EAR - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Eargo First Quarter 2021 Earnings Conference Call. At this time all participants are on listen-only mode after the speakers presentations, there'll be a question and answer session. [Operator Instructions] I would now like to introduce Vice President, Investor Relations, Nick Laudico. Nick?

Nicholas Laudico

Good afternoon, everyone, and welcome to the Eargo first quarter of 2021 earnings conference. Call. slides Relations this website and on are release Investor our @ir.eargo.com. press to call accompany available The Please note, we information at have also provided end the supplemental, of slide presentation. the historical, financial

a both live on reminder, IR website. will a As our call and be digital this available replay

Adam on will and provide open and we Chief me prepared Executive are today's the Gormsen, Christian will Q&A. call remarks, President Joining Financial call Chief Officer. and Christian Officer; Laponis, Adam to and then

you subject that but and forward-looking or Before nature of to, I'd not may events forward-looking the could we to that or results factors to uncertainties, filings our include, remind are on materially. conference We results contain begin, discussed such factors SEC. matters cause will as as slides. based in actual and this press in risks you management's with statements some in to materially our events are and like differ the future differ release actual caution The today, current wish statements that our beliefs well limited outlined expectations as referenced call to and in regarding events are and

non-GAAP Christian. to discussing to slide to be on also Please With results that refer reconciliation. non-GAAP will We for a call. the turn today's over call today's and release GAAP press financial presentation full said, I'll

Christian Gormsen

good and Nick afternoon everyone. you Thank

outstanding again guidance by Following in pleased increasing at we, XXXX financial in report first delivered confidence our term and objectives. performance record quarter fourth I'm XXX, our quarter, the that longer of so to

launch growth given volume drivers strong an will first we Eargo highlight our that quarter on growth X, force Starting first ever. the revenue revolutionary five, all key a for impressive of XXXX to revenue some particular a of Before slide of of our update compared of not upcoming the benefit quarter review new guidance, to repeat our have turning quarter approximately and the the of net launch XX% Adam customers over the first of launch first provide delivered from we or growth detailed XXXX. call financial quarter did most and product growth on of product briefly performance I more and

also gross over rate volume and in return improvement of system a first did by revenue We and Both of the have a of XX% points XX% supported shifts drivers. quarter approximately year-over-year. accrual several were X and growth

serving and penetration into insurance what to we as First of insurance market, the less than market. large immediately remains our we opportunity server is own consider be still the under-penetrated our X% this insurance are addressable

across on and by growth consumer approach and customer dollars methodically are Second data impressed digital, and to consumer to we advertising national innovative to attract products cash the and, in and is, volume of media investments, operating digital Eargo, innovative Telecare distribution model awareness which continuously balance analytics, successful team is the mix so in products, of know audiology. media. types diverse be We these TV attracting expenses. leverages of ways building our by and tool a scalability traditional awareness growth What once and and was we These customer our insurance driving again, also multiple achieve marketing both delivered of and as customers both national scale-up brand. driven our types continued Eargo pay leverage presence, both media offline continue

to existing new the hearing website Telecare launch the ahead product and professionals investing Telecare powerful mode, becoming leverage of believe product comfort based outstanding doesn't completely just and our and team It support stay, the second X. scalable, our hearing simple, home. During tool screening to in transformes plan with consumer schedule and the this engage Consumers industry as hearing a to preparing competitive conversion of more purchase all but today, innovative is across highly hearing stop in to late of both Eargo further important convenient with with Eargo of the of in work journey. Supporting purchase, and to and is hearing before we the insure our training healthcare. convenient, offering launch can model just evident that loyalty. of to quarter, long-term the professionals hard this Telecare that integrated an clinical brand is proven support is is their to share, built and we introduce experience in licensed platform creative customers, established But infrastructure this Eargo This telecare own is an personalized, second post-purchase customers. it of growth we're customer game-changing here product quarter trained be X, most what appointments not

market As a as simply is we a believe efficient more well way there the we pioneer realize vertically to telecare hearing to integrated underpenetrated are and consumers in loss. better, disruption large solve to bringing experience care, hearing of this a for more positioned lead

our and We expectations. will continue term competitive extend to to invest in growth support revenue our Telecare advantage

