CFRA believes that a negative outcome in the claims audit at Eargo’s largest payor would have a significant negative impact on the Company’s revenue because we believe this payor was responsible for about 43% of 2Q21 revenue. Furthermore, if this is an indication that other insurers are also likely to deny claims, the potential future revenue, earnings and cash flow impact could be devastating to the Company. Additionally, customer return accruals have declined since the IPO, driven by the shifting mix to insured customers. A negative development in the claims audit could also lead to a significant increase in actual returns and thus the returns would have to increase. Finally, we are concerned by increasing marginal customer acquisition costs since the IPO, which may impair EAR’s ability to achieve profitability at scale.