Eargo (EAR) 10-Q 11 May 23 2023 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2023	May 08, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Entity Registrant Name	Eargo, Inc.
Entity Central Index Key	0001719395
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding		20,741,841
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	EAR
Security Exchange Name	NASDAQ
Entity File Number	001-39616
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-3879804
Entity Address, Address Line One	2665 North First Street
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	San Jose
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95134
City Area Code	650
Local Phone Number	351-7700
Document Quarterly Report	true
Document Transition Report	false

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 79,776	$ 101,238
Accounts receivable, net	1,920	1,910
Inventories	4,837	5,036
Prepaid expenses and other current assets	11,104	7,846
Total current assets	97,637	116,030
Operating lease right-of-use assets	7,835	5,765
Property and equipment, net	6,430	7,441
Intangible assets, net	956	1,063
Goodwill	873	873
Other assets	779	906
Total assets	114,510	132,078
Current liabilities:
Accounts payable	8,976	6,504
Accrued expenses	8,114	12,715
Sales returns reserve	5,840	3,942
Other current liabilities	1,379	1,462
Lease liability, current portion	695	628
Total current liabilities	25,004	25,251
Lease liability, noncurrent portion	7,166	5,973
Total liabilities	32,170	31,224
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock; $0.0001 par value; 450,000,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; 20,741,841 and 20,726,965 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	2	2
Additional paid-in capital	618,559	615,151
Accumulated deficit	(536,221)	(514,299)
Total stockholders' equity	82,340	100,854
Total liabilities and stockholders' equity	$ 114,510	$ 132,078

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	450,000,000	450,000,000
Common stock, shares issued	20,741,841	20,726,965
Common stock, shares outstanding	20,741,841	20,726,965

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Revenue, net	$ 11,813	$ 9,176
Cost of revenue	6,691	5,491
Gross profit	5,122	3,685
Operating expenses:
Research and development	4,605	5,847
Sales and marketing	13,401	13,290
General and administrative	9,908	14,934
Total operating expenses	27,914	34,071
Loss from operations	(22,792)	(30,386)
Other income (expense), net:
Interest income	870	5
Interest expense		(264)
Total other income (expense), net	870	(259)
Loss before income taxes	(21,922)	(30,645)
Net loss and comprehensive loss	(21,922)	(30,645)
Net loss attributable to common stockholders, basic and diluted	$ (21,922)	$ (30,645)
Net loss per share attributable to common stockholders, basic	$ (1.06)	$ (15.59)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic	20,734,403	1,966,154
Net loss per share attributable to common stockholders, diluted	$ (1.06)	$ (15.59)
Weighted-average shares used in computing net loss per share attributable to common stockholders, diluted	20,734,403	1,966,154

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Beginning balance at Dec. 31, 2021	$ 69,164		$ 425,976	$ (356,812)
Beginning balance, Shares at Dec. 31, 2021		1,965,347
Stock-based compensation	3,024		3,024
Exercise of stock options	92		92
Exercise of stock options, Shares		1,871
Restricted stock units cash settlement	(69)		(69)
Net loss and comprehensive loss	(30,645)			(30,645)
Ending balance at Mar. 31, 2022	41,566		429,023	(387,457)
Ending balance, Shares at Mar. 31, 2022		1,967,218
Beginning balance at Dec. 31, 2022	100,854	$ 2	615,151	(514,299)
Beginning balance, Shares at Dec. 31, 2022		20,726,965
Stock-based compensation	3,408		3,408
Release of restricted stock units, shares		14,876
Net loss and comprehensive loss	(21,922)			(21,922)
Ending balance at Mar. 31, 2023	$ 82,340	$ 2	$ 618,559	$ (536,221)
Ending balance, Shares at Mar. 31, 2023		20,741,841

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating activities:
Net loss	$ (21,922)	$ (30,645)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,280	1,419
Stock-based compensation	3,408	2,985
Non-cash interest expense and amortization of debt discount		105
Non-cash operating lease expense	226	371
Bad debt expense	123	174
Loss on disposal of property and equipment		28
Changes in operating assets and liabilities:
Accounts receivable	(133)	120
Inventories	199	(75)
Prepaid expenses and other current assets	(3,510)	1,345
Other assets	(1,465)	665
Accounts payable	3,389	2,962
Accrued expenses	(4,601)	107
Sales returns reserve	1,898	(141)
Settlement liability		57
Other current and noncurrent liabilities	(83)	257
Operating lease liabilities	(139)	(84)
Net cash used in operating activities	(21,330)	(20,350)
Investing activities:
Purchases of property and equipment	(102)	(685)
Capitalized software development costs	(30)	(257)
Net cash used in investing activities	(132)	(942)
Financing activities:
Proceeds from stock options exercised		93
Restricted stock units settled in cash		(69)
Net cash provided by financing activities		24
Net decrease in cash and cash equivalents	(21,462)	(21,268)
Cash and cash equivalents at beginning of period	101,238	110,500
Cash and cash equivalents at end of period	79,776	89,232
Non-cash operating activities:
Lease liability obtained in exchange for right-of-use asset	1,399
Non-cash investing and financing activities:
Property and equipment and capitalized software costs in accounts payable and accrued liabilities	$ 30	116
Stock-based compensation included in capitalized software costs		39
Convertible preferred stock issuance costs included in accounts payable		$ 600

