Q3 2021 Owlet Inc Earnings Call
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Speaker 3: It's clear from the results we've achieved that giving parents access to the tools and technology they need to better care for their baby is resonating. And we believe we are just beginning to scratch the surface.
Okay.
Okay.
Speaker 3: Parents deal with a lot of challenges and this market is ready for innovation.
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Speaker 3: I'd like to take a moment to address the recent communication Allot has had with the Food and Drug Administration regarding our Smart Sock product in the U.S.
Speaker 3: For those who are newer to the Allis story, we launched the SmartSock in 2015 as a consumer product in the baby monitor category. Initially selling direct to consumers from our website and shortly after expanding to retailers Smart Baby Monitoring Offices.
Thank you for your patience, everyone. The outlet Q3, 2021 and as COO will begin in two minutes time, if you would like to ask a question at the end of the presentation. Please press style, but if I wasn't on your telephone keypad.
Speaker 3: We believe that the product was not subject to oversight by the FDA as a wellness product, but we knew that our smart stock could have broader impact in infant monitoring by pursuing FDA clearance as a medical device to enable us to market it for medical devices.
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Speaker 3: Over the last few years, we've been in discussions with the FDA regarding our efforts to obtain clearance for a prescription use only version of the Smart Sock for sick babies under the care of a physician, and most recently with respect to an over-the-counter medical device Smart Sock for healthy babies.
Speaker 3: After six years on the market with four versions launched and over 1 million babies monitored, on October 1st, Allitt received a warning letter from the FDA. In the letter, the agency stated it believes the Smart Sock is a medical device because of its heart rate and oxygen notification functionality and the marketing of the product around that functionality, which FDA believes requires pre-market authorization.
Speaker 3: We've cooperated in good faith at the FDA's request to cease distribution of the Smart Sock in the U.S. while we work to obtain marketing authorization for the Smart Sock with these functionalities and claims.
Speaker 3: It's important to note that the FDA did not identify any safety issues in this letter. Rather, it focused solely on the regulatory classification of the product in the United States as a result of the heart rate and oxygen notifications and related claims.
Speaker 3: Since receiving the letter and taking prompt action to address FDA's concerns, we've been an ongoing collaborative discussions with the FDA to discuss the password for our medical device application. For the versions of SmartSoc, we'd historically been selling for use in healthy babies with notifications for heart rate and oxygen based on preset values.
Speaker 3: We have a team of some of the best medical device and regulatory experts working together on our medical device.
Yeah.
Hello, everyone and welcome to the outlet Q3, 2021 earnings call. My name is not yet and I will be coordinating the call. Today. If you would like to ask a question at the end of the presentation. Please press star followed by one no telephone keypads I will now hand over to your host Mike have enough from ICR Westwood Investor relations to begin.
Speaker 3: I'm pleased to share that in October we completed our final audit for ISO 13485 certification, which is a third-party certification for medical device manufacturers, as a step toward preparing to become a company marketing medical device.
Speaker 3: We expect to have more meetings with the FDA before we officially submit a marketing application.
Mike. Please go ahead.
Good afternoon, and thank you for joining us today.
Speaker 3: We'll keep you updated and plan to share more on the timing and application status at our next earnings call in February 2020.
Earlier today I'll, let incorporated released financial results for the quarter ended September 32021.
Speaker 3: One thing is for sure, we're not starting from scratch. Alladin's been working on the validation of our safety and accuracy for several years, and we feel confident in the technology, the team, and the progress we're making now more than ever.
The release is currently available on the company's website at investors Dot what care Dot com.
Curt Wortman I'll, let <unk> co founder and Chief Executive Officer, and Kate Skolnik, Chief Financial Officer will host this afternoon's call.
Speaker 3: I'm really excited to share more about our newest product, the Owlet Dreamstock, which we plan to announce in the coming weeks. The average parent loses 44 nights of sleep in the first year.
Before we get started I would like to remind everyone that certain matters discussed in today's conference call or answers that maybe given to questions asked are forward looking statements that are subject to risks and uncertainties related to future events or the future financial performance of the company.
Speaker 3: We know sleep is a huge pain point for parents. My self included is a bad of three kids.
Speaker 3: We're designing the new outlet dream stock to be a revolutionary baby sleep monitor and empower parents to build better sleep routines and habits to improve sleep for baby and the whole family.
Actual results could differ materially from those anticipated in these forward looking statements.