Turning quarter. of revolutionary the for in a Eargo second our of as to we the the ever slide six year, launch second approach half X, initial product now excited and most key driver the we are growth incredibly late

operating charger, on mobile As platform hearing across a and completely instruments, Eargo X be discussed we've app. will new

at gain the the a range moderate nothing the helping people all deliver Eargo been X with people quality tested severe and also cancellation better, delivers with have of Eargo users us with of told Starting more hearing over end of improvements feedback hear short have experienced the We hearing loss X fit Neo the an device impressive more users loss more fundamentals category. already audiological to and has significant allowing sound the of that outstanding. product response HiFi. will

is time, are canal This for real while audio feature hearing such we an conducting in excited Customers beyond profile me. germany, the most and hearing fundamentals, to is a canal. [indiscernible]hearing us people the inside a users the candidates X, aid licensed professionals. the device calibrate design the of not while charging But adjust design Moving capabilities. improve accustomed can situations. include highest battery the good hearing in to also feature fit new the in VARTA settings, leader then professionals product hearing real an Eargo the experience, level the may about pushed fit are level use more of our They appointment X to time who lithium features physical our Eargo functionality. the been with as licensed able and measure to even allowing delivering with Telecare inductive This a smaller the themselves or hearing world will or previously devices which have the in for screen ear loss booth, of one profiles itself, sound personalization. while easier of and anti metal by in Other context is to easy already AG an real making be in work designed adjustment ion no consumer and batteries, waterproof will using their with even micro is of existing co-develop

launch inside Eargo believe device day the that All will a the of which to environment in X. parallel of functionality with we harsh a ear sits the day canal in improve further of

consumers. making we functions hearing that levels. are call exciting, We second launch the the such between quarter. hearing in the we to And related many profile expect scheduling launch We mobile quarter will consumer will of as This launching professionals. introduction deepening the investments revenue the to and in-situ the just contribution in well to totally adjustments, support a assessment as a enable an with I connection X and redesigned are companion will material continue that app app our as believe beginning embedded second take also quarter video described licensed new Telecare first late Eargo and user experience functions,

wants to R&D would to turning call tirelessly and a who to it software product, over hoped this deliver Adam, to everything thank special Before we worked be. you our the have teams make I

We such fortunate impressive helping incredibly an professionals more future the better. of have ego and to people and dedicated are hear driving

Adam his of to for financial results. over it review turn now our me Let

Adam Laponis

Christian, discussion revenue will given systems shipped. drivers, with of Thanks I gross Christian's thorough start

define starter we and As two a AIDS, case unit. is ship charging as reminder, a accessories system single a hearing

system or is XX,XXX approach and driven up of penetration increased strong insurance XX.X% data-driven year-over-year, XXXX national of year-over-year change the performance ship the growth our by quarter market. to advertising First demand generation

of year, As XXXX return slightly rate launch as mix in quarter non-GAAP our expected a driven XX.X% return XX.X% this XXXX to in shipped volumes to expenses. compared first gross primarily margin down in second first previous the holiday accrual growth with was XX.X% system sequentially this year's promotion insurance and first reduction non-GAAP XXXX, the in customers of the quarter was and rate do quarter launches and a in the by of in moving quarter to fourth higher the quarter quarter of strong operating product compared fourth

Our discussion basis, and to GAAP financial will reconciliation a compensation in margin excludes at of today's gross earnings non-GAAP below to metrics which our the Please on release. be non-GAAP expense. refer line stock-based included

compared in as margin decrease prices lower of the year-over-year system shipped XXXX gross sold. of and fourth average in and returns growth XXXX, non-GAAP percentage quarter goods First quarter XX.X% the a first to higher margin in expansion was to primarily gross due XX.X% was XX.X% of the a of quarter sales selling costs

net negative of an a incurred with for were net of non-GAAP net compared increases, million administrative expenses revenues of IPO by to $X.X quarter first XXXX. the million XXXX. Eargo XX.X% $X sales net and $X.X $X.X revenues the loss or increase $XX.X Of XXXX. generation, compared a as in and increase were revenues of negative X compared compared to as net net non-GAAP XXXX driven XX.X% XX.X% cancellation was public of expenses Non-GAAP in offset operating first of $X.X million million investments by to These of XX.X% On XXXX. net quarter basis, The million, the of expenses of to XXXX. company. well or non-GAAP in first preparations. national first loss or in Non-GAAP experienced revenues was revenues million back associated however, demand in first expenses G&A due including XX.X%. of were revenues higher quarter the First and a advertising, were quarter XX.X% the being or research in quarter we quarter costs in of general of or QX million $XX.X marketing million development launch net $XX.X expanded or to Non-GAAP