Description of Business and Oth

Description of Business and Other Matters	3 Months Ended
	Mar. 31, 2023
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Description of Business and Other Matters	1. Description of business and other matters Eargo, Inc. (the “Company”) is a medical device company dedicated to improving the quality of life of people with hearing loss. The Company’s innovative product and go-to-market approach address the major challenges of traditional hearing aid adoption, including social stigma, accessibility and cost. Reverse stock split In January 2023, the Company effected a reverse split of shares of the Company’s common stock on a 1-for- 20 basis (the “Reverse Stock Split”). The Company’s common stock began trading on a post-split basis on January 18, 2023. The number of authorized shares of the common stock was not adjusted as a result of the Reverse Stock Split. All share and per share data in these unaudited condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. The shares of common stock retain a par value of $ 0.0001 per share. Accordingly, an amount equal to the par value of the decreased shares resulting from the Reverse Stock Split was reclassified from common stock to additional paid-in capital. DOJ investigation and settlement On September 21, 2021, the Company was informed that it was the target of a criminal investigation by the U.S. Department of Justice (the “DOJ”) related to insurance claims for reimbursement the Company submitted on behalf of its customers covered by various federal employee health plans under the Federal Employee Health Benefits (“FEHB”) program, which is administered by the Office of Personnel Management (the “OPM”). The investigation also pertained to Eargo’s role in claim submissions to federal employee health plans (collectively, the “DOJ investigation”). Total payments the Company received from the government in relation to claims submitted under the FEHB program, as subject to the DOJ investigation, net of any product returns and associated refunds, were approximately $ 44.0 million. Additionally, the third-party payor with whom the Company historically had the largest volume, which is one of the carriers contracted with the OPM under the FEHB program (“largest third-party payor”), conducted an audit of insurance claims for reimbursement (“claims”) submitted by the Company (the “Primary Audit”), which included a review of medical records. On January 4, 2022, the DOJ confirmed to the Company that the investigation had been referred to the Civil Division of the DOJ and the U.S. Attorney’s Office for the Northern District of Texas and the criminal investigation was no longer active. On April 29, 2022, the Company entered into a civil settlement agreement with the U.S. government that resolved the DOJ investigation related to the Company’s role in claim submissions to various federal employee health plans under the FEHB program. The settlement agreement provided for the Company’s payment of approximately $ 34.4 million to the U.S. government and resolved allegations that the Company submitted or caused the submission of claims for payment to the FEHB program using unsupported hearing loss-related diagnostic codes. As discussed further in Note 5, based on the settlement agreement with the U.S. government, the Company recorded a settlement liability of $ 34.4 million as of December 31, 2021. The settlement amount was treated as consideration payable to a customer and was recorded as a reduction of revenue in the third quarter of 2021. On May 2, 2022, the Company paid the settlement amount. In September 2022, the Company made the determination not to seek payment for approximately $ 16.1 million from customers with unsubmitted and unpaid claims which was accounted for as a pricing concession (the “ Pricing Concession ” ). During the year ended December 31, 2022, the Company recorded a $ 16.1 million reduction to its insurance-related accounts receivable balance along with related reduction to net revenue of $ 11.6 million and an allowance for credit losses balance of $ 4.5 million for such unsubmitted and unpaid claims. Further, the Company simultaneously recorded a decrease in its insurance-related sales return reserve of $ 11.3 million along with a corresponding increase of $ 11.3 million to net revenue for the year ended December 31, 2022 related to unsubmitted and unpaid claims. These changes resulted in a decrease in net revenue of $ 0.3 million for the year ended December 31, 2022. Liquidity and going concern The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. The Company has incurred losses and negative cash flows from operations since its inception and management expects to incur additional substantial losses in the foreseeable future. As of March 31, 2023, the Company had cash and cash equivalents of $ 79.8 million and an accumulated deficit of $ 536.2 million. Since the announcement of the DOJ investigation, there has been and may continue to be a significant reduction in shipments, revenue and gross margin, which has and could continue to negatively impact the Company’s liquidity and working capital, including by impacting its ability to access additional capital. It is difficult to assess or predict at this time the extent to which the Company is able to validate and establish additional processes to support the submission of claims for reimbursement to health plans, including those under the FEHB program, and the future impacts of the implementation of an over-the-counter (“OTC”) hearing aid regulatory framework (which may lead insurance providers to take actions limiting the Company’s ability to access insurance coverage). The Company believes that, without an alternative future financing, its current resources are insufficient to satisfy its obligations as they become due within one year after the date that these unaudited condensed consolidated financial statements are issued. The negative cash flows and current lack of financial resources of the Company raise substantial doubt as to the Company’s ability to continue as a going concern. If the Company is unable to raise additional funding to meet its operational needs, it will be forced to limit or cease its operations. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainty.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2023
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. Summary of significant accounting policies Basis of presentation and principles of consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting of Eargo, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, include all adjustments of a normal recurring nature necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations and cash flows. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 23, 2023. Use of estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made in the accompanying unaudited condensed consolidated financial statements include, but are not limited to, the sales returns reserve, the present value of lease liabilities, the fair value of equity securities, the fair value of financial instruments, the allowance for credit losses, the net realizable value of inventory, the fair value of assets acquired in a business combination, the useful lives of long-lived assets, accrued product warranty reserve, legal and other contingencies, certain other accruals and recoverability of the Company’s net deferred tax assets and the related valuation allowance. Management periodically evaluates its estimates, which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates. Significant accounting policies There have been no significant changes to the accounting policies during the three months ended March 31, 2023, as compared to the significant accounting policies described in Note 2 of the Notes to Consolidated Financial Statements in the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K. Revenue recognition The Company’s revenue is generated from the sale of products, including hearing aid systems and related accessories. Revenue is recognized when promised goods or services are transferred to end-use customers, distributors, or retail partners in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services by following a five-step process: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Identify the contract with a customer. The Company generally considers completion of an Eargo sales order (which requires customer acceptance of the Company’s click-through terms and conditions for website sales and authorization of payment through credit card or another form of payment for sales made over the phone) as a customer contract provided that collection is considered probable. For payments that are not made upfront by credit card, the Company assesses insurance eligibility or customer creditworthiness based on credit checks, payment history, and/or other circumstances. For orders involving insurance payors, the Company validates customer eligibility and potential reimbursement amounts prior to shipping the product. If the criteria to establish a contract with a customer is not met, revenue is not recognized. Identify the performance obligations in the contract. Product performance obligations include hearing aid systems and related accessories and service performance obligations include extended warranty coverage. The Company also offers customers a one-time replacement of certain components of the hearing aid system for a fee (i.e., “loss and damage policy”), which represents an option with material right. However, as the historical redemption rate under the policy has been low, the option is not accounted for as a separate performance obligation. The Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. The Company has elected to treat shipping and handling activities performed after a customer obtains control of products as a fulfillment activity. Determine the transaction price and allocation to performance obligations. The transaction price in the Company’s customer contracts consists of both fixed and variable consideration. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration may include concessions, product returns, discounts, incentives, or other similar items. Variable consideration is estimated based on contractual terms and historical analysis using specific data for the type of consideration being assessed. • Product Returns: The Company’s customer contracts include the general 45-day right of return that applies to all products and the extended right of return offered for certain shipments to direct plan access customers involving certain insurance payors. To estimate product returns, the Company analyzes various factors, including historical return levels, current economic trends, and insurance coverage. Based on this information, the Company reserves a percentage of product sale revenue and accounts for the estimated impact as a reduction in the transaction price. Consideration paid or payable to a customer that is not for a distinct good or service is accounted for as a reduction of the transaction price and recorded as a reduction in revenue in the period it becomes payable. • Concessions: Concessions are generally viewed as any post-execution change to the original agreement between the Company and customer that increase the customer’s rights or the Company’s obligations without a commensurate increase to the consideration due the Company. Concessions may take many forms and include, but are not limited to, (i) accepting returns that are not required under the terms of the original arrangement, (ii) reducing the arrangement fee, and (iii) extending the terms of payment. While the Company granted a price concession to its customers with unsubmitted and unpaid claims during the year ended December 31, 2022 (please see caption “DOJ investigation and settlement” in Note 1), the Company does not have an established history of providing concessions to its customers and has determined that no adjustments should made to the transaction price in the Company’s ongoing customer arrangements. However, for each reporting period, the Company will re-evaluate the occurrence and level of materiality of concessions and will assess any potential impact on the transaction price accordingly. Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple factors including, but not limited to, historical discounting trends for products and services, gross margin objectives, internal costs, competitor pricing strategies, and industry technology lifecycles. Recognize revenue when or as the Company satisfies a performance obligation. Revenue for products (hearing aid systems and related accessories) is recognized at a point in time, which is generally upon shipment, provided all other revenue recognition criteria have been met. The Company does not have material contract liabilities related to unsatisfied performance obligations as of March 31, 2023. Contract costs The Company applies the practical expedient to recognize the incremental costs of obtaining a contract as expense when incurred if the amortization period would be one year or less. These incremental costs include processing fees paid to third-party financing vendors, who provide the Company’s customers with the option to finance their purchases. If a customer elects to utilize this service, the Company receives a non-recourse upfront payment for the product sold, less processing fee withheld by the financing vendor. These processing fees are recognized in cost of revenue in the consolidated statements of operations and comprehensive loss as incurred. Concentration of credit risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of demand deposit accounts, money market accounts and accounts receivable, including credit card receivables. The Company maintains its cash and cash equivalents, which may, at times, exceed federally insured limits, with financial institutions of high credit standing. As of March 31, 2023, the Company has not experienced any losses on its deposit accounts and money market accounts. As of March 31, 2023, the Company does not believe there is significant financial risk from nonperformance by the issuers of the Company’s deposit accounts and money market accounts. As of March 31, 2023, approximately 44 % of the Company’s gross accounts receivable were due from its retail partner, Victra. During the three months ended March 31, 2023, the Company derived 22 % of net revenue from sales to Victra. As of December 31, 2022, there was no credit risk concentration in the Company's accounts receivable. There was no concentration of revenue during the three months ended March 31, 2022.

