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Eargo, Inc. (EAR)

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    • Eargo Reports Third Quarter 2020 Financial Results

      Eargo Reports Third Quarter 2020 Financial Results

      Third Quarter and Recent Highlights: * Net revenues of $18.2 million, up 135.3% year-over-year * Gross systems shipped of 10,077, up 91.7% year-over-year * Return accrual rate of 25.2%, a 10.1 percentage point improvement year-over-year * Gross margin of 70.1%, up 16.5 percentage points year-over-year * Sales and marketing expense as a percent of net revenues of 67.9%, a 52.3 percentage point improvement year-over-year * Loss from operations of ($7.6) million, compared to ($12.0) million in the third quarter of 2019 * Completed initial public offering of 9,029,629 shares of common stock on October 20, 2020, raising approximately $148 million in net proceeds SAN JOSE, Calif., Nov. 19, 2020 (GLOBE NEWSWIRE) -- Eargo, Inc. (Nasdaq: EAR), a medical device company on a mission to improve the quality of life of people with hearing loss, today reported its financial results for the third quarter ended September 30, 2020.Christian Gormsen, President and CEO, said, “By all financial and operational measures, our performance in the third quarter of 2020 was very strong. Most importantly, we are helping more people hear better by offering both a revolutionary product and customer experience. Consumers continued to rapidly adopt our virtually invisible, rechargeable, completely-in-canal solution for hearing loss and our differentiated telecare model, which provides education, purchase and clinical support from the comfort and safety of home.”“During the third quarter, we executed our strategy of efficient revenue growth through multi-channel marketing targeted at a diverse mix of consumers across cash pay, insurance and repeat customers. We expanded our national TV advertising, which built increased consumer awareness of Eargo while complementing our digital marketing to drive 91.7% year over year growth in gross systems shipped while leveraging sales and marketing spend. In addition, we delivered an improved customer return accrual rate and gross margin of 70.1%, all of which contributed to the continued scalability of our business.”“We were also pleased to see hearing aid volumes sold through traditional brick and mortar clinics return to year-over-year growth in the third quarter, but even more pleased to see continued acceleration in our year-over-year gross systems shipped growth even as the clinics’ operations began to recover. We expect strong demand for Eargo as we head into the fourth quarter and holiday buying season, driving our expectation of approximately 97% full year 2020 net revenue growth. With approximately 43 million adults in the U.S. with hearing loss but only approximately 27% owning hearing aids, we believe we have barely scratched the surface of this large and underpenetrated market,” concluded Mr. Gormsen.According to data collected by the Hearing Industries Association (HIA), private/commercial sector hearing aid unit sales in the third quarter of 2020 increased by 0.5% year-over-year, following 58.6% year-over-year decline in the second quarter of 2020. Despite the improvement in traditional clinic-based distribution, Eargo saw expanded awareness and continued consumer adoption of its telecare model, which eliminates the need for cumbersome visits to the clinic by offering an easy-to-use purchasing interface and convenient access to a highly trained clinical support team consisting of licensed hearing professionals.Third Quarter 2020 Financial Results Net revenue was $18.2 million for the third quarter of 2020, compared to $7.7 million in the third quarter of 2019. The increase was driven by an increase in consumer adoption of the Eargo hearing aid system and a decrease in sales return accrual rate.Gross profit for the third quarter of 2020 was $12.8 million compared to $4.2 million for the third quarter of 2019. Gross margin increased to 70.1% for the third quarter of 2020, compared with 53.6% for the third quarter of 2019. The increase was primarily due to higher average selling prices, driven by the shift in mix to our latest product innovation, Neo HiFi, and a decrease in sales returns as a percentage of gross systems shipped.Total operating expenses were $20.4 million or 112.1% of net revenues, for the third quarter of 2020, compared with $16.2 million or 209.5% of net revenues, for the third quarter of 2019. The increase was primarily due to higher sales and marketing investments, personnel investments to scale the organization for