Eargo Reports Fourth Quarter 2022 Financial Results
Eargo, Inc. (Nasdaq: EAR) announced its fourth quarter 2022 results, achieving net revenues of $12.9 million, up from $10.1 million a year prior. Gross systems shipped increased to 8,863 from 7,767 in Q4 2021. Despite a GAAP operating loss of $23.9 million, this represents an improvement from a loss of $45.2 million in Q4 2021. As of December 31, 2022, Eargo had cash and cash equivalents of $101.2 million, with prior debt fully extinguished. Eargo launched the Eargo 7 in February 2023, advancing their omni-channel business model.
- Net revenues increased to $12.9 million in Q4 2022 from $10.1 million in Q4 2021.
- Gross profit improved to $6.2 million with a gross margin of 47.7% in Q4 2022.
- Operating losses decreased to $23.9 million in Q4 2022 from $45.2 million in Q4 2021.
- Cash increased by $13.2 million in Q4 2022, totaling $101.2 million.
- The launch of Eargo 7 indicates product innovation and market expansion.
- Net loss attributable to common stockholders was ($43.8) million or ($4.42) per share.
- Operating cash burn was approximately $20.4 million in Q4 2022, slightly above guidance.
Recent Highlights:
- Net revenues of
$12.9 million in the fourth quarter of 2022, compared to$10.1 million in the fourth quarter of 2021 and$7.9 million in the third quarter of 2022 - Gross systems shipped of 8,863, compared to 7,767 in the fourth quarter of 2021
- GAAP operating loss
$23.9 million in the fourth quarter of 2022, compared to$45.2 million in the fourth quarter of 2021 and$26.0 million in the third quarter of 2022 - Cash and cash equivalents of
$101.2 million as of December 31, 2022 - Prior debt balance fully extinguished following closing of the rights offering in November 2022
SAN JOSE, Calif., March 23, 2023 (GLOBE NEWSWIRE) -- Eargo, Inc. (Nasdaq: EAR) (“Eargo” or the “Company”), a medical device company on a mission to improve hearing health, today reported its financial results for the fourth quarter ended December 31, 2022.
Christian Gormsen, President and CEO, said, “The fourth quarter marked the culmination of a pivotal year for Eargo. In 2022, we settled our DOJ investigation and cleared our SEC filing delinquency, recapitalized the business through a major financing and added Patient Square Capital as our majority shareholder, and made meaningful progress against our most important business priorities. We also are excited to have commercially launched Eargo 7, our most advanced technology yet, in February 2023.”
Mr. Gormsen continued, “Perhaps most impactful to the future of Eargo was the progress we made on our strategic evolution into a true omni-channel business, led by our entry into the physical retail space through a partnership with Victra, one of America’s largest wireless retailers. Given the challenging circumstances, we believe Eargo has made significant progress in 2022, and we are excited about the continued evolution of our business in 2023.”
Fourth Quarter 2022 Financial Results
On January 17, 2023, the Company effected a 1-for-20 reverse stock split. All share and per share information presented herein has been retrospectively adjusted to reflect the reverse stock split.
Gross systems shipped for the fourth quarter of 2022 were 8,863, compared to 7,767 during the fourth quarter of 2021. The increase in shipment volume year over year was largely driven by shipments of our Eargo hearing devices to Victra, our retail partner, for in-person customer sales at its approximately 1,500 store locations across the United States, for which we recognize revenue upon shipment to Victra.
In addition, beginning September 2022, we resumed accepting insurance benefits as a method of direct payment in certain limited circumstances and for which revenue is and has been recognized. Shipment volume in the fourth quarter of 2021 was impacted by our decision to temporarily stop accepting insurance benefits as a method of direct payment in December of 2021.
Net revenue was
Gross profit for the fourth quarter of 2022 was
Total operating expenses were
Sales and marketing expenses were
Research and development expenses were
General and administrative expenses were
Excluding stock-based compensation expense, non-GAAP operating expenses for the fourth quarter of 2022 were
Total operating losses were
Net loss attributable to common stockholders for the fourth quarter of 2022 was (
Quarterly operating cash burn for the fourth quarter of 2022 was approximately
Full Year 2022 Financial Results
The Company is not providing commentary on full year 2022 financial results in this earnings release given the difficult year-over-year comparison as a result of the impact of the DOJ investigation. Please refer to the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and our other filings with the Securities and Exchange Commission for a detailed discussion of such results.
