Eargo Stock Plunges After Mixed Q2 Earnings

Eargo Inc EAR reported Q2 revenue of $22.9 million, up 43.7%, surpassing the consensus of $21.97 million driven by an increase in gross systems shipped and a decrease in the sales return accrual rate.
Christian Gormsen, President and CEO, said, "the shift in mix towards insurance customers facilitated a lower year-over-year return accrual rate of 24.1% and contributed to non-GAAP gross margin improvement of five percentage points Y/Y."
The gross margin increased to 71.8% from 67.3%, led by a decrease in sales returns and a lower cost of goods sold per unit.
Operating expenses were $35.5 million or 155.1% of net revenues, compared with $16.3 million or 102.3% in Q2 FY20.
The increase was primarily due to higher sales and marketing investments in demand generation and the Eargo 5 launch costs.
Eargo posted Q2 adjusted EPS of $(0.36), much narrower than $(21.97) a year ago but missing the consensus of $(0.26).
Cash and cash equivalents were $179.4 million as of June 30, 2021, compared to $212.2 million as of December 31, 2020.
Guidance: Eargo increased revenue guidance to $93 million - $96 million, from $89 million - $93 million.
The Company reaffirmed adjusted gross margin guidance of 70% - 72%.
Price Action: EAR shares are down 24.60% at $24.64 during the market session on the last check Friday.