Fair Value Measurements

Fair Value Measurements	3 Months Ended
	Mar. 31, 2023
Fair Value Disclosures [Abstract]
Fair Value Measurements	3. Fair value measurements There were no financial assets and liabilities outstanding that were remeasured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022. The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their short-term nature.

Balance Sheet Components

Balance Sheet Components	3 Months Ended
	Mar. 31, 2023
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Balance Sheet Components	4. Balance sheet components Inventories Inventories consist primarily of raw materials related to component parts and finished goods. The following is a summary of the Company’s inventories by category: March 31, December 31, 2023 2022 (in thousands) Raw materials $ 352 $ 410 Finished goods 4,485 4,626 Total inventories $ 4,837 $ 5,036 Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following: March 31, December 31, 2023 2022 (in thousands) Advanced payroll deposits $ 2,939 $ 1,686 Insurance costs 2,166 78 Advances to suppliers 2,000 2,000 Software subscriptions 1,624 1,553 Marketing costs 1,275 1,709 Product launch fee 300 252 Other 800 568 Total prepaid expenses and other current assets $ 11,104 $ 7,846 Property and equipment, net Property and equipment, net, consists of the following: March 31, December 31, 2023 2022 (in thousands) Capitalized software $ 11,610 $ 11,579 Tools and lab equipment 5,218 5,087 Furniture and fixtures 2,440 2,440 Leasehold improvements 993 993 Computer and equipment 482 482 20,743 20,581 Less accumulated depreciation and amortization ( 14,313 ) ( 13,140 ) Total property and equipment, net $ 6,430 $ 7,441 Depreciation and amortization expense for the three months ended March 31, 2023 and 2022 amounted to $ 1.2 million and $ 1.3 million, respectively, which includes amortization of capitalized software costs of $ 0.8 million and $ 1.0 million, respectively. Intangible assets, net Intangible assets, net consist of the following: March 31, 2023 Gross carrying value Accumulated amortization Net carrying value (in thousands) Developed technologies $ 1,700 $ 744 $ 956 Other 290 290 — Total intangible assets, net $ 1,990 $ 1,034 $ 956 December 31, 2022 Gross carrying value Accumulated amortization Net carrying value (in thousands) Developed technologies $ 1,700 $ 637 $ 1,063 Other 290 290 — Total intangible assets, net $ 1,990 $ 927 $ 1,063 Amortization expense was $ 0.1 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively. The following table summarizes the estimated future amortization expense of finite-lived intangible assets, net as of March 31, 2023: Amount (in thousands) Remainder of 2023 $ 318 2024 425 2025 213 Total $ 956 Accrued expenses Accrued expenses consist of the following: March 31, December 31, 2023 2022 (in thousands) Accrued compensation $ 3,359 $ 8,070 Accrued warranty reserve 4,066 3,765 Refunds due to customers 639 580 Other accrued expenses 50 300 Total accrued expenses $ 8,114 $ 12,715 Sales returns reserve The sales returns reserve consists of the following activity: Three months ended March 31, 2023 2022 (in thousands) Sales returns reserve, beginning balance $ 3,942 $ 13,827 Reduction of revenue 7,409 4,584 Utilization of sales returns reserve ( 5,511 ) ( 4,725 ) Sales returns reserve, ending balance $ 5,840 $ 13,686 In September 2022, as part of the Pricing Concession, the Company recorded a decrease in its insurance-related sales return reserve liability of $ 11.3 million related to unsubmitted and unpaid claims, which was recorded against revenue in the consolidated statement of operations. Please see caption “DOJ investigation and settlement” in Note 1. Allowance for credit losses The allowance for credit losses consists of the following activity: Three months ended March 31, 2023 2022 (in thousands) Allowance for credit losses, beginning balance $ 158 $ 4,838 Charged to expense 123 174 Accounts written off, net of recoveries ( 101 ) ( 292 ) Allowance for credit losses, ending balance $ 180 $ 4,720 Accrued warranty reserve The accrued warranty reserve consists of the following activity: Three months ended March 31, 2023 2022 (in thousands) Accrued warranty reserve, beginning balance $ 3,765 $ 4,014 Charged to cost of revenue 1,111 958 Utilization of accrued warranty reserve ( 810 ) ( 732 ) Accrued warranty reserve, ending balance $ 4,066 $ 4,240

