Six years ago, Audeara (ASX: AUA) was a start-up aiming to make hearing tests more accessible to the public.
Next week the company, backed by the likes of Wotif co-founder Andrew Brice, will be hitting the boards with an indicative market capitalisation of $21 million.
Audeara, a hearing technology company that has staked its future on innovative headphones that have proved popular among the hearing impaired and a broader consumer market, will make its ASX trading debut on Tuesday (May 18).
The company successfully raised $7 million from investors after issuing 35 million shares at 20c each to help the company expand its base in Australia.
Initially it will be targeting the niche market it has successfully tapped into over the past two years. Plans are also in train to expand internationally, firstly in the US, with the UK, Europe and Asia also in the frame.
Audeara was co-founded in 2015 by Brisbane-based doctors Dr James Fielding and Dr Chris Jeffery, and engineer Alex Afflick.
While Jeffrey has moved forward with the entrepreneurs' other success story, the medical device company Field Orthopaedics, the task for CEO Fielding and chief technical officer Afflick is to build on the vision that could see Audeara capture their share of a global consumer headphones market that is forecast to reach US$27.5 billion by 2025.
"It's been quite a journey," says Fielding, who along with Jeffery was a 2017 finalist in the Business News AustraliaBrisbane Young Entrepreneur Awards.
Through his musical background as a drummer for Brisbane band The Dashounds, Fielding says the early focus for Audeara was to use entertainment as the "hook to get people to pay attention to their hearing health".
"We originally planned to create a hearing test device that could alter the way the music sounds, so you could have an enhanced personalised experience, which is awesome, while also accessing information about your hearing," says Fielding.
This is achieved by a hearing profile algorithm that personalises the sound output to the needs of the individual. Essentially, the headphones adapt to the hearing capabilities of the user which is determined by a hearing test app.
After raising close to $500,000 in 2017, Audeara initially took a consumer-facing approach to the product. It wasn't until the company struck an agreement in late 2018 to supply Hearing Australia, the government body for audiology services in Australia, that the company's business plan finally began firming up.
"Our primary market is for people who have hearing loss and actively looking for a solution - and we are that solution," says Fielding.
The Audeara headphones, which are accompanied by a Bluetooth TV listener, have even broader uses outside of hearing loss. Among these is for autistic children who benefit from the personalised sound in a noise-cancelling device that has the added benefit of being subsidised by NDIS.
Softer, safer experience
"It's a softer, safer experience and we have been getting some really great feedback in that space that we are looking to explore further," says Fielding.
"From 2019 we started supplying into the audiology clinics and from there we kind of pinned our ears back. We canned all of our consumer activities and we went to where the people who needed our product were going to get the most benefit, and from there it just fell into place.
"That shift from trying to break into the consumer electronics space to supplying our health headphones to people who know they have hearing loss meant that we were able to really crack on. Now we are in a position to get on with it. We grew the number of clinics, we refined the product, and we refined the offering."
The percentage of people over 75 with some hearing loss is about 50 per cent, and for those over 60 it is one in three.
"For some people, it's the first time they have considered doing something about their hearing," says Fielding of customers who have turned to Audeara.
"We get some real eyes-wide-open, jaw-drop moments when people realise what they have been missing out on. We're restoring that clarity and that detail for them.
"It was really surprising to us the big impact it has on people's lives when they no longer have to have the TV up loud, driving everyone else crazy."
While Audeara has not provided any financial forecasts, the company's prospectus reveals sales of $903,000 in FY20, up from $582,000 in FY19. Sales in the latest December half hit $526,000, accompanied by a rise in gross margins to 45.6 per cent.
The FY20 loss of $454,000 compares with a $1.5 million deficit in FY19.
Audeara has made a tentative move into the US after striking a distribution agreement with hearing healthcare business Westone which distributes to 16,000 audiology clinics.
"While the primary focus is on finishing the job here in Australia and growing to be in all the clinics here, we are starting to land those beach-head agreements in the US and put the wheels in motion there," says Fielding.
Scaling up in the US
Fielding concedes the US will be a tougher market to crack.
"We're being very respectful about it, as they do operate differently. To do well in Australia, we need to be in all 1,500 clinics here. The groups we are talking to in the US have 5,000 to 6,000 clinics each. So, in terms of the pure scale, if we have a handful of deals there, we will already have a larger footprint than we have here."
Apart from Wotif's Andrew Brice, Audeara's early investors also include Brian Flannery, the rich lister who has also backed the entrepreneurs' other start-up Field Orthopaedics.
Fielding says the backing of sophisticated investors has been a key driver of the company's path to commercialisation and the ASX listing. Most of them are Brisbane-based, which Fielding says allows him to maintain personal contact with his key investors.
"It was a great vote of confidence when those groups came on board at the prototype stage back in 2015. When sophisticated investors who know what they're doing back you, it really gives you the confidence to get on with it.
"The Brice family came on board in 2018; they have been amazing and really supportive. The people who have backed us have been very open with offering support and guidance and helping out."
While Fielding is looking forward to Tuesday's ASX debut, he says his focus remains on growing the business rather tracking the share price.
As for downtime away from Audeara, Fielding laments that the band, The Dashounds, hasn't performed together for some time.
"Music is at the core of everything in my life, but I don't play as much as I'd like to," he says.
"Hopefully after the IPO my life will get much simpler, but everyone tells me that's not the case. Life tends to get in the way."
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