2023 Financial Guidance
The Company is not providing financial guidance at this time.
Conference Call and Webcast Information
Eargo will host a conference call to discuss the fourth quarter financial results after market close on March 23, 2023, at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time. The conference call can be accessed live over the phone at (800) 715-9871 for U.S. callers or (646) 307-1963 for international callers, using conference ID: 2951533. The live webinar can be accessed at ir.eargo.com.
About Eargo
Eargo is a medical device company on a mission to improve hearing health. Our innovative products and go-to-market approach address the major challenges of traditional hearing aid adoption, including social stigma, accessibility and cost. We believe our Eargo hearing aids are the first virtually invisible, rechargeable, completely-in-canal, FDA-regulated devices indicated to compensate for mild to moderate hearing loss. Our differentiated, consumer-first approach empowers consumers to take control of their hearing. Consumers can purchase online, at retail locations or over the phone and get personalized and convenient consultation and support from hearing professionals via phone, text, email or video chat. Eargo hearing aids are offered to consumers at approximately half the cost of competing hearing aids purchased through traditional channels in the United States.
Eargo’s seventh generation device, Eargo 7, is an FDA 510(k) cleared, self-fitting over-the-counter hearing aid featuring Sound Adjust+ with Comfort and Clarity Modes, which focuses on noise reduction and adapting to the user’s environment and needs. Eargo 7 is available for purchase here.
Related Links
http://eargo.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this press release are forward-looking statements, including statements regarding continued evolution of the Company’s omni-channel business. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that could cause actual results and events to differ materially from those anticipated, including, but not limited to, risks, uncertainties and assumptions related to: our expectations regarding our omni-channel business, including partnerships with brick-and-mortar retailers and resellers with online storefronts; the extent to which we may be able to validate processes to support the submission of claims for reimbursement from the FEHB program in the future, if at all, and our ability to maintain or increase insurance coverage of our hearing aids; the timing or results of ongoing claims audits and medical records reviews by third-party payors; estimates of our future capital needs and our ability to raise capital on favorable terms, if at all, including the timing of future capital requirements and the terms or timing of any future financings; the impact of third-party payor audits and the regulatory landscape for hearing aid devices on our business and results of operations; our expectations concerning additional orders by existing customers; our expectations regarding the potential market size and size of the potential consumer populations for our products and any future products, including insurance coverage of our hearing aids; our ability to release new hearing aids and the anticipated features of any such hearing aids; developments and projections relating to our competitors and our industry, including competing products; our ability to maintain our competitive technological advantages against new entrants in our industry; the pricing of our hearing aids; our expectations regarding the ability to make certain claims related to the performance of our hearing aids relative to competitive products; our expectations with regard to changes in the regulatory landscape for hearing aid devices, including the implementation of the new over-the-counter hearing aid regulatory framework; our estimates regarding the COVID-19 pandemic, including but not limited to, its duration and its impact on our business and results of operations; and uncertainty or volatility in the market (including recent and potential disruption in the banking system and financial markets). These and other risks are described in greater detail under the section titled “Risk Factors” contained in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and our other filings with the Securities and Exchange Commission. Any forward-looking statements in this press release are made pursuant to the Private Securities Litigation Reform Act of 1995, as amended, are based on current expectations, forecasts and assumptions, and speak only as of the date of this press release. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Measures
The Company may report non-GAAP results for gross margin, operating expenses, sales and marketing expense as a percent of net revenues, net income/loss, and net income/loss per share in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company’s financial measures under GAAP include charges such as stock-based compensation, as listed in the itemized reconciliations between GAAP and non-GAAP financial measures included in this press release. Management has excluded the effects of this item in non-GAAP measures to assist investors in analyzing and assessing operating performance. The Company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business.
