Owlet — Third Quarter 2026 Earnings Summary

Financial Performance:

• Q3 2026 revenue was $30.4 million, a 4.9% decrease from $32.0 million in Q3 2025.
• Q3 2026 subscription revenue was $3.6 million, an increase of $2.1 million (140%) from $1.5 million in Q3 2025.
• Q3 2026 gross margin was 53.8%, an increase of 315 basis points from 50.6% in Q3 2025.
• Q3 2026 operating income was $1.2 million, compared to $1.3 million in Q3 2025.
• Q3 2026 net income was $1.4 million, compared to $4.2 million in Q3 2025.
• Q3 2026 Adjusted EBITDA (non-GAAP) was $3.5 million, compared to $1.6 million in Q3 2025.
• Q3 2026 operating cash inflows were $2.2 million.
• Nine months ended September 30, 2026, total revenue was $86.7 million, compared to $79.6 million in the same period in 2025.
• Nine months ended September 30, 2026, net loss was $2.4 million, compared to a net loss of $29.7 million in the same period in 2025.
• Nine months ended September 30, 2026, Adjusted EBITDA (non-GAAP) was $8.6 million, compared to $2.5 million in the same period in 2025.
• As of September 30, 2026, cash and cash equivalents were $31.6 million, down from $35.5 million as of December 31, 2025.
• As of September 30, 2026, total current liabilities were $41.9 million, including $11.0 million in line of credit and $3.6 million in current deferred revenue.
• As of September 30, 2026, total stockholders' equity was $26.5 million, up from $19.0 million as of December 31, 2025.
• Subscription gross margin for Q3 2026 was 68.4%.

Guidance and Future Outlook:

• The Company withdrew its previously issued full-year 2026 financial outlook.
• Withdrawal is due to anticipated remediation expenses, interruption in retail sales during Q4 2026, retailer returns, and near-term demand uncertainty resulting from the camera cable guard safety update.
• Management stated confidence that the long-term opportunity for Owlet remains intact despite the Q4 impact.

Business Segments and Product Lines:

• Q3 2026 hardware revenue was $26.8 million, down from $30.5 million in Q3 2025, driven by lower hardware revenue from the prior-year Dream Sight launch and aggressive competitor discounting ahead of the August 10, 2026 FDA-clearance deadline.
• Q3 2026 subscription revenue growth was offset by hardware declines, contributing to stronger underlying consumer demand and continued momentum in subscriptions.
• The Owlet360 subscription service ended the quarter with over 142,000 paying subscribers.
• The Company initiated a safety update for the camera cable guard accessory, providing a replacement enclosed cable guard system free of charge to all Owlet camera owners upon request.

Market and Competitive Landscape:

• Hardware revenue was negatively affected by aggressive competitor discounting ahead of Amazon's August 10, 2026 FDA-clearance deadline.
• The Company noted lower hardware revenue driven by the prior-year Dream Sight launch.

Risks and Challenges:

• Safety incident reports involving exposed camera cables led to the safety update and withdrawal of 2026 financial guidance.
• Risks include anticipated remediation expenses, interruption in retail sales during Q4 2026, retailer returns, and near-term demand uncertainty.
• The Company identified errors in historical financial statements related to overstatement of stock-based compensation expense due to valuation miscalculations in the employee stock purchase plan, resulting in revisions to prior periods.
• Forward-looking statements highlight risks regarding product commercial success, regulatory clearance (FDA), competition, ability to scale subscription services, debt covenant compliance, and product liability claims.

Management Commentary and Tone:

• CEO Kurt Workman described the quarter as "strong," driven by a focus on profitable growth.
• Workman noted revenue was in line with expectations and highlighted the expansion of gross margin, positive operating income, and positive operating cash flow.
• Management expressed confidence that the long-term opportunity remains intact despite the safety update impacting the fourth quarter.

Other Key Points:

• The Company revised previously issued consolidated financial statements for periods including the three months ended March 31, 2026, and annual periods ended December 31, 2025 and 2024, to correct errors related to stock-based compensation valuation.
• The safety update involves shipping replacement enclosed cable guard systems free of charge to all camera owners upon request.
• The Company will host a conference call and webcast on November 13, 2026, at 8:30 a.m. ET to discuss results and the business update.
• Nine months ended September 30, 2026, net cash used in operating activities was $3.0 million, compared to $10.3 million in the same period in 2025.
• Nine months ended September 30, 2026, net cash used in investing activities was $2.0 million, compared to $0.5 million in the same period in 2025.
• Nine months ended September 30, 2026, net cash provided by financing activities was $(4.1) million, compared to $14.2 million in the same period in 2025.