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2023
Commitments And Contingencies Disclosure [Abstract]
Commitments and Contingencies	5. Commitments and contingencies Operating leases Nashville office space lease In January 2023, the Company entered into a lease agreement for approximately 17,572 sq. ft. of office space in Nashville, Tennessee. The tenant improvements of $ 0.9 million were funded by the Company and considered to be lessor-owned for accounting purposes. As such, the tenant improvement funding was recorded as part of the right-of-use asset. The Company recorded a right-of-use asset of $ 2.3 million and the corresponding lease liability of $ 1.4 million as of the commencement date in March 2023. The initial term of the lease is 76 months with the option to extend the lease term once for additional 5 years. The Company has elected to apply the tenant improvement allowance of $ 0.9 million against the lease payments, and this amount was excluded from the operating lease liability. The right-of-use asset and corresponding lease liability for the Nashville lease were estimated using an incremental borrowing rate of 11.2 %. Operating lease costs and minimum lease payments For the three months ended March 31, 2023, the Company incurred $ 0.4 million of operating lease costs. Variable lease payments for operating expenses and costs related to short-term leases were immaterial for the three months ended March 31, 2023. As of March 31, 2023, undiscounted future minimum lease payments due under the non-cancelable operating leases are as follows: Amount (in thousands) Remainder of 2023 $ 849 2024 1,081 2025 1,635 2026 1,886 2027 1,945 Thereafter 3,066 Total minimum future lease payments 10,462 Present value adjustment for minimum lease commitments ( 2,601 ) Total lease liability $ 7,861 Legal and other contingencies The Company is involved in legal proceedings in the ordinary course of its business and may become involved in additional legal proceedings. Other than those listed below, the Company does not believe that any lawsuits or claims currently pending against it, individually or in the aggregate, are material or will have a material adverse effect on its financial condition, results of operations or cash flows. The Company may enter into settlement discussions, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company and its shareholders. Unless stated otherwise, the matters discussed below, if decided adversely or settled by the Company, individually or in the aggregate, may result in a liability material to the Company’s financial condition, results of operations or cash flows. The Company is also subject to review from federal and state taxing authorities in order to validate the amounts of income, sales and use taxes which have been claimed and remitted. The Company has estimated exposure and established reserves for its estimated sales tax audit liability. In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products, when used for their intended purposes, infringe the intellectual property rights of such other third parties, or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in any particular claim. Securities Class Action On October 6, 2021, putative shareholder Joseph Fazio filed a purported securities class action against the Company and certain of its officers, captioned Fazio v. Eargo, Inc., et al. , No. 21-cv-07848 (N.D. Cal. Oct. 6, 2021) (the “Fazio Action”). Plaintiff Fazio alleges that certain of the Company’s disclosures about its business, operations, and prospects, including reimbursement from third-party payors, violated federal securities laws. Fazio voluntarily dismissed his complaint on December 6, 2021. On November 4, 2021, putative shareholder Alden Chung filed a purported class action lawsuit substantially similar to the Fazio Action, captioned Chung v. Eargo, Inc., et al. , No. 21-cv-08597 (N.D. Cal. Nov. 4, 2021) (the “Chung Action”). On November 10, 2021, putative shareholder IBEW Local 353 Pension Plan filed a purported class action substantially similar to the Fazio and Chung Actions and also asserting claims under the federal securities laws against current and former members of the Company’s Board of Directors (the “Board of Directors”) and the underwriters of the Company’s October 15, 2020 initial public offering of common stock, captioned IBEW Local 353 Pension Plan v. Eargo, Inc., et al. , No. 21-cv-08747 (N.D. Cal. Nov. 10, 2021) (the “IBEW Action”). These class actions, which seek damages and other relief, were filed in the United States District Court for the Northern District of California. The Fazio and Chung Actions were brought purportedly on behalf of a class of investors who purchased or otherwise acquired Eargo securities between February 25, 2021 and September 22, 2021. The IBEW Local 353 Action was brought purportedly on behalf of a class of investors who purchased or otherwise acquired: (i) Eargo shares in or traceable to the Company’s October 15, 2020 initial public offering of common stock; and/or (ii) shares of Eargo common stock between October 15, 2020 and September 22, 2021. On January 5, 2022, the court consolidated the foregoing class actions (as consolidated, the “Securities Class Action”) under the caption In re Eargo, Inc. Securities Litigation , No. 21-cv-08597-CRB, and appointed IBEW Local 353 Pension Plan and Xiaobin Cai as Lead Plaintiffs and Bernstein Litowitz Berger & Grossmann LLP and Block & Leviton LLP as Lead Counsel. On May 20, 2022, Lead Plaintiffs filed a consolidated amended complaint, which purported to extend the class period through March 2, 2022. Defendants filed a motion to dismiss on July 29, 2022. The Court granted the defendants’ motion to dismiss on February 14, 2023. Plaintiffs filed a second amended complaint on March 16, 2023 and defendants filed a second motion to dismiss on April 21, 2023. Plaintiffs have until May 26, 2023 to file an opposition to defendants’ motion. The Company intends to vigorously defend the Securities Class Action and cannot reasonably estimate any loss or range of loss that may arise from the litigation. Accordingly, the Company can provide no assurance as to the scope and outcome of this matter and no assurance as to whether its business, financial position, results of operations, or cash flows will not be materially adversely affected. Derivative Action On December 3, 2021, putative shareholder Barbara Wolfson filed a derivative complaint purportedly on the Company’s behalf against members of the Board of Directors and the Company as nominal defendant, captioned Wolfson v. Gormsen , et. al., No. 21-cv-09342 (N.D. Cal. Dec. 3, 2021) (the “Wolfson Action”). Plaintiff asserts, among other things, that the defendants breached their fiduciary duties by allegedly failing to implement and maintain an effective system of internal controls related to the Company’s financial reporting, public disclosures and compliance with laws, rules and regulations governing the business. Plaintiff purports to assert derivative claims on the Company’s behalf for alleged violations of Section 14(a) of the Securities Exchange Act of 1934, as amended, breach of fiduciary duty, waste of corporate assets, and aiding and abetting. On March 1, 2022, the court entered the parties’ stipulation staying the Wolfson Action until the resolution of the motion to dismiss in the Securities Class Action. On June 9, 2022, putative shareholder Brodie Woodward filed a derivative complaint purportedly on Eargo’s behalf against the same defendants as in the Wolfson Action, as well as Juliet Tammenoms Bakker, Adam Laponis, and Geoff Pardo, captioned Woodward v. Gormsen, et al. , No. 22-cv-03419 (N.D. Cal. June 9, 2022) (together with the Wolfson Action, the “Derivative Action”). Plaintiff Woodward asserts substantively similar allegations and causes of action as those asserted in the Wolfson Action. On August 4, 2022, the court granted the parties’ stipulation to consolidate the Derivative Action and to stay the consolidated action until the resolution of the motion to dismiss in the Securities Class Action. The defendants intend to vigorously defend the Derivative Action and cannot reasonably estimate any loss or range of loss that may arise from the litigations. Accordingly, the Company can provide no assurance as to the scope and outcome of these matters and no assurance as to whether its business, financial position, results of operations, or cash flows will not be materially adversely affected. Proxy Statement Class Action On September 14, 2022, putative shareholder Adam C. Wolfe filed a purposed securities class action against members of the Board of Directors and the Company as nominal defendant, captioned Wolfe v. Gormsen, et al. , No. 2022-0812-MTZ (Del. Ch. Sept. 14, 2022) (the “Wolfe Action”). Plaintiff Wolfe asserted, among other things, breaches of fiduciary duty by the Board of Directors in connection with the Note issuance, as well as that the Company’s proxy statement omitted material information concerning the Note issuance. Plaintiff Wolfe sought injunctive relief and attorneys’ fees and costs, among other remedies. Although the Company believes no supplemental disclosures were required under applicable law, to alleviate the costs, risks and uncertainties inherent in litigation, avoid any potential delay in the Company’s annual meeting of stockholders or the Company’s rights offering and provide additional information to its stockholders, on October 3, 2022, the Company filed a Current Report on Form 8-K to voluntarily supplement its proxy statement disclosures. On October 17, 2022, Plaintiff Wolfe filed a notice of dismissal with the court, which the court granted on October 24, 2022. On March 15, 2023, the parties agreed that the Company would pay $ 249,500 to Plaintiff Wolfe’s counsel in full satisfaction of Plaintiff Wolfe’s claim for attorneys’ fees and expenses in the Wolfe Action. The court was not asked to review, and did not pass judgment on, the payment of the attorneys’ fees and expenses or their reasonableness. As of December 31, 2022, the Company recorded a settlement liability in such amount in the consolidated balance sheet, which amount was paid during the three months ended March 31, 2023.