Speaker 3: The AlitreamSoc will be designed to teach what to do and when to help little ones up to 18 months old and their parents sleep better. Combining the power of Alit's award-winning technology and sleep program, the AlitreamSoc is meant to empower parents to build better sleep habits from day one. We plan to launch this new product as a duo as well with the Alit Camp. Similar to the SmartSoc duo, we had previously...
The risk factors that may affect results are detailed in the Companys. Most recent public filings with the U S Securities and Exchange Commission, including its prospectus dated August 24, 2021, and other reports filed with the SEC, which can be found on its website at investors that our care Dot com.
Speaker 3: With the upcoming edition of the Dream Talk to our suite of products, we are doubling down on our focus on infant sleep with our carousel services, which we expect to include coaching, courses, and other service integrations. We're building this out to initially focus on wellness off.
Or on the SEC's website at Www Dot FCC Dot Gov.
The information provided in this conference call speaks only as of today's live call.
I'll, let 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.
Speaker 3: specifically sleep related services in 2022. If we obtain marketing authorization for the notification features of the smart talk, that FDA believes rendered in a medical device, we plan to expand into more telehealth-focused integrations and services.
Speaker 3: Kate will now take us through the financial results for the third quarter of this.
Please note that I'll, let will refer to certain non-GAAP financial information on today's call.
Speaker 4: Thank you, Kurt, and good afternoon, everyone. Total revenues for the third quarter of 2021 were 31.5 million, a year-over-year increase of 48.8% and a sequential increase of 26.3% from the second quarter of 2021.
Can find reconciliations of these 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 investor page of its website.
I will now turn the call over to Kurt.
Speaker 4: Q3 revenue growth was driven primarily by our flagship Smart Sock and Monitor Duo, our Smart Sock and Canberra combination product.
Thanks, Mike and thank you all for joining US today, the third quarter of this year was our strongest ever in terms of revenue delivering 31 $5 million in revenue. This represents 48, 8% year over year growth and 26, 3% sequential growth from the second quarter of this year.
Speaker 4: Cost of goods sold were $16.69 in Q3, and gross profit was $14.9 million, up 51.5% from Q3 2020.
International revenue accounted for 10, 6% of those and it's exciting to see the contribution from outside of the U S continue to grow and account for even more of the overall pie.
Speaker 4: Gross margin for Q3 2021 was 47.2%, representing sequential decrease attributed to seasonal sales acceleration and a few macro factors related to supply chain and increased transportation costs.
We officially launched in both Switzerland, and France in July and September respectively. In the fourth quarter, we are well on our way to our next launches in Italy, Spain, the Netherlands and Belgium.
Speaker 4: The over-year Q3 2021 gross margin increased from 46.4% in Q3 2020.
Kate will go deeper into our Q3 2021 financial results later in this call.
I'm incredibly proud of all that we've accomplished at Alice through the first three quarters of the year.
Speaker 4: In Q3, we experienced a significant increase in demand in September , primarily related to retailers placing orders earlier than expected for the holiday season. As a result, we incurred increased air freight shipping costs, seasonal related promotional costs, and return allowances associated with retailers' sell-in activity we've usually seen in Q4.
We achieved everything we set out to do at the start of the year, our domestic penetration awareness continue to grow organically and that growth has accelerated with increased investment.
Moreover, I'm happy to report that adoption and growth rates internationally, and the outpaced our expectations and our progress towards key platform expansion opportunities are on the doorstep.
Speaker 4: The fuzumote cell's acceleration activity was approximately two-thirds of the sequential decrease in margin.
I'd also like to highlight some additional key accomplishments so far in 2021, which include.
We delivered over $78 million in revenue in the first nine months of 2021. This represents a 44% increase over the same period in the year prior and exceeds our full year 2020 revenue.
Speaker 4: The remaining one third of the sequential margin decrease was macro in nature, materials pricing increases we did not pass on to customers and overall heightened cost in shipping.
We delivered over $6 million in revenue from our international business in the first nine months of 2021, representing eight 3% of total revenue and an increase of 159, 6% over the same time period in the prior year.
Speaker 4: Operating expenses in the third quarter were 28.6 million compared with 10.9 million in the same prior quarter. The inquiries in Q3 operating expenses was for planned increases in spending associated with the scaling of our business included strategic talent hiring across the organization, increase investments in sales and marketing, product development costs as we expand our product portfolio, and expenses related to our business emanations.
We successfully delivered on the global launch of our newest products, the smart stock plus which gives us the opportunity to extend our relationship with parents and their babies from 18 months up to five years.
At the end of September the global net promoter score or NPS for the smart lock with 75, which is best in class and which we believe highlights how powerful word of mouth is for our brand.
