Lily 2 suddenly stopped tracking sleep

Hi! I recently bought a lily 2 for my wife. She used to have a the original lily and never faced any issues. After a recent update on the watch, it suddenly stopped tracking sleep. We tried a few things like tightening the watch on her wrist, adjusted her sleep time in the app, etc. I finally got tired and redid a full reset, thinking that it would get resolved by itself. Well, not exactly! Is this a software issue that will get fixed in future software updates?