OWLT · Owlet, Inc.

Revenue reached $22.5 million in Q1 FY2026, up 6.4% from $21.1 million in the prior year quarter. This growth stemmed from higher subscription revenue, driven by an increase in subscribers to the Owlet360 service alongside higher average revenue per user. These subscription gains offset broader hardware challenges, demonstrating the diversifying impact of recurring revenue streams on top-line stability.

Gross profit improved to $12.2 million, a 8.1% increase from $11.3 million, yielding a 54.5% gross margin. However, hardware gross margins declined primarily due to tariffs announced in 2025, which raised cost of goods sold. This pressure was partially mitigated by a favorable product mix and reductions in direct product and fulfillment costs. Subscription cost of revenue increased with Owlet360 adoption, mainly reflecting app store distribution fees, underscoring scale dynamics in the digital service layer.

Net income swung to a -$3.3 million loss from $3.0 million profit, yielding diluted EPS of -$0.25 versus $0.11. This shift aligns with the deeper operating loss and reduced non-operating benefits compared to prior period warrant adjustments.

Net cash used in operating activities improved to -$5.0 million from -$5.9 million. The positive change was driven by working capital shifts, particularly in accounts receivable, inventory, and accounts payable, coupled with a smaller common stock warrant liability adjustment year-over-year. Capital expenditures were modest at $15 thousand, resulting in free cash flow of -$5.1 million. Tariffs continue to pose risks to cash flows if elevated rates persist, potentially necessitating additional financing if liquidity proves insufficient for future needs amid macroeconomic uncertainties like inflation or reduced product demand.