Speaker 4: Operating loss in the quarter was 13.8 million compared with operating loss of 1.1 million in the third quarter of 2020.
We also completed our business combination, taking the company public and infusing more than $130 million of new capital into the organization to fuel continued innovation and to grow our offerings and international expansion.
Speaker 4: Net loss in the third quarter was 34.5 million compared with net loss of 1.5 million in the third quarter of 2020.
Speaker 4: EBITDA loss for Q3 2021 was $7.6 million compared with EBITDA loss of $0.9 million in the same prior year period.
It's clear from the results, we've achieved giving parents access to the tools and technology they need to better care for their baby is resonating and we believe we are just beginning to scratch the surface parents deal with a lot of challenges in this market is ready for innovation.
Speaker 4: EBITDA margin for Q3 2021 was negative 24.2% compared to negative 4.1% in the prior year.
I'd like to take a moment to address the recent communication outlet has had with the food and drug administration regarding our smart sock product in the U S for.
Speaker 4: The adjusted the Damage in Q3 2021 was negative 36.3%, compared to negative 2.9% in the same priority or period.
So those who are newer to the outlet story, we launched the smart Socs in 2015, as a consumer product and the baby monitor category.
Speaker 4: For our balance sheet, cash and cash equivalents as of September 30th, 2021, were approximately 114.9 million.
Initially selling direct to consumers from our website and shortly after expanding to retailers smart baby monitoring offerings.
Speaker 4: As Kurt outlined, your today outlet has executed very well against our business and financial growth goals as we set at the beginning of the year. Some select year-to-date 2021 financial highlights and year-over-year growth metrics include 78.4 million in revenue, up 44% and representing more than all the revenue achieved in full year 2020. 41.1 million in gross profit, up 59.8%. And gross margin of 52.4% up from 47.3%.
We believe that the product was not subject to oversight by the FDA as a wellness product, but we knew that our smart socs could have broader impact in infant monitoring by pursuing FDA clearance of the medical device to enable us to market. It for medical device uses over.
Over the last few years, we've been in discussions with the FDA regarding our efforts to obtain clearance for prescription use only version of the smart Socs for sick babies under the care of a physician and most recently with respect to an over the counter medical device smart socs for healthy babies.
After six years on the market with four versions launched in over 1 million babies monitor on October 1st I'll, Let received a warning letter from the FCA.
Speaker 4: The moment of we've seen the marketplace for our connected nursery solutions in 2021, demonstrate the value, parents see in our products, and our ability to drive significant growth through targeted investments in our product roadmap and go to market initiatives.
In the letter the agency stated it believes the smart sock as a medical device because of its heart rate and oxygen notification functionality and the marketing of the product around that functionality.
Speaker 4: As we head into Q4 2021, the domestic regulatory factors were working through our smart stock products have created near-term headwinds for our product sales growth trajectory in the US.
FDA believes requires pre market authorization.
We've cooperated in good faith with the Fda's request to cease distributions of smart sock in the U S. While we work to obtain marketing authorization for the smart stock with these functionalities and claims.
Speaker 4: As we prepare to announce our new DreamSock and Duo products domestically in the coming weeks, we're continuing to sell our camera and accessory products.
It is important to note that the FDA did not identify any safety issues in this letter rather it focused solely on the regulatory classification of the product in the United States as a result of the heart rate and oxygen notifications and related claims.
Speaker 4: Internationally, our growth plans remain in place for our existing product lines, and we are optimistic about the number of countries we will have expanded to in EMEA through the end of 2021.
Speaker 4: In terms of operating expenses, we are managing variable spend while planning to support our new dream stock and dream duo product announcements. And we have a strong balance sheet to support our business.
Since receiving the letter and taking prompt action to address Fda's concerns we've been in ongoing collaborative discussions with the FDA to discuss the path forward for a medical device application for the version of the smart stock, we'd historically been selling for use in healthy babies with notifications for heart rate and oxygen based on preset values.
Speaker 4: Given the near-term business factors we are working through in Q4, we are not providing guidance for our full year 2021 financial expectations at this time.
Speaker 4: We anticipate providing an updated outlook when we report our Q4 and full year 2021 results in February 2022.
He was sort of the best medical device and regulatory experts working together on our medical device submission.
I'm pleased to share that in October we completed our final audit for ISO 13, 45 certification, which is a third party certification for medical device manufacturers as a step toward preparing to become a company marketing medical devices.
