Airsculpt Technologies Inc
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
AIRS$0.53-62.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0001870940-24-000030
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001870940-24-000035
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 77 previous paragraphs and 90 current paragraphs.
50 unchanged; 21 reworded; 12 added; 6 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 6 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
For the three and six months ended June 30, 2024, we performed 3,949 and 7,695 cases, respectively, compared to 4,186 and 7,826 for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2024, we generated approximately $51.0 million and $98.6 million of revenue, respectively, compared to $55.7 million and $101.5 million for the three and six months ended June 30, 2023, respectively. This represents approximately 8% decline in revenue for the three months ended June 30, 2024 over the same period in prior year and approximately 3% decline in revenue for the six months ended June 30, 2024 over the same period in prior year.
Current report
(1) During the first quarter of fiscal year 2024, the Company recorded a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Current report
For the three months ended June 30, 2024 and 2023, pre-opening de novo and relocation costs were $0.1 million and $0.8 million, respectively. For the six months ended June 30, 2024 and 2023, pre-opening de novo and relocation costs were $0.2 million and $0.9 million, respectively.
Current report
(1) During the first quarter of fiscal year 2024, the Company recorded a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Current report
(1) During the first quarter of fiscal year, 2024, the Company recorded a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Current report
Revenue—Our revenue decreased $4.7 million, or 8.4%, compared to the same period in 2023. The decrease is primarily attributed to weaker than expected performance across the broader aesthetics and high-end retail industries.
Current report
General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expenses were approximately $21.1 million and $18.5 million for the three months ended June 30, 2024 and 2023, respectively. This increase is related to the $3.7 million in severance costs incurred in the three months ended June 30, 2024.
Current report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Current report
Revenue—Our revenue decreased $2.9 million, or 2.8%, compared to the same period in 2023. The decrease is primarily attributed to weaker than expected performance across the broader aesthetic and high-end retail industries.
Current report
Cost of Service—Our cost of service decreased $1.1 million, or 2.9%, compared to the six months ended June 30, 2023. This decrease is consistent with the (2.8%) decrease in revenue over the same period.
Current report
Interest Expense, net—Interest expense decreased to $3.0 million from $3.6 million for the six months ended June 30, 2024 and 2023, respectively. The decrease is due to the lower principal balance resulting from the Company's voluntary $10 million prepayment made in 2023.
Current report
Certain trends in our business, including declining revenues and increased advertising costs, could make it difficult for us to meet certain financial covenants—particularly relating to leverage ratios—contained in the Credit Agreement (as defined below). Although we are in compliance with these covenants as of June 30, 2024, and expect to remain in compliance going forward, if trends in revenue continue to deteriorate, we believe that at some point in next twelve months we may be at risk of violating certain financial covenants. If we were to violate these covenants and were unable to obtain waivers of such violations or otherwise arrange for modified financial covenants with our lender syndicate, our business and results of operations could be materially and adversely affected. We will continue to monitor our compliance with all of our financial covenants and, if we feel that we are likely to violate any such covenant, we will seek to obtain the necessary relief.
Removed paragraphs (6)
Previous report
For the three months ended March 31, 2024, we performed 3,746 cases and generated approximately $47.6 million of revenue, compared to 3,640 cases and $45.8 million in revenue for the three months ended March 31, 2023. This represents approximately 4% growth in revenue for the three months ended March 31, 2024 over the same period in prior year.
Previous report
(1) As of the three months ended March 31, 2024, this amount contains a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Previous report
(1) As of the three months ended March 31, 2024, this amount contains a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Previous report
(1) As of the three months ended March 31, 2024, this amount contains a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Previous report
Revenue—Our revenue increased $1.8 million, or 3.9%, compared to the same period in 2023. The increase is the result of adding four de novo centers which expanded our footprint from 23 centers to 27 centers and our number of procedure rooms from 49 to 57 as of March 31, 2024.
Previous report
Loss on disposal of long-lived assets—We recognized a $5.0 thousand loss related to the disposal of previous long-lived assets as a result of relocations to expand certain centers.
Reworded paragraphs (21)
Previous wording
AirSculpt is an experienced, fast-growing national provider of body contouring procedures delivering a premium consumer experience. At AirSculpt, we provide custom body contouring using our proprietary AirSculpt® method that removes unwanted fat in a minimally invasive procedure, producing dramatic results. We now deliver our AirSculpt® procedures through a growing nationwide footprint of 27 centers across 18 states, Canada, and the United Kingdom as of May 10, 2024.