Finally, we had $XXX.X at cash and cash March million XXst, XXXX. equivalent of

due our ability business. Now to our to drive high confidence momentum degree and the growth capitalize to of guidance on in turning in our

million revenue $XX raising $XX $XX are million $XX to guidance We up million. to full XXXX from to year net million

ASPs customer XXXX. stable growth to rates, stable revenue how and by robust expect volume with we We driven to exited compared return be accrual growth as

Looking everything cadence, full remainder gross at XX% we half of year, generate year of revenue the to second margin revenue, guidance. of XXXX the to approximately the expect

GAAP margin would to reiterating the continued now in reiterating closing margin guidance guidance of for non-GAAP turn launch consumer reflects guidance summary We Eargo Christian of between it with like through remainder are and gross confidence also X XX%. XX XXXX, XX%. adoption back launch This the in particularly late gross of I our between to XX remarks. to initial We're QX.

Christian Gormsen

Thanks Adam.

both mix launch how with strong generation. our this our scale pleased driving executing We year, of this XXXX. first and the including of X. course the volume and on quarter XXXX customer initiatives very Eargo are of far focused momentum And up us results positions offline remain strategic demand growth the of We digital through from

And Our like more our gross revenue for future on and excited type. mission full Eargo. and initiatives couldn't our We for the margin for focused the helping these what be would people holds prepared gives call concludes achieving to the to remarks. my confidence increased operator on initial hear turn back and Q&A. better, progress year That of us remain more I

Operator

Instructions] our and Again, Marcus comes question ladies first of gentlemen, Morgan. [Operator from JP Robbie

open. is line Your

Robbie Marcus

was mix quarter. was a the get of was, patients the a of much to Maybe to the of look on to Was first the nice things, in did hoping Thanks to repeat it You, you question. start consumer the due the direct quarter? how just sense Congrats expectations how channel? couple for what customers a great. customers. it insurance see Oh, new would better and

Christian Gormsen

cash Great,Good Robbie both growth pay in we saw and to talk. insurance. Christina

we'd did was, we seen know, repeat, lot prior as so expected. of see that quarters lower not than You a significantly in

So, the sort development. so of that was

it, other, we, able Adam. again, back we in close we Yeah, believe pleased mix and on in the much the to So were fact again, in about talked about in line where I are cash we QX mix, the and last both fan came where The we is specifically pretty that on with to conversations. pretty goes expectations worked forties year were doing to insurance. prior high it insurance, grow I

insurance Now in was year the full the of, that, where of it XX, mix we expect to roughly half of XXXX in XX forties. back mid be all the

Robbie Marcus

it. Got

Okay.

So well pretty to direct it consumer implies as nice in quarter. the growth

now been the something low, trend can me. return think second was at I this end you the how The was but know, breaking a for record maybe thinking towards that. for what drove maybe bottom Maybe low I you it touch So think XX%. could I, you're, low rate, XX% barriers just the do like past on And, we'd down think here? how, you in as you you're

Christian Gormsen

right. it put you no, No,

this our user our We're and not can diligence assumptions return we really keep really team fluctuations how that will we You know, of time do ahead I time expectations. here. to due the be on optimizing And from, to support do changing rate the we're from what think is a own with of all experience?

it's got we Adam hunting just we forward. our we're mix know, can we slightly Again, rates by about talked on but one, benefit early you a little say but, keep will definitely insurance know, of the changing bit return where the say that to You not the assumptions on going this better side.

Robbie Marcus

stream year more have as you quarter, $X was a sure very or It just a just it typically that end you low Got the conservative early wanna know could the raised really but into the it. end, the versus anything in approach million And I on not towards guidance you if million squeeze the setting well. by expectations, went mid-point just in make $X that. first and I beat the low is to here one by read still? guidance, up

Christian Gormsen

we're so guidance it, want we, one to this even very seal been no, but it's like going ahead now. right some getting year some, about some and we [indiscernible] said, is definitely year, into looking and and feel Well, great not of strength support but is don't are but year do so, we're the we given get good feel we've again, you great quarter and, of a to we where better guidance, and have full our it into a ourselves, we QX, about

So, so that's the logic.