continued growth, and expenses related to being a public company.Sales and marketing expenses were $12.4 million or 67.9% of net revenues, for the third quarter of 2020, compared with $9.3 million or 120.2% of net revenues, for the third quarter of 2019.Research and development expenses were $2.9 million or 15.8% of net revenues, for the third quarter of 2020, compared with $3.2 million or 41.6% of net revenues, for the third quarter of 2019.General and administrative expenses were $5.2 million or 28.4% of net revenues for the third quarter of 2020, compared with $3.7 million or 47.6% of net revenues, for the third quarter of 2019.Total stock-based compensation expenses were $1.4 million for the third quarter of 2020, compared with $0.5 million for the third quarter of 2019.Loss from operations was ($7.6) million for the third quarter of 2020 compared with ($12.0) million for the third quarter of 2019.Cash and cash equivalents were $70.2 million as of September 30, 2020, compared to $25.3 million as of September 30, 2019.Initial Public Offering Eargo closed its initial public offering of 9,029,629 shares of its common stock at a public offering price of $18.00 per share, which included 1,177,777 shares of common stock issued upon the exercise in full by the underwriters of their option to purchase additional shares, for total net proceeds from the offering of approximately $148 million. All of the shares of common stock were offered by Eargo. Eargo’s common stock began trading on The Nasdaq Global Select Market on October 16, 2020, under the ticker symbol “EAR.”Full Year 2020 Financial Guidance Eargo expects revenue for the full year 2020 of approximately $64.5 million, which represents approximately 97% growth over the company’s prior year revenue.Conference Call and Web Cast Information Eargo will host a conference call to discuss the third quarter financial results after market close on Thursday, November 19, 2020 at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time. The conference call can be accessed live over the phone (833) 649-1234 for U.S. callers or (914) 987-7293 for international callers, using conference ID: 2826509. The live webinar can be accessed at ir.eargo.com.About Eargo Eargo is a medical device company dedicated to improving the quality of life of people with hearing loss. Our innovative product 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 and only virtually invisible, rechargeable, completely-in-canal, FDA regulated, exempt Class I device for the treatment of hearing loss. Our differentiated, consumer-first solution empowers consumers to take control of their hearing. Consumers can purchase online or over the phone and get personalized and convenient consultation and support from licensed hearing professionals via phone, text, email or video chat. The Eargo solution is offered to consumers at approximately half the cost of competing hearing aids purchased through traditional channels in the United States.The company’s 4th generation product, the Eargo Neo HiFi, was launched in January and features improved capabilities across audio fidelity and bandwidth. The Eargo Neo HiFi is available for purchase here.Related Links http://eargo.comForward Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. All statements other than statements of historical fact contained in this press release are forward-looking statements. These forward-looking statements include, but are not limited to, statements about: our 2020 revenue guidance; consumer adoption of our hearing loss solution and telecare model; the continued scalability of our business; expectations regarding strong demand for Eargo during the fourth quarter and holiday buying season; and the size of the hearing loss market and our ability to penetrate the market. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated, including, but not limited to, risks and uncertainties related to: 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 our ability to increase insurance coverage of Eargo 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 pending over-the-counter hearing aid pathway regulatory framework; and our estimates regarding the COVID-19 pandemic, including but not limited to, its duration and its impact on our business and results of operations. These and other risks are described in greater detail under the section titled “Risk Factors” contained in Eargo’s prospectus filed with the Securities and Exchange Commission (SEC) on October 19, 2020 pursuant to Rule 424(b) under the Securities Act and the company’s other filings with the SEC. Any forward-looking statements in this press release are made pursuant to the Private Securities Litigation Reform Act of 1995, as amended, and speak only as of the date of this press release. Except as required by law, the company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.Investor Contact Nick Laudico Vice President of Investor Relations ir@eargo.comMedia Contact Brad Sheets eargo@edelman.com Eargo, Inc.  