Stock-based Compensation

Stock-based Compensation	3 Months Ended
	Mar. 31, 2023
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-based Compensation	6. Stock-based compensation Total stock-based compensation is as follows: Three months ended March 31, 2023 2022 (in thousands) Cost of revenue $ 42 $ 22 Research and development 653 985 Sales and marketing 890 637 General and administrative 1,823 1,341 Total stock-based compensation $ 3,408 $ 2,985 Equity incentive plans As of March 31, 2023, 218,330 shares of common stock were issuable upon the exercise of outstanding awards under the 2010 Equity Incentive Plan. As of March 31, 2023, the Company had reserved 3,930,595 shares of common stock for issuance under the 2020 Equity Incentive Plan (the “2020 Plan”), of which 1,249,144 were available for issuance in connection with grants of future awards. Service-based stock options Service-based stock option activity for the three months ended March 31, 2023 is set forth below: Number of Weighted Weighted Aggregate (in years) (in thousands) Balance December 31, 2022 309,315 $ 82.08 5.60 $ — Grants 1,224,374 11.55 Cancelled or forfeited ( 27,880 ) 62.27 Balance March 31, 2023 1,505,809 $ 25.00 8.92 $ — Vested and exercisable at March 31, 2023 217,101 $ 70.17 5.17 $ — The weighted-average grant-date fair value of service-based stock options granted during the three months ended March 31, 2023 was $ 8.13 per share. As of March 31, 2023, the unrecognized stock-based compensation related to outstanding unvested service-based stock options was $ 14.5 million, which the Company expects to recognize over a remaining weighted-average period of approximately 4.5 years. The following assumptions were used to estimate the grant date fair value of the service-based options granted during the three months ended March 31, 2023: Black-Scholes model assumptions: Expected volatility 76.5 - 77.0 % Expected term, years 6.4 - 6.5 Risk-free interest rate 3.45 % - 4.09 % Dividend yield — Market-based stock options During the three months ended March 31, 2023, the Company granted options to purchase an aggregate of 1,224,370 shares of common stock that include a market condition (the “Market-Based Options”). The Market-Based Options vest on the date on which the volume-weighted average closing price of the Company’s common stock equals or exceeds $ 20.00 per share over 360 consecutive calendar days within a specified period that starts after the grant date. The Market-Based Options vesting is subject to continued service through the applicable vesting date. Prior to March 31, 2023, 13,625 shares were forfeited due to the termination of service by the grantees. During the three months ended March 31, 2023, the fair value of the Market-Based Options was estimated as of the grant dates using the Monte Carlo simulation using the following assumptions: Monte Carlo simulation assumptions: Expected volatility 76.5 - 77.0 % Cost of equity 25.0 % Risk-free interest rate 3.39 % - 3.93 % Dividend yield — The Market-Based Options have exercise prices equal to the closing prices of the Company’s common stock on the applicable grant dates. The weighted-average grant-date fair value of the Market-Based Options granted during the three months ended March 31, 2023 was $ 6.36 per share. The Company will recognize the aggregate fair value of the Market-Based Options of $ 7.8 million as compensation expense over the derived service period of approximately 1.6 years. As of March 31, 2023, the unrecognized stock-based compensation related to Market-Based Options was $ 6.9 million, which the Company expects to recognize over a remaining weighted-average period of approximately 1.5 years. Restricted stock units RSUs granted under the 2020 Plan represent share-based awards that generally entitle the holder to receive freely tradable shares of the Company’s common stock upon vesting. The RSUs cannot be transferred and the awards are subject to forfeiture if the holder’s service to the Company terminates prior to the satisfaction of the vesting restrictions. RSU activity for the three months ended March 31, 2023 is set forth below: Number of Weighted average Balance December 31, 2022 176,063 $ 101.76 RSUs vested ( 14,876 ) 155.29 RSUs forfeited ( 4,048 ) 93.22 Balance March 31, 2023 157,139 $ 96.90 As of March 31, 2023, total unrecognized stock-based compensatio n related to unvested RSUs was $ 14.2 million, which the Company expects to recognize over a remaining weighted-average period of approximately 3.2 years. Employee stock purchase plan As of March 31, 2023, the Company reserved 282,384 shares of common stock for issuance under the 2020 Employee Stock Purchase Plan (the “ESPP”), of which 273,738 were available for future issuance. The ESPP was suspended on November 9, 2021, and there were no offering periods in effect through March 31, 2023.

Net Loss Per Share Attributable

Net Loss Per Share Attributable To Common Stockholders	3 Months Ended
	Mar. 31, 2023
Earnings Per Share [Abstract]
Net Loss Per Share Attributable To Common Stockholders	7. Net loss per share attributable to common stockholders The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share for the periods presented due to their anti-dilutive effect: March 31, 2023 March 31, 2022 Service-based options issued and outstanding 1,505,809 267,705 Market-based options issued and outstanding 1,210,745 — Restricted stock units 157,139 102,009 Total 2,873,693 369,714

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2023
Accounting Policies [Abstract]
Basis of Presentation and Principles of Consolidation	Basis of presentation and principles of consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting of Eargo, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, include all adjustments of a normal recurring nature necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations and cash flows. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 23, 2023.
Use of Estimates	Use of estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made in the accompanying unaudited condensed consolidated financial statements include, but are not limited to, the sales returns reserve, the present value of lease liabilities, the fair value of equity securities, the fair value of financial instruments, the allowance for credit losses, the net realizable value of inventory, the fair value of assets acquired in a business combination, the useful lives of long-lived assets, accrued product warranty reserve, legal and other contingencies, certain other accruals and recoverability of the Company’s net deferred tax assets and the related valuation allowance. Management periodically evaluates its estimates, which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates.
Revenue Recognition	Revenue recognition The Company’s revenue is generated from the sale of products, including hearing aid systems and related accessories. Revenue is recognized when promised goods or services are transferred to end-use customers, distributors, or retail partners in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services by following a five-step process: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Identify the contract with a customer. The Company generally considers completion of an Eargo sales order (which requires customer acceptance of the Company’s click-through terms and conditions for website sales and authorization of payment through credit card or another form of payment for sales made over the phone) as a customer contract provided that collection is considered probable. For payments that are not made upfront by credit card, the Company assesses insurance eligibility or customer creditworthiness based on credit checks, payment history, and/or other circumstances. For orders involving insurance payors, the Company validates customer eligibility and potential reimbursement amounts prior to shipping the product. If the criteria to establish a contract with a customer is not met, revenue is not recognized. Identify the performance obligations in the contract. Product performance obligations include hearing aid systems and related accessories and service performance obligations include extended warranty coverage. The Company also offers customers a one-time replacement of certain components of the hearing aid system for a fee (i.e., “loss and damage policy”), which represents an option with material right. However, as the historical redemption rate under the policy has been low, the option is not accounted for as a separate performance obligation. The Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. The Company has elected to treat shipping and handling activities performed after a customer obtains control of products as a fulfillment activity. Determine the transaction price and allocation to performance obligations. The transaction price in the Company’s customer contracts consists of both fixed and variable consideration. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration may include concessions, product returns, discounts, incentives, or other similar items. Variable consideration is estimated based on contractual terms and historical analysis using specific data for the type of consideration being assessed. • Product Returns: The Company’s customer contracts include the general 45-day right of return that applies to all products and the extended right of return offered for certain shipments to direct plan access customers involving certain insurance payors. To estimate product returns, the Company analyzes various factors, including historical return levels, current economic trends, and insurance coverage. Based on this information, the Company reserves a percentage of product sale revenue and accounts for the estimated impact as a reduction in the transaction price. Consideration paid or payable to a customer that is not for a distinct good or service is accounted for as a reduction of the transaction price and recorded as a reduction in revenue in the period it becomes payable. • Concessions: Concessions are generally viewed as any post-execution change to the original agreement between the Company and customer that increase the customer’s rights or the Company’s obligations without a commensurate increase to the consideration due the Company. Concessions may take many forms and include, but are not limited to, (i) accepting returns that are not required under the terms of the original arrangement, (ii) reducing the arrangement fee, and (iii) extending the terms of payment. While the Company granted a price concession to its customers with unsubmitted and unpaid claims during the year ended December 31, 2022 (please see caption “DOJ investigation and settlement” in Note 1), the Company does not have an established history of providing concessions to its customers and has determined that no adjustments should made to the transaction price in the Company’s ongoing customer arrangements. However, for each reporting period, the Company will re-evaluate the occurrence and level of materiality of concessions and will assess any potential impact on the transaction price accordingly. Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple factors including, but not limited to, historical discounting trends for products and services, gross margin objectives, internal costs, competitor pricing strategies, and industry technology lifecycles. Recognize revenue when or as the Company satisfies a performance obligation. Revenue for products (hearing aid systems and related accessories) is recognized at a point in time, which is generally upon shipment, provided all other revenue recognition criteria have been met. The Company does not have material contract liabilities related to unsatisfied performance obligations as of March 31, 2023. Contract costs The Company applies the practical expedient to recognize the incremental costs of obtaining a contract as expense when incurred if the amortization period would be one year or less. These incremental costs include processing fees paid to third-party financing vendors, who provide the Company’s customers with the option to finance their purchases. If a customer elects to utilize this service, the Company receives a non-recourse upfront payment for the product sold, less processing fee withheld by the financing vendor. These processing fees are recognized in cost of revenue in the consolidated statements of operations and comprehensive loss as incurred.
Concentration of Credit Risk	Financial instruments that potentially subject the Company to concentrations of credit risk consist of demand deposit accounts, money market accounts and accounts receivable, including credit card receivables. The Company maintains its cash and cash equivalents, which may, at times, exceed federally insured limits, with financial institutions of high credit standing. As of March 31, 2023, the Company has not experienced any losses on its deposit accounts and money market accounts. As of March 31, 2023, the Company does not believe there is significant financial risk from nonperformance by the issuers of the Company’s deposit accounts and money market accounts. As of March 31, 2023, approximately 44 % of the Company’s gross accounts receivable were due from its retail partner, Victra. During the three months ended March 31, 2023, the Company derived 22 % of net revenue from sales to Victra. As of December 31, 2022, there was no credit risk concentration in the Company's accounts receivable. There was no concentration of revenue during the three months ended March 31, 2022.