Current wording
AirSculpt is an experienced, fast-growing national provider of body contouring procedures delivering a premium consumer experience. We provide custom body contouring using our proprietary AirSculpt® method that removes unwanted fat and tightens skin in a minimally invasive procedure, producing dramatic results. We opened a new center in Kansas City, KS in July 2024. We deliver our AirSculpt® procedures through a growing nationwide footprint of 28 centers across 19 states, Canada and the United Kingdom as of August 9, 2024.
Previous wording
We define Adjusted EBITDA as net loss excluding depreciation and amortization, net interest expense, income tax expense, restructuring and related severance costs, loss/(gain) on disposal of long-lived assets, and equity-based compensation.
Current wording
We define Adjusted EBITDA as net (loss)/income excluding depreciation and amortization, net interest expense, income tax (benefit)/expense, restructuring and related severance costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation.
Previous wording
We define Adjusted Net Income as net income/(loss) excluding restructuring and related severance costs, loss/(gain) on disposal of long-lived assets, equity-based compensation and the tax effect of these adjustments.
Current wording
We define Adjusted Net Income as net (loss)/income excluding restructuring and related severance costs, (gain)/loss on disposal of long-lived assets, equity-based compensation and the tax effect of these adjustments.
Previous wording
The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net income/(loss), the most directly comparable GAAP financial measure:
Current wording
The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net (loss)/income, the most directly comparable GAAP financial measure:
Previous wording
The following table reconciles Adjusted Net Income and Adjusted Net Income per Share to net income/(loss), the most directly comparable GAAP financial measure:
Current wording
The following table reconciles Adjusted Net Income and Adjusted Net Income per Share to net (loss)/income, the most directly comparable GAAP financial measure:
Previous wording
Overview—Our financial results for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 reflect the addition of four de novo centers which increased our procedure rooms by 8.
Current wording
Overview—Our financial results for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 reflect the addition of two de novo centers which increased our procedure rooms by four.
Previous wording
Cost of Service—Our cost of services was in line with the prior period at $18.0 million for both the three months ended March 31, 2024 and 2023. Cost of service was 37.9% and 39.3% as a percentage of revenue for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Cost of Service—Our cost of services decreased $1.1 million, or 5.6%, compared to the same period in 2023. The percentage decrease in cost of service is consistent with the decrease in cases over the same period. Cost of service was 36.9% and 35.8% as a percentage of revenue for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $11.2 million and $8.6 million for the three months ended March 31, 2024 and 2023, respectively. Our customer acquisition costs were approximately $2,990 and $2,360 per customer in the three months ended March 31, 2024 and 2023, respectively. We intend to continue investing in our sales and marketing capabilities as we add new centers and further increase our brand awareness, which will also drive further same-center growth. As a result, we expect these costs to increase on an absolute dollar basis. Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.
Current wording
Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $13.1 million and $9.4 million for the three months ended June 30, 2024 and 2023, respectively. Our customer acquisition costs were approximately $3,325 and $2,250 per customer in the three months ended June 30, 2024 and 2023, respectively. We intend to continue investing in our sales and marketing capabilities as we add new centers. Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.
Previous wording
Depreciation and Amortization—Depreciation and amortization increased to approximately $2.8 million for the three months ended March 31, 2024 compared to $2.3 million for the same period in 2023. This increase is the result of having four additional de novo centers during the three months ended March 31, 2024 as compared to the 2023 period.
Current wording
Depreciation and Amortization—Depreciation and amortization increased to approximately $2.9 million for the three months ended June 30, 2024 compared to $2.5 million for the same period in 2023. This increase is the result of having two additional de novo centers during the three months ended June 30, 2024 as compared to the 2023 period.
Previous wording
Interest Expense, net—Interest expense was $1.5 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively. The decrease is due to the voluntary prepayment of $10.0 million of the principal balance of the term loans under the Credit Agreement on September 29, 2023.
Current wording
Interest Expense, net—Interest expense was $1.5 million and $1.9 million for the three months ended June 30, 2024 and 2023, respectively. The decrease is due to the voluntary prepayment of $10.0 million of the principal balance of the term loans under the Credit Agreement on September 29, 2023.
Previous wording
Income Tax Expense— Our effective tax rate is 36.4% and 151.9% for the three months ended March 31, 2024 and 2023, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.