Speaker 4: In summary, we remain confident in the value Owlet provides for a growing customer base, and we are optimistic about the long-term opportunities for our connected nursery ecosystem products. I want operators to check their
We expect to have more meetings with the FDA before we officially submitted a marketing application.
Speaker 1: Of course, if you would like to ask a question, please press staff, fill it by one on your telephone keypads. If you choose to withdraw your question, please press staff, fill it by two. When preparing to ask your question, please ensure that your phone is unmuted load.
We'll keep you updated and plan to share more on the timing and application status at our next earnings call in February 2022.
One thing is for sure we're not starting from scratch all it has been working on the validation of our safety and accuracy for several years and we feel confident in the technology the team and the progress, we're making now more than ever.
Speaker 1: And our first question today comes from Charles Rhee of Cohen & Co. Charles, please go ahead, your line is open.
Speaker 5: Hi guys, this is Gwen Shih-Yon for Charles. Congratulations on the quarter. Just a first quick question. With the new Dream Sock, I mean, is sleep training something that you...
I'm really excited to share more about our newest product the outlet dream stock, which we plan to announce in the coming weeks. The average parent loses 44 nights of sleep in the first year.
We know sleep is a huge pain point for parents myself included is the data of three kids.
Speaker 5: And is that something that parents had really asked for or talked about? And second question is, you mentioned that there was some pull forward of holiday orders from retailers in the third quarter. So as we're kind of thinking about the fourth quarter and the fact that we got the warning letter around 20 days into the fourth quarter, how should we be thinking about the revenue recognized?
We're designing the new Ala dream Socs to be a revolutionary baby's sleep monitor and empower parents to build better sleep routines and habits to improve sleep for baby and the whole family.
Yes, I'll drink Sox will be designed to teach what to do and when to help a little ones up to 18 months old and their parents to sleep better.
Finding the power of all its award winning technology and Fleet program Gallo Dream Soccer is meant to empower parents to build better sleep habits from day, one we plan to launch this new product as a duo as well with the outlet count similar to the smart talk to are we had previously.
Speaker 5: days. Was there some positive impact of a pool for it as well?
Speaker 3: Thanks Gwen. I'll go ahead and take the first question. In case you want to take the second. Yeah, just to answer that question, the average parent loses 44 nights of sleep in the first year alone. And Alex collected one of the largest data sets of.
With the upcoming addition of the dreams talk to our suite of products, we are doubling down on our focus on infant sleep with our carrier services, which we expect will include coaching courses and other service integrations. We're building this out to initially focus on wellness offerings, specifically sleep related services in 2022.
Speaker 3: Intent sleep available and at least been a big part of our focus for several years now We we launched the sleep tracking portion of our app a few years ago. We recently launched our sleep learning program dream lab
If we obtain marketing authorization for the notification features of the smart talk but after you believes rendered in the medical device, we plan to expand into more telehealth focused integrations and services.
Speaker 3: And it is a message that's resonating and as we're getting ready to announce StreamSOC, it's also something that we're...
Speaker 3: We're testing with customers and there's a lot of excitement around. I think I'll have the ability to use this technology to help solve real problems.
Kate we'll now take us through the financial results for the third quarter of this year.
Thank you Curt and good afternoon, everyone total revenues for the third quarter of 2021, or 31 5 million a year over year increase of 48, 8% and a sequential increase of 26, 3% from the second quarter of 2021.
Speaker 3: is something that's resonating with parents and we're excited to do that. You know, the category leader here and it's the number one brand, I think, you know, our mission and vision haven't changed. We're really excited about the long-term opportunity.
Speaker 3: to, you know, fundamentally self-sleep and then add health and safety to that as we get the FDA clear.
Q3 revenue growth was driven primarily by our flagship smart sock and monitor duo our smart tuck in camera combination product.
Speaker 4: Yeah, and regarding the additional demand that we saw in Q3 and what was happening at the beginning of Q4, what I'd say is that, we would have anticipated strong growth in Q4, just given the timing of that seasonally. So, while we saw some increase in demand in Q3, the really part of the quarter was as we would have expected until we needed to see.
Cost of goods sold were $16 six nine in Q3 and gross profit was $14 9 million up 51, 5% from Q3 2020.
Gross margin for Q3, 2021 with 47, 2%.
Presenting sequential decrease attributed to seasonal sales acceleration and a few macro factors related to supply chain and increased transportation costs.
Every year Q3, 2021 gross margin increased from 46, 4% in Q3 2020.
Speaker 5: Okay, that's helpful. And then one last question is just around your kind of ability to sell internationally.