Operator

comes Malgorzata of question Blair. Kaczor from next Our William

is line open. Your

Malgorzata Kaczor

little Hey, at May. good more in even was demand potentially open seeing everyone. as afternoon, questions. the pullback to bit clinics saying more there? to in the or guys Thanks for Are mobile try I on trends or taking return beginning actually of audiologists start go hoping and to patients know, to begin You up and the you start be restaurants a any as maybe demand groups to you're, be patients April

Christian Gormsen

from seeing, always be would know, moving here you That, I and we We're driving be definitely that give our the again, sort you landscape, of we're activities what are terms but in know, where through pieces quarterly here. mail we doing demand guidance more of multiple through don't having of specific say, that be well. direct T as ways digital, through demand, V, benefiting there's

So, of our know, not major of terms changes business the that here. in changing seeing any any outlooks so you are, we're

built large it's based really have adapt that have our think us. macro Margaret focus really media telling is is I also to we to I the we think mix we set on resilient how ability up what what and model business our And a changes.

making quarter giving but here. we guidance not we're track sort time So and the specific something real-time, this to adjustments of we're real is

Malgorzata Kaczor

had of everyone be channel at as half Does know, year, launched help the I X enough. Is You we new as I short-term that know, does you that the being a you in that rates? a bullish? to you has when have it guys what with that traditionally material about of launch, X more we to a long-term for you've are back product? you think launch? Eargo wants a should Fair close seen looking on but of give metrics that talked try it success think Eargo and What you guys it bullish? this

Christian Gormsen

Yeah, year.in we best think launch I and so last really what's Eargo QX, the it's of example we've impact. the a what seen, Hi-Fi long-term have, the really

of we this really, or So for go us, what's lot Everything platform do has a spike brand a you five key potential. new new drive going at to in The a be short-term was, key, bet. it impact but QX, and it's but is if around it's is not a to a platform. is believe

you driving, be will forward. We going know,

So that's emphasis. our really

also of see where dividing that? would say, it that's reception? KPI’s know, conversion you on we really And Are we see use think the as the what I rate. is this, we

piece we we do we this the, we know, a do all growth long-term that ago? degree how where important is in platform see personalization returning ago, build can integrations then Telecare do. can improving I five, to and young we customers launch more, an And rest of level And higher other is The have year the higher when as of right? that really given year also you terms we we customers, our returning a and is approach, drive expectations think the of of continue this

Malgorzata Kaczor

competition copy that maybe future? I manufacturers can outside and either that Oh, some know, that. guys?. companies at saying, changes just I And you of competitive any the questions just bit, then of you a you one one the like because little touch online you to seen looking Thanks. more was be some we've in services Okay. the on the hoping environment could go around last today or the five And just getting big to other could for a me, and of be, or started Have ahead hear.com the

Christian Gormsen

exactly. no. No, Yeah,

things the proving I of You in know, general, think of to reason it's happening know, that's and potential industry Sennheisers for course with of acquisition across obviously a lot this across [indiscernible], reason you industry their Sonova lively, in these of consumer. know

So definitely in that's space. a activity of this lot

impact to of Bose's new. earlier to seeing fair. not I outside back think know, we're about year business comment that None announcement is be a this You my ago, our

a long live You know, for, a time. been around comment around get has for

a not new not So anything this it's dynamic ministry. in is

just it's will more the think always I we visibility something which industry, is applaud. into

sort seen doing. making what think us about haven't anything is extra that we of hard So we're

I what we're that proposition more vertically think if driving, of penetration hopefully, in very a industry. push anything, this you differentiated know, leadership confident you fully know, is feeling integrated know, will, that building we're being unique and to you a know, continue still into you terms our value

Operator

[Operator Wells Fargo. from question Instructions] Gelson Larry Our of next comes

Your open. line is

Larry Gelson

Good question. on afternoon Thanks A a guys. for taking of couple ago, year start five. the

needs to to still So going be decided done a and there's have you before you you Christian if what be launch premium? know, price

Christian Gormsen

as questions of end is, always X back the and where Eargo Good the planning, we with there are ramp.