Current wording
Income Tax Expense— Our effective tax rate is 50.6% and 48.8% for the three months ended June 30, 2024 and 2023, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.
Previous wording
Selling, General and Administrative Expenses—Selling, general and administrative expenses decreased $8.1 million, or 34.0%, for the three months ended March 31, 2024 compared to the same period in 2023. This decrease is related to a decrease in our equity-based compensation expense (see Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion) partially offset by additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers. We expect our marketing and corporate support costs to continue to increase as we open de novo centers and expand the support we provide to our centers. Selling, general and administrative expenses as a percent of revenue was at 33.1% and 52.1% for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Selling, General and Administrative Expenses—Selling, general and administrative expenses decreased $1.7 million, or 3.4%, for the six months ended June 30, 2024 compared to the same period in 2023. This decrease is related to a decrease in our equity-based compensation expense (see Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion) partially offset by additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers. We expect our marketing and corporate support costs to continue to increase on an absolute dollar basis as we open de novo centers. Selling, general and administrative expenses as a percent of revenue were 50.7% and 51.0% for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expenses were approximately $4.5 million and $15.3 million for the three months ended March 31, 2024 and 2023, respectively. This decrease is related to a decrease in equity-based compensation expense (see Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion). We expect to continue to expand our corporate team to support the opening of new centers and growth at existing facilities.
Current wording
General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expense were approximately $25.7 million and $33.8 million for the six months ended June 30, 2024 and 2023, respectively. This reduction is due to a decrease in equity-based compensation (see Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion).
Previous wording
We principally rely on cash flows from operations as our primary source of liquidity and, if needed, up to $5.0 million in revolving loans under our revolving credit facility. Our primary cash needs are for payroll, marketing and advertisements, rent, capital expenditures associated with de novo locations and new procedure room additions, as well as information technology and infrastructure, including our corporate office. We believe that the cash expected to be generated from operations and the availability of borrowings under the revolving credit facility will be sufficient for our working capital requirements, liquidity obligations, anticipated capital expenditures relating to the opening of de novo centers, and the addition of new procedure rooms to our existing locations, and payments due under our existing credit facilities for at least the next 12 months.
Current wording
We principally rely on cash flows from operations as our primary source of liquidity and, if needed, up to $5.0 million in revolving loans under our revolving credit facility. Our primary cash needs are for payroll, marketing and advertisements, rent, capital expenditures associated with de novo locations and new procedure room additions, as well as information technology and infrastructure, including our corporate office. We believe that the cash expected to be generated from operations and the availability of borrowings under the revolving credit facility will be sufficient for our working capital requirements, liquidity obligations, anticipated capital expenditures relating to the opening of de novo centers, and payments due under our existing credit facilities for at least the next 12 months.
Previous wording
As of March 31, 2024, we had $11.0 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility. We do not have any letters of credit outstanding as of March 31, 2024.
Current wording
As of June 30, 2024, we had $9.9 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility. We do not have any letters of credit outstanding as of June 30, 2024.
Previous wording
The primary source of our operating cash flow is the collection of patient payments received prior to performing surgical procedures. For the three months ended March 31, 2024, our operating cash flow decreased by $2.9 million compared to the same period in 2023. The decrease is related to our increased investment in customer acquisition during the three months ended March 31, 2024 as compared to the prior year period. At March 31, 2024, we had working capital of $(6.8) million compared to $(4.4) million at December 31, 2023.
Current wording
The primary source of our operating cash flow is the collection of patient payments received prior to performing surgical procedures. For the six months ended June 30, 2024, our operating cash flow decreased by $11.6 million compared to the same period in 2023. The decrease is primarily attributed to weaker than expected revenue performance and an increase in our marketing investments during the six months ended June 30, 2024 as compared to the prior year period. At June 30, 2024, we had working capital of $(3.4) million compared to $(4.4) million at December 31, 2023.
Previous wording
Net cash used in investing activities for the three months ended March 31, 2024 and 2023 was $1.6 million and $3.8 million, respectively. Investing activities during both periods were attributable to the expansion of multiple existing facilities and the preparation for the opening of de novo locations. The decrease in investing cash flows during the three months ended March 31, 2024 is due to the opening of the Orange County facility during the three months ended March 31, 2023 with no comparable facility openings in the current year period.