In Q3, we experienced a significant increase in demand in September primarily related to retailers, placing orders earlier than expected for the holiday season. As a result, we incurred increased air freight shipping costs seasonal related promotional costs and return allowances associated with retailers sell in.
Speaker 3: Yeah, the FG advisory letter is only specific to the US and our international business continues as usual with the SmartStock available. We're really proud of the progress who've made towards our international expansion. And this year alone, we've launched into eight new countries with additional countries on the horizon. We also continue to see international revenue grow and account for a larger portion of our overall revenues. So we're excited about the international opportunity.
In activity, we've usually seen in Q4.
The seasonal sales acceleration activity was approximately two thirds of the sequential decrease in margin.
The remaining one third of the sequential margin decrease was macro nature materials pricing increases we did not pass on to customers and overall heightened cost in shipping.
Operating expenses in the third quarter were $28 6 million compared with $10 9 million in the same prior year quarter.
Speaker 1: Thank you. Our next question comes from John Babcock of Bank of America. John , please go ahead your line is open.
The increase in Q3 operating expenses, which were planned increases in spending associated with the scaling of our business, including strategic talent hiring across the organization increase investments in sales and marketing.
Speaker 6: Hey, good afternoon, Dash. Evening. I guess just starting out, could you talk about the extent to which the FDA is aware of, you know, the DreamSock coming out and, and ultimately, you know, any thoughts on timing on when you might get FDA approval for the SmartSoft?
Development costs, as we expand our product portfolio and expenses related to our business combination.
Speaker 3: Yeah, we've been in communication with FDA about the proposed dream stock and we've outlined how we believe it fits within the agency's own general wellness guidelines.
Operating loss in the quarter was $13 8 million compared with operating loss of $1 1 million in the third quarter of 2020.
Net loss in the third quarter was $34 5 million compared with net loss of $1 5 million in the third quarter of 2020.
Speaker 3: in which the FDA states it does not regulate wellness products. So that is very much been part of our ongoing collaborative communications. They're aware of that and we've shared it with them. In terms of the FDA timeline, you know, again, we're really excited about the opportunity to get clearance. Allard is the technology leader in the nursery with the largest data set of infant health and sleep and the best technology. And we've done extensive testing on the safety and accuracy of our products. Over 1 million families have used Allard.
EBITDA loss for Q3, 2020, one was seven 6 million compared with EBITDA loss of <unk> 9 million in the same prior year period.
EBITDA margin for Q3, 2021 was negative 24, 2% compared to negative four 1% in the prior year.
Adjusted EBITDA margin Q3, 2021 was negative 36, 3% compared to negative two 9% in the same prior year period.
Speaker 3: It's the number one brand we've seen real
Speaker 3: real impact and we're not starting from scratch in that we've been working with FDA for a few years on clearance and just received our ISO 1345 recommendation. So while I can't speak to the specifics timelines because that's up to FDA, we feel really confident in the safety and accuracy of our technology and we have a fantastic team that's making great progress.
For our balance sheet cash and cash equivalents as of September 30th 2021 were approximately $114 9 million.
It's Curt outlined here today I'll, let has executed very well against our business and financial growth goals as we said at the beginning of the year.
Speaker 6: And as a follow-up to that, have you gotten any sense that the FCA warning letter has had an impact at all on consumers perception of the product?
Select year to date, 2021 financial highlights and year over year growth metrics include $78 4 million in revenue up 44% and representing more than all of the revenue achieved in full year 'twenty 'twenty.
$41 1 million and gross profit up 59, 8% and gross margin of 52, 4% up from 47, 3%.
Speaker 3: Obviously a lot of insight into that. You know, we launched our SmartSock over six years ago.
Speaker 3: And in that time, we've released four versions of the product. We've monitored over a million babies. And overall, parents mostly just have questions about what this means for them.
The momentum we've seen in the marketplace for our connected nursery solutions in 2021 demonstrate the value parents in our products and our ability to drive significant growth through targeted investments in our product roadmap and go to market initiatives.
Speaker 3: and whether or not they can continue to use the product and we continue to get positive NPS scores and feedback. We believe retailers are excited about the long-term relationship with Owlet and we're doing our best to navigate.
As we head into Q4 2021, the domestic regulatory factors, we're working through for our smart sock products have created near term headwinds for our product sales growth trajectory in the U S. As.
Speaker 3: a tough situation and work with parents and retailers even more.
Speaker 6: And that actually, I guess I kind of blend into my next question. With the launch of the DreamSock, assuming that that moves forward, are you going to be able to get that to all the same channel partners that you currently work with or you address perhaps of losing any channel partners to this?