Balance Sheet Components (Table

Balance Sheet Components (Tables)	3 Months Ended
	Mar. 31, 2023
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Summary of Inventories	Inventories consist primarily of raw materials related to component parts and finished goods. The following is a summary of the Company’s inventories by category: March 31, December 31, 2023 2022 (in thousands) Raw materials $ 352 $ 410 Finished goods 4,485 4,626 Total inventories $ 4,837 $ 5,036
Summary of Prepaid Expenses and Other Current Assets	Prepaid expenses and other current assets consist of the following: March 31, December 31, 2023 2022 (in thousands) Advanced payroll deposits $ 2,939 $ 1,686 Insurance costs 2,166 78 Advances to suppliers 2,000 2,000 Software subscriptions 1,624 1,553 Marketing costs 1,275 1,709 Product launch fee 300 252 Other 800 568 Total prepaid expenses and other current assets $ 11,104 $ 7,846
Summary of Property And Equipment, Net	Property and equipment, net, consists of the following: March 31, December 31, 2023 2022 (in thousands) Capitalized software $ 11,610 $ 11,579 Tools and lab equipment 5,218 5,087 Furniture and fixtures 2,440 2,440 Leasehold improvements 993 993 Computer and equipment 482 482 20,743 20,581 Less accumulated depreciation and amortization ( 14,313 ) ( 13,140 ) Total property and equipment, net $ 6,430 $ 7,441
Summary of Intangible Assets, Net	Intangible assets, net consist of the following: March 31, 2023 Gross carrying value Accumulated amortization Net carrying value (in thousands) Developed technologies $ 1,700 $ 744 $ 956 Other 290 290 — Total intangible assets, net $ 1,990 $ 1,034 $ 956 December 31, 2022 Gross carrying value Accumulated amortization Net carrying value (in thousands) Developed technologies $ 1,700 $ 637 $ 1,063 Other 290 290 — Total intangible assets, net $ 1,990 $ 927 $ 1,063
Summary of Estimated Future Amortization Expense of Finite-lived Intangible Assets, Net	The following table summarizes the estimated future amortization expense of finite-lived intangible assets, net as of March 31, 2023: Amount (in thousands) Remainder of 2023 $ 318 2024 425 2025 213 Total $ 956
Summary of Accrued Expenses	Accrued expenses consist of the following: March 31, December 31, 2023 2022 (in thousands) Accrued compensation $ 3,359 $ 8,070 Accrued warranty reserve 4,066 3,765 Refunds due to customers 639 580 Other accrued expenses 50 300 Total accrued expenses $ 8,114 $ 12,715
Summary of Sales Returns Reserve	The sales returns reserve consists of the following activity: Three months ended March 31, 2023 2022 (in thousands) Sales returns reserve, beginning balance $ 3,942 $ 13,827 Reduction of revenue 7,409 4,584 Utilization of sales returns reserve ( 5,511 ) ( 4,725 ) Sales returns reserve, ending balance $ 5,840 $ 13,686 In September 2022, as part of the Pricing Concession, the Company recorded a decrease in its insurance-related sales return reserve liability of $ 11.3 million related to unsubmitted and unpaid claims, which was recorded against revenue in the consolidated statement of operations. Please see caption “DOJ investigation and settlement” in Note 1.
Summary of Allowance for Credit Losses	The allowance for credit losses consists of the following activity: Three months ended March 31, 2023 2022 (in thousands) Allowance for credit losses, beginning balance $ 158 $ 4,838 Charged to expense 123 174 Accounts written off, net of recoveries ( 101 ) ( 292 ) Allowance for credit losses, ending balance $ 180 $ 4,720
Summary of Accrued Warranty Reserve	The accrued warranty reserve consists of the following activity: Three months ended March 31, 2023 2022 (in thousands) Accrued warranty reserve, beginning balance $ 3,765 $ 4,014 Charged to cost of revenue 1,111 958 Utilization of accrued warranty reserve ( 810 ) ( 732 ) Accrued warranty reserve, ending balance $ 4,066 $ 4,240

Commitments and Contingencies (

Commitments and Contingencies (Tables)	3 Months Ended
	Mar. 31, 2023
Commitments And Contingencies Disclosure [Abstract]
Schedule of Undiscounted Future Minimum Lease Payments Due under Non-cancelable Operating Leases	As of March 31, 2023, undiscounted future minimum lease payments due under the non-cancelable operating leases are as follows: Amount (in thousands) Remainder of 2023 $ 849 2024 1,081 2025 1,635 2026 1,886 2027 1,945 Thereafter 3,066 Total minimum future lease payments 10,462 Present value adjustment for minimum lease commitments ( 2,601 ) Total lease liability $ 7,861