Current wording
Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $5.6 million and $6.0 million, respectively. Investing activities during both periods were attributable to the relocation of multiple existing facilities and the preparation for the opening of de novo locations.
Previous wording
Net cash used in financing activities during the three months ended March 31, 2024 was $1.1 million. During the three months ended March 31, 2024, we made principal payments on our debt of $0.5 million and made payments of taxes withheld through vested equity-based compensation of $0.4 million.
Current wording
Net cash used in financing activities during the six months ended June 30, 2024 was $1.6 million. During the six months ended June 30, 2024, we made principal payments on our debt of $1.1 million and made payments of taxes withheld through vested equity-based compensation of $0.4 million.
Previous wording
Net cash used in financing activities for the three months ended March 31, 2023 was $0.7 million. For the three months ended March 31, 2023, we paid cash dividends to shareholders of $0.2 million and made principal payments on our debt of $0.5 million.
Current wording
Net cash used in financing activities for the six months ended June 30, 2023 was $1.3 million. For the six months ended June 30, 2023, we paid cash dividends to shareholders of $0.2 million and made principal payments on our debt of $1.1 million.
Previous wording
The carrying value of our total indebtedness was $71.2 million and $71.6 million, which includes unamortized deferred financing costs and issuance discount of $1.2 million and $1.2 million, as of March 31, 2024 and December 31, 2023, respectively.
Current wording
The carrying value of our total indebtedness was $70.7 million and $71.6 million, which includes unamortized deferred financing costs and issuance discount of $1.1 million and $1.2 million, as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
On November 7, 2022, the Company entered into a credit agreement with a syndicate of lenders (the "Credit Agreement") maturing November 7, 2027. Pursuant to the Credit Agreement, there is (i) an $85.0 million aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $5.0 million. The proceeds were used, in part, to pay off the Company’s $83.6 million outstanding principal balance under its previous credit facility. On September 29, 2023, the Company voluntarily pre-paid $10.0 million of the principal balance of the term loans under the Credit Agreement using cash on hand.
Current wording
On November 7, 2022, the Company entered into a credit agreement with a syndicate of lenders (the "Credit Agreement") maturing November 7, 2027. Pursuant to the Credit Agreement, there is (i) an $85.0 million aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $5.0 million. On September 29, 2023, the Company voluntarily pre-paid $10.0 million of the principal balance of the term loans under the Credit Agreement using cash on hand.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
For the six months ended June 30, 2024 and 2023, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that were owned and operated during the six months ended June 30, 2024 and 2023, respectively. At facilities that were not owned or operated for the entirety of the prior year period, the current year period has been pro-rated to reflect only growth experienced during the portion of the six months ended June 30, 2024 in which such facilities were owned and operated during the six months ended June 30, 2023.We define same-center facilities and procedure rooms based on if a facility was owned or operated as of June 30, 2023.
Current report — wording carried from elsewhere
Selling, General and Administrative Expenses—Selling, general and administrative expenses increased $6.4 million, or 22.9%, for the three months ended June 30, 2024 compared to the same period in 2023. This increase is related to the additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers. We expect our marketing and corporate support costs to continue to increase on an absolute dollar basis as we open de novo centers. Additionally, we incurred $3.7 million in severance costs in the three months ended June 30, 2024. Selling, general and administrative expenses as a percent of revenue was at 67.2% and 50.1% for the three months ended June 30, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
The following table and notes summarize certain results from the statements of operations for each of the periods indicated and the changes between periods. The table also shows the percentage relationship to revenue for the periods indicated:
Current report — wording carried from elsewhere
Overview— Our financial results for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 reflect the addition of two de novo centers which increased procedure rooms by four.
Current report — wording carried from elsewhere
Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $24.3 million and $18.0 million for the six months ended June 30, 2024 and 2023, respectively. Our customer acquisition costs were approximately $3,165 and $2,300 per customer in the six months ended June 30, 2024 and 2023, respectively. We intend to continue investing in our sales and marketing capabilities as we add new centers. Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.
Current report — wording carried from elsewhere
Depreciation and Amortization—Depreciation and amortization increased to approximately $5.7 million for the six months ended June 30, 2024 compared to $4.9 million for the same period in 2023. This increase is the result of having two additional de novo centers during the six months ended June 30, 2024 as compared to the 2023 period.
Current report — wording carried from elsewhere
Income Tax Expense—Our effective tax rate is 5.4% and 49.6% for the six months ended June 30, 2024 and 2023, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.