As we prepare to announce our new dreams talking to our products domestically in the coming weeks, we're continuing to sell our camera and accessory products internationally.
Internationally, our growth plans remain in place for our existing product lines and we are optimistic about the number of countries. We will have expanded to in EMEA through the end of 2020 one.
In terms of operating expenses, we are managing variable spend while planning to support our new Dream Socgen Dream duo product announcements and we have a strong balance sheet to support our business.
Speaker 3: I think our sales team has done a fantastic job of communicating with our channel partners. And we know that DreamSoc will resonate with parents at solving a real need. And it's something that we've been working on and delivering for a long time. So we feel really confident that this is a product that our partners are gonna be excited about.
Given the near term business factors, we're working through in Q4, we are not providing guidance for full year, 2020, one financial expectations at this time.
We anticipate providing an updated outlook when we report our Q4 and full year 2021 results in February 2022.
Speaker 6: Gotcha. And then just last question before I turn it over, could you just talk about operating expenses, how you're thinking about that here, especially, you know, in light of, I guess, you know, the smart stock, you know, temporarily, I while I guess, you know, being suspended overall, but, you know, potentially, you know, replaced by the dream talk or being a different product? Just generally, I mean, how are you thinking about the overall pace and pace and spending here on the operating spend?
In summary, we remain confident in the value outlet provided start growing customer base and we are optimistic about the long term opportunities for our connected nursery ecosystem products.
Operator, let's open up for questions.
Of course, if you will.
Like to ask a question. Please press star one on your telephone keypad. If you choose to withdraw your question. Please press star, but it's like too well the pairing to ask a question. Please ensure that you'll find is a me too likely.
Speaker 4: Yes, sure. So I'm the, you know, for the, this game, you know, we received the warning letter at the beginning of Q4. Obviously a lot of our activity was already in motion for the holiday season. So we're really focused on the top priorities to drive the business forward, which would be around DreamSack and Duo, as well as our increased efforts around the FDA. And then we're very focused also on reducing any discretionary spend that's outside of those key areas.
And our first question today comes from Charles array of Cowen and co. A child was please go ahead. Your line is open.
Hi, guys. This is Gwen Shea on for Charles.
On the corner just a first quick question.
With the new Dream socket is sleep train them what you.
Wanted to incorporate into the smart codec before and is that something that you know parents had really you know ask for I talked about and second question is you mentioned that there was some pull forward of holiday orders from retailers in the third quarter. So as we're kind of thinking about the fourth quarter and the fact that we got the warning letter around 20 days into the fourth quarter you know how.
Speaker 1: Thank you. Our next question comes from Jim Sousa of City Group. Jim, please go ahead, your line is open.
Speaker 3: Thank you and I think I'm correct but it sounds like the dream stock sock is completely outside of the FDA scope and better you got it You can just kind of confirm that you know those type of things are looking at has isn't in the realm of what they're looking at
Should we be thinking about the revenue recognized in those first 20 days was there some positive impact of a pull for it as well.
<unk>.
Thanks Gwen.
Although I didn't take the first question and then Kate if you want to take the second.
Yeah, just to answer that question.
Speaker 3: That's right. Yeah, the DreamSock was designed specifically to address FDA's concerns and our value proposition around sleep, so it's not a medical device. It doesn't have medical intent.
Average parent loses 44 and I used to sleep in the first year alone.
And outlets collected one of the largest dataset.
Sleep.
Available in place, it's been a big part of our focus for several years now we we launched the sleep tracking portion of our App a few years ago. We recently launched our sleep learning program Dream lab.
Speaker 7: Okay, and and then can you talk about your Manufacturing pipeline You know other companies that are putting this all together for you. Did you have to slow down your order production orders?
And it is a message that's resonating and as we're as we're getting ready to announce stream sockets also something that where we.
Speaker 7: for the smart sock until you get this resolved or are you kind of keeping it as is. And the reason why I ask is the global supply chain, whether you're buying a smartphone or a TV or even clothing seems to have longer lead times. So I'm just wondering about your production flow of what you've done to that.
We're testing with customers and there's a lot of excitement around I think I'll, let the ability to use this technology to help solve real problems and sleep.
Is it something that's resonating with parents and we're excited to do that is that as the category leader here and as the as the number one brand I think you know our mission vision hasn't changed we're really excited about the long term opportunity to fundamentally fell asleep and then add health and safety to that as we get the FDA clearances.
Speaker 3: Yeah, we've kept the production flow moving, and we're in close, you know, really good relationship with our supplier, which is top tier, and we're very well aware of that. And so, of course, we're making sure that we have enough inventory to be able to support DreamSock as it rolls out.
