to grow. So it's a slow process, but we're continuing to gain momentum.

Great. And maybe one last question for me then. The warrant exchange, I saw the announcement that just -- that it has been -- that you announced this. What does that turn into for common shares if they're all exchanged?

We'll get back to you on that, Charles.

The following comes from Ben Haynor with Lake Street Capital Markets.

Thanks for taking my question. Can you hear me okay?

Yes, we can hear you. Can you hear us?

Okay. Great. Yes, I can hear you fine. Sorry about that. On just kind of wanted to touch on telehealth, and I apologize, I m jumping between a couple of calls here. Any update to the plans there? Is that something that you expect to kind of roll out similarly to the subscription offering where initially offer it to a subset of folks on the platform and then they expand it later? And have you set pricing or any other details there?

Yes. So we're super excited about the opportunity to roll in the telehealth. It's still under development. Integration is taking a little bit longer than expected. So we will roll it out by the end of this year, and we have not set or structured pricing on that at this time.

Okay. Fair enough. And then any more color on kind of the interest level from other children's hospitals or other entities after seeing CHKD?

Yes. The dialogue with our hospitals has really picked up since that announcement, and we're lining them up. Nobody wants to be first, but they sure don't want to be last. So we're really standing up to our Owlet Connect. Once we get CHKD set up with that, then we're going to begin rolling out to other hospital groups. But we are already in conversations with a few as we speak.

Okay. Got it. And then I think lastly for me, just following up on the prior question on BabySat and you re now in 29 states. Are you seeing any trends that are similar to what you've seen as you kind of get adoption to a certain level in a given geography amongst these sort of Medicaid populations? Or is it too early for that?

Yes. I'd say it's still too early for that. We're building momentum, but it's a slower process than the consumer side.

Fair enough. Congrats on the quarter and the guidance and the new roles, Jonathan and Kurt.

[Operator Instructions] The next question comes from Owen Rickert with Northland Capital Markets.

Congrats on a great quarter. Just can you dive a bit deeper into this Owlet Connect offering? Maybe just provide us with a little bit more color there. What are you excited about with this one?

Yes. Great question. We're excited because this is going to provide real-time monitoring back from our babies that are discharged from the hospital, from the NICUs into their homes. This will give real-time information back to the neonatologists through the Connect. So this is not changing the workflow on the neonatologist side. But for the first time ever, babies at home will be able to share information with their doctors back at their offices or back at the hospital in real time. So we're super excited about this opportunity. It's taking a little bit longer to get the full integration, but we believe once this is live, this will be groundbreaking technology for discharges and children at home.

The following question comes from Alex Fuhrman with Lucid Capital Markets.

I wanted to ask about the Owlet360 subscription offering. That's pretty big growth from last quarter, getting to 66,000 subscribers. Can you talk a little bit about what you've learned over the past couple of months? It looks like you've kind of changed the price a couple of times as you've tested things like that. Has there been any sensitivity to price? And what as you're onboarding as you've been selling new devices, what kind of attach rate have you gotten on the subscription to activators of the new devices?

All right. Thanks for the question, and thanks for calling in. We've seen really strong progress on subscription. We're seeing everything that we want to see. Growth in total paying subscribers, the MRR attach rate, retention rate and overall satisfaction and feedback. We're not ready to share those specific metrics yet, as this is still emerging. But currently, we've got 66,000 paying subscribers. They are at different pricing levels as some were in an introductory period versus the more recent pricing structures. But something we are seeing since we've increased the price, the conversion rate was slightly less, but not to the extent that it was worth having the higher price, if that makes sense. So we're seeing really good, strong momentum given our current price point. So we do expect to scale throughout the year. It's still early, but we are excited for the long-term impact that we expect subscription to have on the business just from a financial standpoint, but as well as we are in our transition to become a pediatric health platform.

The next question comes from Boris Peaker with Titan Partners.

Great. I do want to add my congratulations to the great quarter. Just a few questions here. Maybe on the hospital side of things, what is the actual process or at least from the contract that you've signed already, what is the process of bringing another hospital on board? Do they -- is there some kind of an internal committee that needs to make a decision? Do they do a little pilot trial? Or just help us understand how that works and what that can imply about kind of future hospital contracts.

Yes. Great question, Boris. So yes, it definitely comes through the committee working through that. And then it's getting the integration through our Owlet Connect integrated into whatever their remote patient monitoring platform that they're using. So there is an integration cycle. And then it's also partnered through one of our DME partners to make sure that they're supplying the BabySats into the hospital itself. So sort of 2 components. One is the hardware itself. And then the second is the integration into the service on the backside. So it's a little bit of a process. And as you know, hospital contracts can take a while to negotiate.

Got it. And maybe just a question on tariffs. Assuming that these higher tariffs remain, is there a strategy to bring manufacturing to the U.S., or maybe to another country with a lower tariff? Or is the kind of strategy to just continue paying them as that's the most optimal path forward?

Yes. We are looking into other options for other manufacturing sites. At this point in our journey, we are hitting up against capacity and had planned expansion anyway. So this is a really good opportunity for us to diversify our sourcing and look at other possible locations. So it's something that we're actively looking into and seeking to minimize the overall impact of the tariffs.

There are currently no other questions.

Just wanted to address the question that Charles had just regarding the exchange agreement with the warrants. So we are exchanging about $7.2 million of Series A and $1.8 million of Series B for an aggregate amount of 5,429 newly issued shares. So that is disclosed in our press release and 8-K. So I just wanted to make sure that we answered that question.

[Operator Instructions] No more questions have queued at this time. I'll now turn it back over to Jonathan Harris for closing remarks.

Thank you for joining us today. We're incredibly proud of the progress we've made this quarter from our strong financial performance to the continued expansion of our global footprint. Our commitment to empowering parents with the information they need to care for their babies remains at the heart of everything we do. We believe that our FDA-cleared products, combined with our strategic partnerships and growing subscription service, position us for sustained growth and profitability. We are confident in our vision for the future and look forward to updating you on our progress. Thank you again for your time and continued support.

This concludes today's conference call. Thank you for your participation. You may now disconnect your line.