Condensed Consolidated Statements of Operations and Comprehensive Loss  (Unaudited)  (In thousands, except share and per share amounts)               Three months ended September 30, Nine months ended September 30,     2020   2019   2020   2019   Revenue, net $18,186  $7,730  $46,776  $22,175   Cost of revenue  5,434   3,583   15,295   11,033   Gross profit  12,752   4,147   31,481   11,142   Operating expenses:          Research and development  2,871   3,219   7,888   8,781   Sales and marketing  12,354   9,290   34,041   24,698   General and administrative  5,163   3,683   14,498   8,781   Total operating expenses  20,388   16,192   56,427   42,260   Loss from operations  (7,636)  (12,045)  (24,946)  (31,118)  Other income (expense), net:          Interest income  3   136   26   555   Interest expense  (279)  (218)  (1,422)  (492)  Other income (expense), net  (187)  (30)  (87)  (84)  Loss on extinguishment of debt  (1,627)  —   (1,627)  —   Total other income (expense), net  (2,090)  (112)  (3,110)  (21)  Loss before income taxes  (9,726)  (12,157)  (28,056)  (31,139)  Income tax provision  —   —   —   —   Net loss and comprehensive loss $(9,726) $(12,157) $(28,056) $(31,139)  Net income (loss) attributable to common stockholders, basic and diluted $—  $(12,157) $(18,216) $(31,139)  Net income (loss) per share attributable to common stockholders, basic and diluted $—  $(46.26) $(57.73) $(122.74)  Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic and diluted  398,895   262,785   315,546   253,701   Eargo, Inc.  Condensed Consolidated Balance Sheets  (Unaudited)  (In thousands, except share and per share amounts)           September 30, December 31,     2020   2019   ASSETS      Current assets:      Cash and cash equivalents  70,224   13,384   Accounts receivable, net  2,576   2,051   Inventories  3,289   2,880   Prepaid expenses and other current assets  1,379   1,598   Total current assets  77,468   19,913   Operating lease right-of-use assets  1,369   —   Property and equipment, net  6,946   5,400   Other assets  2,304   1,992   Total assets $88,087  $27,305   LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT      Current liabilities:      Accounts payable $6,658  $5,428   Accrued expenses  10,809   9,939   Long-term debt, current portion  —   4,800   Other current liabilities  2,079   1,717   Deferred revenue, current  441   406   Lease liability, current portion  1,097   —   Total current liabilities  21,084   22,290   Lease liability, noncurrent portion  412   —   Deferred revenue, noncurrent portion  17   269   Long-term debt, noncurrent portion  14,502   7,446   Convertible preferred stock warrant liability  544   396   Other liabilities  —   127   Total liabilities  36,559   30,528   Commitments and contingencies (Note 5)      Convertible preferred stock, $0.0001 par value; 73,108,323 and 36,269,166 shares authorized as of September 30, 2020 and December 31, 2019, respectively; 24,229,281 and 11,825,812 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively  223,125   152,880   Stockholders’ deficit:      Common stock; $0.0001 par value; 110,000,000 and 55,190,000 shares authorized as of September 30, 2020 and December 31, 2019, respectively; 534,599 and 265,943 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively  —   —   Additional paid in capital  15,662   3,100   Accumulated deficit  (187,259)  (159,203)  Total stockholders’ deficit  (171,597)  (156,103)  Total liabilities, convertible preferred stock and stockholders’ deficit $88,087  $27,305          Eargo, Inc.    Condensed Consolidated Statements of Cash Flows    (Unaudited)     (In thousands)               Nine months ended September 30,        2020   2019     Operating activities:       Net loss $(28,056) $(31,139)    Adjustments to reconcile net loss to net cash used in operating activities:      Depreciation and amortization  1,805   1,011     Stock-based compensation  2,363   997     Non-cash interest expense and amortization of debt discount  1,178   200     Non-cash operating lease expense  838   —     Bad debt expense  2,135   44     Loss on extinguishment of debt  1,627   —     Change in fair value of warrant liability  (122)  84     Change in fair value of derivative liability  206   —     Changes in operating assets and liabilities:        Accounts receivable  (2,660)  (113)    Inventories  (409)  (1,110)    Prepaid expenses and other current assets  219   (199)    Other assets  963   (311)    Accounts payable  579   (585)    Accrued expenses  147   1,750     Other current liabilities  362   (172)    Deferred revenue  (217)  409     Operating lease liabilities  (883)  —     Other liabilities  (127)  (59)    Net cash used in operating activities  (20,052)  (29,193)    Investing activities:        Purchases of property and equipment  (844)  (1,616)    Capitalized software development costs  (2,601)  (1,017)    Net cash used in investing activities  (3,445)  (2,633)    Financing activities:        Proceeds from stock options exercised  359   40     Proceeds from debt financing  15,000   5,000     Proceeds from convertible preferred stock issuance, net of issuance costs  67,867   865     Proceeds from issuance of convertible notes, net of issuance costs  10,053   —     Proceeds from PPP loan  4,574   —     Repayment of PPP loan  (4,574)  —     Debt repayments  (12,720)  —     Payments of deferred offering costs  (222)  —     Net cash provided by financing activities  80,337   5,905     Net increase (decrease) in cash and cash equivalents and restricted cash 56,840   (25,921)    Cash and cash equivalents and restricted cash at beginning of period  13,384   51,201     Cash and cash equivalents and restricted cash at end of period $70,224  $25,280     Supplemental disclosure of cash flow information:        Cash paid for interest $253  $275     Non-cash operating activities:        Lease liability obtained in exchange for right-of-use asset $2,392  $—     Non-cash investing and financing activities:        Property and equipment and capitalized software costs in accounts payable and accrued liabilities $421  $307     Deferred offering costs in accounts payable and accrued liabilities $1,053  $—     Convertible preferred stock issuance costs included in accounts payable $600  $—     Derivative liability in connection with issuance of convertible promissory notes on issuance $2,879  $—     Issuance of Series E convertible preferred stock upon extinguishment of convertible notes $12,818  $—     Settlement of derivative liability in connection with extinguishment of convertible notes $3,085  $—     Issuance of convertible preferred stock warrants in connection with debt financing $270  $41


      Eargo Inc to Host Earnings Call

      NEW YORK, NY / ACCESSWIRE / November 19, 2020 / Eargo Inc (NASDAQ:EAR) will be discussing their earnings results in their 2020 Third Quarter Earnings call to be held on November 19, 2020 at 4:30 PM Eastern Time.

    • Time to Make a Move? J.P. Morgan Offers 3 Stocks to Buy

      Time to Make a Move? J.P. Morgan Offers 3 Stocks to Buy

      The markets are doing well in November. Powered by the conclusion (albeit controversial) of the election results and by the enthusiasm around potential vaccine for COVID 19, the S&P 500 soared more than 10% this month.Are there any more high profile news stories left to drive the markets higher or do we go down from here?According to Marko Kolanovic, JPMorgan’s global head of macro quantitative and derivatives strategy, there is plenty of room for the market to run. The strategist described the election outcome of a Democratic president and Republican controlled Senate as “likely the best of both worlds for stocks.” A Joe Biden presidency means investors can anticipate an easing of the trade wars while a Republican controlled Senate will likely keep President Trump's business-friendly policies in place.To get a head start on the anticipated market strength ahead we tapped three JPMorgan analysts who are recommending three stocks that they believe are poised to go higher. We also ran the three through TipRanks database to see what other Wall Street's analysts have to say about them.Aligos Therapeutics (ALGS)To start us off we have Aligos Therapeutics, a biotechnology company that develops medications for liver and viral ailments with a focus on curing chronic Hepatitis B (CHB). CHB is still a widespread cause of liver disease despite modern society’s growing rates of immunization. J.P. Morgan analyst Eric Joseph takes the view that the company’s Phase I drug candidate ALG-010133 is a possible game changer, “we see Aligos’s clinical-stage STOPs platform on a compelling, differentiated path toward the goal of bringing functional cures to a majority of CHB patients.”Joseph acknowledges that there is work to do and there are challenges along the road, however, the analyst believes the company is on the path to achieving success.