Yeah.
Yeah.
Regarding the.
Additional demand that we saw in Q3 and and what was happening at the beginning of Q4, what I'd say is that we would have anticipated strong growth in Q4, just given the timing of that seasonally so while we saw some increase in demand in Q3. The the early part of the quarter was as expected until.
Speaker 7: Okay. And my last question is on operating expenses, maybe in any thought about I know there's some shareholders of litigation, there's the FDA stuff, any step up or planning we should plan on for operating expenses, because there's just a lot of, I'd say unique things that are kind of happening right now that won't really plan in the pipeline.
We needed to see shipping.
Speaker 4: Yeah, I was saying I obviously will have some additional expenses there, but you know, we've had the FAA
Okay. That's helpful.
And then one last question is just around your kind of ability to sell internationally and in the UK.
Speaker 4: in place and we've had budget around that. We have a great team running it. So a lot of that has been built into our strategy.
<unk>.
Does the decision change anything internationally at all have you guys kind of spoken to European regulators and stuff day decision.
Speaker 4: And anything else that's covered around it will be timing in nature. So we're looking at operating expense.
Yeah. The FDA advisory letter is only specific to the U S and our international business continues as usual with the smart stock available. We're really proud of the progress we've made towards our international expansion and you know this year alone we've launched into eight new countries with additional countries on the horizon.
Speaker 4: you know, just trying to take out any variable that we can, but I wouldn't say that we're looking for.
Speaker 4: significant increases that we would need to be talking about today. Those all take time and we're just looking at, we're solving since as quickly.
We also continue to see international revenue grow and account for a larger portion of our overall revenue. So we're excited about the international opportunity.
Speaker 7: Great, and I want to express my appreciation for your audience so open about things in that difficult and uncertain time. So thank you so much.
Got it thanks.
Thank you. Our next question comes from John Babcock of Bank of America. John. Please go ahead. Your line is open.
Speaker 1: Thank you, we have a follow up question from John Babcock of Bank of America. John , please go ahead, your line is open.
Hey, good afternoon. This evening I guess, just starting now could you talk about the extent to which the FDA is aware of that.
Speaker 6: Hey guys, I'm sure you're pleased to hear from me again. Just one very quick follow up. Do you have any sense on the timing of when the Dreamstock might come to market? It sounded like next week, so...
Dreams saw coming out and then ultimately how do you.
Your thoughts on timing on when you might get FDA approval for this one as well.
Speaker 3: Yeah, we're going to announce it in the next few weeks, and the plan is to get it out as soon as possible. So you'll hear more communication within the next few weeks on Dreamstock.
Yeah, we've we've been in communication with FDA about the proposed dream sock and we've outlined how we believe it fits within the agencies out in general wellness guidelines.
Speaker 1: Thank you as a reminder if you would like to ask a question, please press star, fill it by one on your telephone keypad now.
In which the FDA states. It does not regulate wellness products. So that is a very much been part of our ongoing collaborative communications. They are aware of that and we've shared it with them.
In terms of the FDA timeline, you know again, we're really excited about the opportunity to get a.
Clearance out as the technology leader in the nursery with the largest data set of events and health and sleep and and the best technology and we've done extensive testing on the safety and accuracy of our products over 1 million families have used outlet.
Speaker 1: At this time we can't really have no further questions so I'll hand a call back over to Kurt for any closing remarks.
Speaker 3: Yeah, I just want to thank everybody for joining today and thank.
It's the number one brand we've seen real.
Speaker 3: Jim and John and Charles for the questions. We're obviously here to support parents, and I just wanna reiterate that our mission vision have not changed. We see a really big opportunity as we move into next year, and we roll out, continue to accelerate our international expansion. We roll out DreamSock and Dream Duo in the US, Caracist, our new subscription service, and...
No real impact in and we're not starting from scratch and that we've been working with FDA for a few years some clearance and just received our ISO 13 45 recommendation.
So while I can't speak to the specifics timelines because that the F D. A.
Feel really confident in the safety and accuracy of our technology and and we have a fantastic team, that's making great progress.
Yeah.
Gotcha.
Speaker 3: and then continue to work towards getting FDA clearance. I think we'll have a strong foundation that's a full stack ecosystem to serve parents and help them better care for their little ones, which is our goal.
And as a follow up to that have you gotten any sense of the FDA warning letter has had an impact at all on consumers' perception of the product.
Yeah, we've we've had a lot of.