Investor Contact
Nick Laudico
Chief Retail Officer
ir@eargo.com
Eargo, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts)
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 101,238 | $ | 110,500 | ||||
| Accounts receivable, net | 1,910 | 12,547 | ||||||
| Inventories | 5,036 | 5,712 | ||||||
| Prepaid expenses and other current assets | 7,846 | 10,873 | ||||||
| Total current assets | 116,030 | 139,632 | ||||||
| Operating lease right-of-use assets | 5,765 | 7,165 | ||||||
| Property and equipment, net | 7,441 | 9,551 | ||||||
| Intangible assets, net | 1,063 | 1,681 | ||||||
| Goodwill | 873 | 873 | ||||||
| Other assets | 906 | 1,209 | ||||||
| Total assets | $ | 132,078 | $ | 160,111 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 6,504 | $ | 9,053 | ||||
| Accrued expenses | 12,715 | 9,235 | ||||||
| Sales returns reserve | 3,942 | 13,827 | ||||||
| Settlement liability | — | 34,372 | ||||||
| Long-term debt, current portion | — | 3,333 | ||||||
| Other current liabilities | 1,462 | 1,813 | ||||||
| Lease liability, current portion | 628 | 750 | ||||||
| Total current liabilities | 25,251 | 72,383 | ||||||
| Lease liability, noncurrent portion | 5,973 | 6,640 | ||||||
| Long-term debt, noncurrent portion | — | 11,924 | ||||||
| Total liabilities | 31,224 | 90,947 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, | — | — | ||||||
| Common stock; | 2 | — | ||||||
| Additional paid-in capital | 615,151 | 425,976 | ||||||
| Accumulated deficit | (514,299 | ) | (356,812 | ) | ||||
| Total stockholders’ equity | 100,854 | 69,164 | ||||||
| Total liabilities and stockholders’ equity | $ | 132,078 | $ | 160,111 | ||||
Eargo, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)
| Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue, net | $ | 12,917 | $ | 10,060 | $ | 37,248 | $ | 32,122 | ||||||||
| Cost of revenue | 6,757 | 7,645 | 22,988 | 27,956 | ||||||||||||
| Gross profit (loss) | 6,160 | 2,415 | 14,260 | 4,166 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 4,124 | 8,010 | 18,813 | 25,232 | ||||||||||||
| Sales and marketing | 15,641 | 22,557 | 52,947 | 85,759 | ||||||||||||
| General and administrative | 10,279 | 17,076 | 54,259 | 49,882 | ||||||||||||
| Total operating expenses | 30,044 | 47,643 | 126,019 | 160,873 | ||||||||||||
| Loss from operations | (23,884 | ) | (45,228 | ) | (111,759 | ) | (156,707 | ) | ||||||||
| Other income (expense), net: | ||||||||||||||||
| Interest income | 716 | 2 | 1,196 | 21 | ||||||||||||
| Interest expense | — | (270 | ) | (549 | ) | (1,068 | ) | |||||||||
| Change in fair value of convertible notes | (20,503 | ) | — | (45,503 | ) | — | ||||||||||
| Loss on extinguishment of debt | — | — | (772 | ) | — | |||||||||||
| Total other income (expense), net | (19,787 | ) | (268 | ) | (45,628 | ) | (1,047 | ) | ||||||||
| Loss before income taxes | (43,671 | ) | (45,496 | ) | (157,387 | ) | (157,754 | ) | ||||||||
| Income tax provision | 100 | — | 100 | — | ||||||||||||
| Net loss attributable to common stockholders, basic and diluted | $ | (43,771 | ) | $ | (45,496 | ) | $ | (157,487 | ) | $ | (157,754 | ) | ||||
| Net loss per share attributable to common stockholders, basic and diluted | $ | (4.42 | ) | $ | (23.16 | ) | $ | (39.68 | ) | $ | (81.11 | ) | ||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 9,904,301 | 1,964,793 | 3,968,432 | 1,944,857 | ||||||||||||
Eargo, Inc.