Stock-based Compensation (Table

Stock-based Compensation (Tables)	3 Months Ended
	Mar. 31, 2023
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Summary of Total Stock-based Compensation	Total stock-based compensation is as follows: Three months ended March 31, 2023 2022 (in thousands) Cost of revenue $ 42 $ 22 Research and development 653 985 Sales and marketing 890 637 General and administrative 1,823 1,341 Total stock-based compensation $ 3,408 $ 2,985
Summary of Service-Based Stock Option Activity	Service-based stock option activity for the three months ended March 31, 2023 is set forth below: Number of Weighted Weighted Aggregate (in years) (in thousands) Balance December 31, 2022 309,315 $ 82.08 5.60 $ — Grants 1,224,374 11.55 Cancelled or forfeited ( 27,880 ) 62.27 Balance March 31, 2023 1,505,809 $ 25.00 8.92 $ — Vested and exercisable at March 31, 2023 217,101 $ 70.17 5.17 $ —
Schedule of RSU Activity	RSU activity for the three months ended March 31, 2023 is set forth below: Number of Weighted average Balance December 31, 2022 176,063 $ 101.76 RSUs vested ( 14,876 ) 155.29 RSUs forfeited ( 4,048 ) 93.22 Balance March 31, 2023 157,139 $ 96.90
Service-Based Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Assumptions used in Estimating Grant-Date Fair Value of Stock-based Awards	The following assumptions were used to estimate the grant date fair value of the service-based options granted during the three months ended March 31, 2023: Black-Scholes model assumptions: Expected volatility 76.5 - 77.0 % Expected term, years 6.4 - 6.5 Risk-free interest rate 3.45 % - 4.09 % Dividend yield —
Market-Based Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Assumptions used in Estimating Grant-Date Fair Value of Stock-based Awards	During the three months ended March 31, 2023, the fair value of the Market-Based Options was estimated as of the grant dates using the Monte Carlo simulation using the following assumptions: Monte Carlo simulation assumptions: Expected volatility 76.5 - 77.0 % Cost of equity 25.0 % Risk-free interest rate 3.39 % - 3.93 % Dividend yield —

Net Loss Per Share Attributab_2

Net Loss Per Share Attributable To Common Stockholders (Tables)	3 Months Ended
	Mar. 31, 2023
Earnings Per Share [Abstract]
Summary of Outstanding Potentially Dilutive Common Stock Equivalents Excluded from Calculation of Diluted Net Loss Per Share	The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share for the periods presented due to their anti-dilutive effect: March 31, 2023 March 31, 2022 Service-based options issued and outstanding 1,505,809 267,705 Market-based options issued and outstanding 1,210,745 — Restricted stock units 157,139 102,009 Total 2,873,693 369,714

Description of Business - Addit

Description of Business - Additional Information (Details) $ / shares in Units, $ in Thousands	1 Months Ended			12 Months Ended
	Jan. 31, 2023	Sep. 30, 2022 USD ($)	Apr. 29, 2022 USD ($)	Dec. 31, 2022 USD ($) $ / shares	Mar. 31, 2023 USD ($) $ / shares	Jan. 01, 2023 $ / shares	Dec. 31, 2021 USD ($)	Sep. 21, 2021 USD ($)
Description Of Business [Line Items]
Reverse stock split description	1-for-20 basis
Reverse stock split ratio	20
Common stock, par value | $ / shares				$ 0.0001	$ 0.0001	$ 0.0001
Insurance claims received under FEHB program								$ 44,000
Unsubmitted and unpaid claims		$ 16,100
Reduction in insurance related accounts receivable				$ 16,100
Reduction in insurance related revenue from contracts with customer				11,600
Reduction In Insurance Related Allowance For Doubtful Accounts Receivable				4,500
Reduction in revenue related to unpaid claims		$ 11,300		11,300
Increase in insurance related revenue from contracts with customer				11,300
Reduction in net revenue				300
Cash and cash equivalents				101,238	$ 79,776
Accumulated deficit				$ 514,299	$ 536,221
Civil Settlement Agreement
Description Of Business [Line Items]
Settlement liability							$ 34,400
Civil Settlement Agreement | U.S. Government
Description Of Business [Line Items]
Settlement Liability			$ 34,400

Summary of Significant Accoun_3

Summary of Significant Accounting Policies - Additional Information (Details) - Credit Concentration Risk - Victra	3 Months Ended
	Mar. 31, 2023
Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage	44%
Net Revenue
Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage	22%

Fair Value Measurements - Addit

Fair Value Measurements - Additional Information (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Fair Value Disclosures [Abstract]
Financial assets outstanding	$ 0	$ 0
Financial liabilities outstanding	$ 0	$ 0

Balance Sheet Components - Summ

Balance Sheet Components - Summary of Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials	$ 352	$ 410
Finished goods	4,485	4,626
Total inventories	$ 4,837	$ 5,036

Balance Sheet Components - Su_2

Balance Sheet Components - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Statement Of Financial Position [Abstract]
Advanced payroll deposits	$ 2,939	$ 1,686
Insurance costs	2,166	78
Advance to suppliers	2,000	2,000
Software subscriptions	1,624	1,553
Marketing costs	1,275	1,709
Product launch fee	300	252
Other	800	568
Total prepaid expenses and other current assets	$ 11,104	$ 7,846

Balance Sheet Components - Su_3

Balance Sheet Components - Summary of Property And Equipment, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Property Plant And Equipment [Line Items]
Total property and equipment, gross	$ 20,743	$ 20,581
Less accumulated depreciation and amortization	(14,313)	(13,140)
Total property and equipment, net	6,430	7,441
Capitalized Software
Property Plant And Equipment [Line Items]
Total property and equipment, gross	11,610	11,579
Tools and Lab Equipment
Property Plant And Equipment [Line Items]
Total property and equipment, gross	5,218	5,087
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Total property and equipment, gross	2,440	2,440
Leasehold Improvements
Property Plant And Equipment [Line Items]
Total property and equipment, gross	993	993
Computer and Equipment
Property Plant And Equipment [Line Items]
Total property and equipment, gross	$ 482	$ 482

Balance Sheet Components - Addi

Balance Sheet Components - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended		12 Months Ended
	Sep. 30, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Property Plant And Equipment [Abstract]
Depreciation and amortization expense		$ 1.2	$ 1.3
Amortization of capitalized software costs		0.8	1
Amortization expense		$ 0.1	$ 0.2
Reduction in revenue related to unpaid claims	$ 11.3			$ 11.3

Balance Sheet Components - Su_4

Balance Sheet Components - Summary of Intangible Assets, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Finite Lived Intangible Assets [Line Items]
Gross carrying value	$ 1,990	$ 1,990
Accumulated amortization	1,034	927
Net carrying value	956	1,063
Developed Technologies
Finite Lived Intangible Assets [Line Items]
Gross carrying value	1,700	1,700
Accumulated amortization	744	637
Net carrying value	956	1,063
Other
Finite Lived Intangible Assets [Line Items]
Gross carrying value	290	290
Accumulated amortization	$ 290	$ 290

Balance Sheet Components - Su_5

Balance Sheet Components - Summary of Estimated Future Amortization Expense of Finite-lived Intangible Assets, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2023	$ 318
2024	425
2025	213
Net carrying value	$ 956	$ 1,063

Balance Sheet Components - Su_6

Balance Sheet Components - Summary of Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Accrued compensation	$ 3,359	$ 8,070
Accrued warranty reserve	4,066	3,765
Refunds due to customers	639	580
Other accrued expenses	50	300
Total accrued expenses	$ 8,114	$ 12,715