“Meeting this goal is likely to take a multi-modal combination approach. With a diversified pipeline targeting various points of the HBV lifecycle (multiple candidates with best-in-class potential), we see Aligos having the greatest flexibility in developing and commercializing a curative treatment regimen,” Joseph wrote. The analyst concluded, “Backed by favorable preclinical data for its CAM (‘184) and ASO/siRNA (‘572/‘097) molecules, we see a strong positioning for the planned combo regimen.”To this end, Joseph rates ALGS an Overweight rating (i.e. Buy) along with a $33 price target. This translates to a healthy 65% upside potential for the next 12 months. (To watch Joseph’s track record, click here)The rest of the street is on board with Joseph’s opinion. 4 Buys and no Holds or Sells add up to a Strong Buy consensus rating. The average price target of $30.50 provides upside potential of 52%. (See ALGS stock analysis on TipRanks)Plantronics (PLT)Next up we have electronics company Plantronics, operating under the Poly brand, which provides business and personal headsets as well as video-conferencing technology. Plantronics has taken shareholders on a roller coaster ride this year, with shares plunging as much as 80% between January and March, before surging a whopping 310% in the following months. The stock is now on the positive side of that trend following tremendous second fiscal quarter results. Specifically, the company reported adjusted EPS of $0.93, which beat the consensus earnings estimate by a huge 107%.Among the fans is J.P. Morgan analyst Paul Coster who sees more growth ahead.“PLT is seeing strong demand for headsets for work-from-home, remote learning, and remote healthcare administration. The surprising recovery in headset demand in June quarter carried over into F2Q21 and the F3Q guide points to a return to about 10% year over year growth,” Coster noted.Another important factor which has the J.P. Morgan analyst bullish on the stock is the company’s performance under the new CEO.“The firm seems to be turning a corner, capitalizing on demand, re-engaging with the channel, resolving supply chain constraints, cutting costs and prioritizing the repayment of debt [...] “We are incrementally constructive on the story owing to strengthening demand for the company’s," the analyst concluded. It's not surprising, then, why Coster rates PLT an Overweight (i.e. Buy). The analyst has a price target of $25 which implies a modest 7% upside. (To watch Coster’s track record, click here)Turning to the rest of the Street, the opinions are mixed. 3 Buys and 1 Sell assigned in the last three months add up to a Moderate Buy consensus rating. The average price target is $21.75, which is below the current price of $23.35 (See PLT stock analysis on TipRanks)Eargo (EAR)Last but not least we have Eargo, which sells in-ear canal hearing aids in the US. The company sells its products directly to consumers through its website.J.P. Morgan analyst Robbie Marcus is excited about Eargo’s future prospects, predicting a handsome 5-year CAGR of about 40%. The 5-Star analyst believes the company’s technology is quite simply better than the competition.“…when choosing a hearing aid, consumers are often forced to make trade-offs between a more discreet in-ear option that distorts sound quality and is generally uncomfortable or a behind-the-ear option with better acoustics.The Eargo solution, however, marries near-invisibility with a feature-rich offering,” Marcus commented. Moreover, the J.P. Morgan analyst is of the opinion that Eargo’s direct to consumer business model gives it a leg up on the competition: “This model allows the company to generate above-average industry margins as the only vertically integrated DTC hearing aid company by eliminating the significant mark-ups that audiologists normally charge.”The US hearing aid market is about $30 Billion so there is lots of room to expand. In addition, Eargo will benefit from the growth in online sales. The J.P. Morgan analyst pointed out, “With strong adoption trends heading into COVID-19, and now a significantly faster migration online in today’s environment, we see a clear path for Eargo to grow at the upper end of its high-growth peers.”Based on the above, Marcus recently initiated coverage on Eargo shares with an Overweight (i.e. Buy) rating and a $41 prices target, representing upside potential of ~19%. (To watch Marcus’ track record, click here)There are two other analysts who cover the company and both are in agreement with Marcus. 3 Buys and no Holds or Sells add up to a Strong Buy consensus rating. The average price target of $43 implies a potential upsisde of 24%. (See Eargo stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.