Eargo, Inc.

Good afternoon and welcome to the ERGO Tech in Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nick Ledeco, Senior Vice President, Strategy and Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to the ERGO Second Quarter 2022 Earnings Conference Call. As a reminder, this call is being broadcast live and a digital replay will be available on our IR website. Joining me on today's call are Christian Gormson, President and Chief Executive Officer, and Adam Oponis, Chief Financial Officer. Before we begin, I'd like to remind you that some of the matters discussed in this conference call will contain forward-looking statements regarding future events as outlined in our press release today. We wish to caution you that such statements are based on management's current expectations and beliefs, are forward-looking in nature, are subject to risks and uncertainties, and actual events or results may differ materially. The factors that could cause actual results or events to differ include but are not limited to factors referenced in our press release today, as well as our filings with the SEC. Before turning the call over to Christian, I want to make note that we have posted a historical gap to non-gap reconciliation table on our IR website in the events and presentation section. With that said, I will turn the call over to Christian.

Thank you, Nick, and thank you, everyone, for joining us today. The second quarter for ERGO can be characterized as transitionary. Approximately seven months after we learned of the investigation by the DOJ, we reached a civil settlement agreement with the U.S. government to resolve the DOJ investigation with no admission of liability. We have since cured our SEC filing delinquency, retaining the listing of Ergo stock on NASDAQ, and secured capital to fund our activities and pursue our omni-channel growth strategy. We also took several efforts to reduce our cash burn, including significant reduction in monthly media spend and an additional 17% reduction in our workforce following the previous 27% reduction at the end of 2021. Clearly, our second quarter financial results and year-over-year comparisons reflect our decision to stop accepting insurance as a form of direct payment on December 8, 2021, as well as the cash burn reduction initiatives I just mentioned. With volumes sequentially down as expected, we took the time to continue refining the efficiency of our cash pay business, reducing media spend to $4.1 million in the quarter, down $500,000 sequentially, but improving conversion rate to nearly 16%. Since our last call, we have made progress in enhancing our internal compliance and risk management processes, as well as building our infrastructure across revenue lifecycle management and claims processing to support any future reentry into the insurance market. We also continue to improve the customer experience both online and over the phone. From a financing perspective, we achieved a significant milestone in that we secured a strategic commitment of up to $125 million from Patient Square Capital, closing the first-range investment of $100 million in senior secured convertible notes on June 28th. We're now focused on completing a rights offering of 375 million common shares to existing stockholders by November 25th 2022 or within 150 days of the closing of the first launch investment. Adam will discuss a more detailed timeline in a few moments. As part of our financing process and in light of the events of the last 10 months, as well as the macro environment, management and the board took the time to evaluate our short and long-term business strategies. While we made several changes to improve focus and efficiency, we reconfirmed that our omnichannel strategy should continue to be the primary approach to returning Yirgo towards a growth trajectory. The capital from PatientSquare allows us to begin executing on that strategy, and we're excited to enter the second half of the year with a clear focus on our business priorities. Number one, potentially regain insurance coverage of ERGO for government employees under the FEHB program. We need to work with individual FEHB carriers to align on go-forward processes and require documentation to support insurance coverage. Although we are working to establish dialogues with third-party payers, we expect any negotiations with payers to last an extended period of time. and we do not plan to provide an update until, if, and when we have reached an understanding with payers. Number two, refine and expand our physical retail strategy. We continue to conduct retail pilots to better understand the optimal consumer journey in a physical retail environment and interact with our retail partners to refine our strategy for an expanded retail presence. Number three, optimize our cash paid business. Most recently, we improved conversion to nearly 16% in the second quarter on significantly reduced media spend. And number four, continue to invest in innovation to maintain an annual product launch cadence, which has historically driven new consumer demand and increased repeat customer business. Before turning it over to Adam, We also announced today that Peter Bisgard has stepped down from the company's board of directors effective August 3rd, 2022. With an expanding role at Pivotal and Manphone Life Sciences Fund, Peter has decided to dedicate more time to these increasing responsibilities. We're grateful for the insight and expertise Peter has brought to the board over the years and wish him well in his expanded role. Let me now turn it over to Adam for a more detailed summary of the next steps in our financing process and our second quarter financial results.