Balance Sheet Components - Su_7

Balance Sheet Components - Summary of Sales Returns Reserve (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Sales returns reserve, beginning balance	$ 3,942	$ 13,827
Reduction of revenue	7,409	4,584
Utilization of sales returns reserve	(5,511)	(4,725)
Sales returns reserve, ending balance	$ 5,840	$ 13,686

Balance Sheet Components - Su_8

Balance Sheet Components - Summary of Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Receivables [Abstract]
Allowance for credit losses, beginning balance	$ 158	$ 4,838
Charged to expense	123	174
Accounts written off, net of recoveries	(101)	(292)
Allowance for credit losses, ending balance	$ 180	$ 4,720

Balance Sheet Components - Su_9

Balance Sheet Components - Summary of Accrued Warranty Reserve (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Accrued warranty reserve, beginning balance	$ 3,765	$ 4,014
Charged to cost of revenue	1,111	958
Utilization of accrued warranty reserve	(810)	(732)
Accrued warranty reserve, ending balance	$ 4,066	$ 4,240

Commitments and Contingencies -

Commitments and Contingencies - Additional Information (Details)	1 Months Ended	3 Months Ended
	Jan. 31, 2023 USD ($) ft²	Mar. 31, 2023 USD ($)	Mar. 15, 2023 USD ($)	Dec. 31, 2022 USD ($)
Commitments And Contingencies [Line Items]
Operating lease right-of-use assets		$ 7,835,000		$ 5,765,000
Operating lease liabilities		7,861,000
Operating lease costs		400,000
Settlement liability			$ 249,500
Nashville, Tennessee
Commitments And Contingencies [Line Items]
Area of land | ft²	17,572
Tenant improvements	$ 900,000
Operating lease right-of-use assets		2,300,000
Operating lease liabilities		$ 1,400,000
Operating lease, description		The initial term of the lease is 76 months with the option to extend the lease term once for additional 5 years.
Operating lease, term of contract	76 months
Operating lease, renewal term	5 years
Tenant improvement allowance	$ 900,000
ROU asset and operating lease liability, weighted-average incremental borrowing rate		11.20%

Commitments and Contingencies_2

Commitments and Contingencies - Schedule of Undiscounted Future Minimum Lease Payments Due under Non-cancelable Operating Leases (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Remainder of 2023	$ 849
2024	1,081
2025	1,635
2026	1,886
2027	1,945
Thereafter	3,066
Total minimum future lease payments	10,462
Present value adjustment for minimum lease commitments	(2,601)
Total lease liability	$ 7,861

Debt Obligations - Additional I

Debt Obligations - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Interest expense	$ 264
Cash and cash equivalents		$ 79,776	$ 101,238

Stock-based Compensation - Summ

Stock-based Compensation - Summary of Total Stock-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 3,408	$ 2,985
Cost of Revenue
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	42	22
Research and Development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	653	985
Sales and Marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	890	637
General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,823	$ 1,341

Stock-based Compensation - Addi

Stock-based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation related to outstanding unvested stock options	$ 14.2
Unrecognized stock-based compensation related to outstanding unvested stock options, period of recognition	3 years 2 months 12 days
Service-Based Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock issuable upon exercise of outstanding awards	217,101
Weighted-average grant-date fair value of options granted	$ 8.13
Weighted average closing price	$ 25	$ 82.08
Unrecognized stock-based compensation related to outstanding unvested stock options	$ 14.5
Unrecognized stock-based compensation related to outstanding unvested stock options, period of recognition	4 years 6 months
Common stock options issued	1,505,809	309,315
Granted option to purchase shares of common stock	1,224,374
Shares forfeited due to termination of service by grantees	27,880
Market-Based Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average grant-date fair value of options granted	$ 6.36
Weighted average closing price	$ 20
Unrecognized stock-based compensation related to outstanding unvested stock options	$ 6.9
Unrecognized stock-based compensation related to outstanding unvested stock options, period of recognition	1 year 6 months
Granted option to purchase shares of common stock	1,224,370
Shares forfeited due to termination of service by grantees	13,625
Aggregate fair value yet to be recognized	$ 7.8
Aggregate fair value yet to be recognized over service period	1 year 7 months 6 days
2010 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock issuable upon exercise of outstanding awards	218,330
2020 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for issuance	3,930,595
Number of shares available for grant	1,249,144
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for issuance	282,384
Number of shares available for grant	273,738

Stock-based Compensation - Su_2

Stock-based Compensation - Summary of Service-based Stock Option Activity (Details) - Service-Based Stock Options - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares, Balance	309,315
Number of shares, Grants	1,224,374
Number of shares, Cancelled/forfeited	(27,880)
Number of shares, Balance	1,505,809	309,315
Number of shares, Vested and exercisable	217,101
Weighted average exercise price, Balance	$ 82.08
Weighted average exercise price, Grants	11.55
Weighted average exercise price, Cancelled/forfeited	62.27
Weighted average exercise price, Balance	25	$ 82.08
Weighted average exercise price, Vested and exercisable	$ 70.17
Weighted average remaining contractual term, Balance	8 years 11 months 1 day	5 years 7 months 6 days
Weighted average remaining contractual term, Vested and exercisable	5 years 2 months 1 day

Stock-Based Compensation - Assu

Stock-Based Compensation - Assumptions used in Estimating Grant-Date Fair Value of Stock-based Awards (Details)	3 Months Ended
	Mar. 31, 2023
Service-Based Stock Options
Valuation assumptions:
Expected volatility, Minimum	76.50%
Expected volatility, Maximum	77%
Risk-free interest rate, Minimum	3.45%
Risk-free interest rate, Maximum	4.09%
Market-Based Stock Options
Valuation assumptions:
Expected volatility, Minimum	76.50%
Expected volatility, Maximum	77%
Cost of equity	25%
Risk-free interest rate, Minimum	3.39%
Risk-free interest rate, Maximum	3.93%
Minimum | Service-Based Stock Options
Valuation assumptions:
Expected term	6 years 4 months 24 days
Maximum | Service-Based Stock Options
Valuation assumptions:
Expected term	6 years 6 months

Stock-based Compensation - Su_3

Stock-based Compensation - Summary of RSU Activity (Details) - Restricted Stock Units	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares, Balance | shares	176,063
Number of shares, RSUs vested | shares	(14,876)
Number of shares, RSUs forfeited | shares	(4,048)
Number of shares, Balance | shares	157,139
Weighted average grant date fair value per share, Balance | $ / shares	$ 101.76
Weighted average grant date fair value per share, RSUs vested | $ / shares	155.29
Weighted average grant date fair value per share, RSUs forfeited | $ / shares	93.22
Weighted average grant date fair value per share, Balance | $ / shares	$ 96.90

Net Loss Per Share Attributab_3

Net Loss Per Share Attributable To Common Stockholders - Summary of Outstanding Potentially Dilutive Common Stock Equivalents Excluded from Calculation of Diluted Net Loss Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from calculation of diluted net loss per share	2,873,693	369,714
Service-Based Options Issued and Outstanding
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from calculation of diluted net loss per share	1,505,809	267,705
Market-Based Options Issued and Outstanding
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from calculation of diluted net loss per share	1,210,745
Restricted Stock Units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from calculation of diluted net loss per share	157,139	102,009

Subsequent Events - Additional

Subsequent Events - Additional Information (Details) - shares	Mar. 31, 2023	Dec. 31, 2022
Subsequent Event [Line Items]
Common stock, shares authorized	450,000,000	450,000,000