Results of Operations – Reconciliation between GAAP and Non-GAAP
(Unaudited)
(In thousands, except per share amounts)
Reconciliation between GAAP and non-GAAP net loss per share attributable to common stockholders:
| Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| GAAP net loss per share to common stockholders, basic and diluted | $ | (4.42 | ) | $ | (23.16 | ) | $ | (39.68 | ) | $ | (81.11 | ) | |||
| Stock-based compensation | 0.24 | 6.05 | 2.51 | 14.26 | |||||||||||
| Non-GAAP net loss per share to common stockholders, basic and diluted | $ | (4.18 | ) | $ | (17.11 | ) | $ | (37.17 | ) | $ | (66.85 | ) | |||
Reconciliation between GAAP and non-GAAP net loss attributable to common stockholders:
| Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| GAAP net loss attributable to common stockholders, basic and diluted | $ | (43,771 | ) | $ | (45,496 | ) | $ | (157,487 | ) | $ | (157,754 | ) | |||
| Stock-based compensation | 2,373 | 11,881 | 9,965 | 27,731 | |||||||||||
| Non-GAAP net loss attributable to common stockholders, basic and diluted | $ | (41,398 | ) | $ | (33,615 | ) | $ | (147,522 | ) | $ | (130,023 | ) | |||
Reconciliation between GAAP and non-GAAP operating expenses and operating loss:
| Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| GAAP gross profit | $ | 6,160 | $ | 2,415 | $ | 14,260 | $ | 4,166 | |||||||
| Stock-based compensation | 32 | 335 | 126 | 738 | |||||||||||
| Non-GAAP gross profit | $ | 6,192 | $ | 2,750 | $ | 14,386 | $ | 4,904 | |||||||
| GAAP gross margin | 47.7 | % | 24.0 | % | 38.3 | % | 13.0 | % | |||||||
| Stock-based compensation | 0.2 | % | 3.3 | % | 0.3 | % | 2.3 | % | |||||||
| Non-GAAP gross margin | 47.9 | % | 27.3 | % | 38.6 | % | 15.3 | % | |||||||
| GAAP research and development expense | $ | 4,124 | $ | 8,010 | $ | 18,813 | $ | 25,232 | |||||||
| Stock-based compensation | 103 | (3,188 | ) | (1,039 | ) | (6,939 | ) | ||||||||
| Non-GAAP research and development expense | $ | 4,227 | $ | 4,822 | $ | 17,774 | $ | 18,293 | |||||||
| GAAP sales and marketing expense | $ | 15,641 | $ | 22,557 | $ | 52,947 | $ | 85,759 | |||||||
| Stock-based compensation | (745 | ) | (5,618 | ) | (2,720 | ) | (11,213 | ) | |||||||
| Non-GAAP sales and marketing expense | $ | 14,896 | $ | 16,939 | $ | 50,227 | $ | 74,546 | |||||||
| GAAP general and administrative expense | $ | 10,279 | $ | 17,076 | $ | 54,259 | $ | 49,882 | |||||||
| Stock-based compensation | (1,699 | ) | (2,740 | ) | (6,080 | ) | (8,841 | ) | |||||||
| Non-GAAP general and administrative expense | $ | 8,580 | $ | 14,336 | $ | 48,179 | $ | 41,041 | |||||||
| GAAP total operating expense | $ | 30,044 | $ | 47,643 | $ | 126,019 | $ | 160,873 | |||||||
| Stock-based compensation | (2,341 | ) | (11,546 | ) | (9,839 | ) | (26,993 | ) | |||||||
| Non-GAAP total operating expense | $ | 27,703 | $ | 36,097 | $ | 116,180 | $ | 133,880 | |||||||
| GAAP operating loss | $ | (23,884 | ) | $ | (45,228 | ) | $ | (111,759 | ) | $ | (156,707 | ) | |||
| Stock-based compensation | 2,373 | 11,881 | 9,965 | 27,731 | |||||||||||
| Non-GAAP operating loss | $ | (21,511 | ) | $ | (33,347 | ) | $ | (101,794 | ) | $ | (128,976 | ) | |||
FAQ
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