So a lot of insight into that you know, we launched our smart stock over six years ago.
Speaker 1: Thank you ladies and gentlemen, this includes today's call. Thank you all for joining. You may now disconnect your lines.
And.
In that time, we've released four versions of the product and we've monitored over a million babies and overall parents, mostly just have questions about what this means for them and whether or not they can continue to.
Speaker 2: To
You know use the product in and we continue to get positive NPS scores and feedback.
We believe retailers are excited about the long term relationship with outlet and we're doing our best to navigate tough.
Tough situation and work with parents and retailers are even more.
Okay.
That actually I guess, it kind of blends into my next question.
With the launch of the dream sock, assuming that that moves forward.
Going to be able to get that to all the same channel partners that you. Currently worked with are you at risk perhaps of losing any channel partners through this.
Yeah.
I think our sales team has done a fantastic job of of communicating with our channel partners and we know that dream sock will resonate with with parents with solving a real a real need and it's something that we've been working on them delivering for a long time so.
We feel really confident that this is a product that our partners are going to be excited about.
Got you and then just a last final question before I turn it over could you just talk about operating expenses, how you're thinking about that here, especially in.
In light of I guess, you know the smarts Hawk temporarily I I, while I guess, you know being suspended overall, but potentially replace part of the dream soccer or be in a different product just.
Just generally I mean, how are you thinking about the overall pace and pace and spending here on the operating expense line.
Sure I can give you want to pick on.
Yeah sure. So on the you know for the this game you know we received the warning letter at the beginning of Q4, obviously a lot of our activity.
Activity was already in motion for the holiday season. So we're really focused on the top priorities to drive the business forward, which would be around trade socgen duo as well as our increased efforts around the S. P. A and then we're very focused on reducing any discretionary spend that's outside of those key areas.
Okay. Thank you.
Okay.
Thank you. Our next question comes from Jim Suva 50, Great. Kim. Please go ahead. Your line is open.
Thank you and I think I'm correct, but it sounds like the dream stock Sock is completely outside of the F. D. A scope and butter you got if you can just kind of confirm that you know those type of things you are looking at has isn't in the realm of what Theyre looking at.
That's right, yes, the dream stock was designed specifically to address fda's concerns and our value prop proposition around sleep. So it's not a medical device that doesn't have the medical and test.
That's correct, Okay and.
And then can you talk about your manufacturing pipeline.
The companies that are putting this all together for you did you have to slow down your quarter production orders for the smart sock until you get this resolved or are you kind of keeping it as is and the reason why I ask because the global supply chain, whether you're buying a smartphone or a T V or even clothing seems to have longer lead times.
So I'm just wondering about your production flow of what you've done to that.
Yeah.
Yeah, we've kept the production flow moving and we're in close.
Really good relationship with our supplier, which is top tier in when we're very well aware of that and so of course, we're making sure that we have enough inventory to be able to support dream soccer as it rolls out.
Yeah.
Okay and my last question is on operating expenses, maybe any thoughts about I know, there's some shareholder litigations, there's the F D. A.
Off any step up our planning we should plan on four operating expenses because theres just a lot of I'd say unique things that are kind of happening right now that weren't really planned and in the pipeline.
Yeah, I always say I mean, obviously, we'll have some additional expenses there, but you know we've had the FDA process in place and we've we've had budget around that and have a great team running it. So a lot of that has been built entire strategy and anything else that's covered around it will be.
Timing in nature. So we're looking at operating expense I'm, just trying to take out any variables that we can but I wouldn't say that we're looking for significant increases.
That you know we would need to be talking about today, you know those all take time and you know we're just looking at where is the where's all maintenance as quickly as possible.
Great and I wanted to express my appreciation for all being so open about things in that difficult and uncertain time. So thank you so much.
Okay. Thanks, Jim.
Yeah.
Thank you we have a follow up question from John Babcock of Bank of America. Please go ahead. Your line is open.
Hey, guys I'm sure are pleased to hear from you again, just one very quick follow up I'm. Just do you have any sense on the timing of when the dreams might come to market.
It sounded like next few weeks I was wondering if you might be able to provide more color than that.
Yeah.
Yeah, we're going to announce within the next few weeks and in the the plan is to get it out as soon as possible. So youll hear more communication within the next few weeks on Dream Socs.
Okay.
We'll have a strong foundation, that's a full full stack ecosystem to serve parents and help them better care for their little ones, which is R.
Cargo so thank you all for joining.
Thank you ladies and gentlemen, that's in case it as cool. Thank you for joining you may now disconnect your lines.
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