you of piece more chain it. is of this know, So supply the logistics, a,

on locked and point experience, how it's of a software know, on know, more we're the we've all but software in supplier we the do of off through as it's you I'll feedback and our out blocks know, right or, sort terms hardware tuning constantly of on timeline this, test to continue way to So question piece So that's a to monitoring way You the to, gone Margaret platform know, really really do are, of the customers? of us now allows in users we, have, we're in all right? getting we that, a price the you front focus around, how our us right? this we do from new point. you We registrations the, and is view, in at, remaining of the know, actually from how the you fully bring here position this

we there's access more believe to we've it's very very, we, important a drive you lot know, know, into You category. this debated

you product. introducing five of to this we're and in confidence So audible the lack go not a not be is and at going premium,

into at a today we're what know, contrary, to seeing similar conversions On people we price bringing hopefully out can to industry. believe by stronger more do the even get point revolutionary we a the drive product and you motivate

to from guidance with what So it's we again, that view of here. do. And proud very are we point being able consistent a our something very faced strategic of into

to, to question, preempt that Just

Larry Gelson

the de-risk the know, late Christian, you just you follow launch? some based software is QX you what do said on up QX tweaks to late how that launches think there's how de-risk

Christian Gormsen

feel speak. right. we or Right. I AIDS we No, else comfortable hearing the wearing openly wouldn't talking as this I'm about call, be on this very

both, revenue think readiness point view, we're Right. view, for launch? you product we, do it's I know, see material also QX, And are but how from view you never hardware how from a where why do scale know, will we us, a point more, from that's we saying, acoustic in felt are. I've the point of know, of of around an you that we impact

things obviously sort product at day, know, then core business, felt, together there's I've the but best or of that lot a but year to you audiological hardware plus ago, the the core launch You end of of need tie

Larry Gelson

said ear the Christian company's and the of the to trying the five clear. you maybe so guidance biggest you the product seems kind is understand know, history. And you benefit of, go it, know, and, this in Adam because launch impact kind I'm

in in, know, in there this year know, you So you Adam, an dollar you be business, at saw imply, inflection and sequential improvements, I seems that why increase what sales. XX% know, about a large your XXXX. talked than in we of these XXXX for modest, wouldn't guidance that's number you looked If given the lower that to

be successful should gave? guidance guys for me with reconcile important a know, seems launch So you what with, like pretty help the you you and

Christian Gormsen

here. maybe and add them, the I'll you no, nuance give you definitely thought, I no, Yeah, know,

lean you what's has been, a want we point think from since make assumptions to does to to, that in want base of opportunities. markets That with we've historically, so been view, mean we're to new seen into everything done what's, really we've what I level, important not going on started we exploring a pushing we to guidance if to not public things the right. don't it

also into team's and my we you do I higher having on We believe our let's rates Larry, will we higher it conversion the of guy hear that, but do phasing in we not I achieve, we've guidance directly. will guidance that the more out about, can, hear in, that. that an hope very think approach risk in Adam, always can putting best confident adoption be say put or well, opportunity proven you has and of you been, feel know, so we what approach, from, our have terms into and are, from can't guidance, know meet I'll always you do, set XXXX. our know, if you we things I guidance tone, we would provide very to, to to feel a it can And of we probably lot but you can good We exceed

about for biggest this as thinking think the built, off, we I are me, things the getting on around. really

Let's outperform year ourselves in the full of basis. pricing. not and see with get volume, board the every like rate herself we a a to in It's going the have to area in opportunity on across RFC herself but not ahead the head

Larry Gelson

for for are opportunities questions. about Yeah, omni-channel market. Got the taking other and for it. me, of And the thinking Thanks DTC as model, just the how insured you such timelines outside opportunity the Christian, last international

Christian Gormsen

our doubling QX too. another on in, is really we and insecure down part through this No, investments that been

construction we're, these it's know, before you but markets, we're to specific happen about there and any a insurance about it's be just year. happen to opportunities, execute who people focused marketplace But know, opening as give in also believe all meaningful So, world and given plan the you spoken our hard to to on, and it. get this omni-channel the here. more on. elements going now, opportunities are first of I We, to of you all, is right that's scale inside something that you you I additional in and, on moving, not very the, know, obviously expecting of we're to can the specifically within But given the predict, know, signs insurance more guidance can't out teams to we've but it's you more, lot building that of up know, able opening some is what any on and when, timing know,

know, know, spot events, happens, putting believe that's it. hope to you way come ready something fair in Although the definitely When that we we're of you participate. a I when opportunities up,

Operator

I'm closing remarks. I'd at Mr. showing to no back any for further this time. call like to the over Laudico turn questions

Nicholas Laudico

call us on concludes you Thank everyone earnings for joining quarter the today. conference This ergo first call. XXXX of

Operator

a Thank you and thank for participating. have gentlemen, And you, ladies day. we all great

Eargo (EAR) 13 May 212021 Q1 Earnings call transcript