Q4 2023 AirSculpt Technologies Inc Earnings Call
Operator: Greetings and welcome to Airsculpt Technology's fourth quarter and full year 2023. This time, all participants are listening. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the presentation, please press star zero on your telephone.
Greetings and welcome to the Air Sculpt technologies fourth quarter and full year 2023 earnings call.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad and the reminder, this conference is being recorded it is now my pleasure to introduce your host Dennis Steen Chief Financial Officer.
Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce you to Dennis Dean, Chief Financial Officer. Thank you, Dean. Thank you, Dennis.
Thank you Dean. Thank you Dennis you may begin.
Dennis Dean: Good morning, everyone, and thanks for joining us to discuss Airsculpt Technology's results for the fourth quarter. Joining me on the call today is the company's founder and executive chairman, Dr. Aaron Rollins, and chief executive officer, Todd Magazine. Before we begin, I would like to remind you that this conference call may include forward-looking statements. These statements may include our future expectations regarding financial results and guidance, market opportunities, and our growth. Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we will file with the SEC, all of which can be found on our website at Investors. EliteBodySculpture.com.
Good morning, everyone and thanks for joining us to discuss air Sculpt Technologies' results for the fourth quarter. Joining me on the call today is the company's founder and executive Chairman, Dr. Aaron Rollins and Chief Executive Officer, Todd Magazine.
Before we begin I would like to remind you that this conference call May include forward looking statements. These statements may include our future expectations regarding financial results and guidance market opportunities and our growth rate.
Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we will file with the SEC all of which can be found on our website at investors <unk> elite body sculpture dotcom.
Dennis Dean: We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial measures. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10-K when filed, which will also be available on our website. With that, I'll turn the call over to Aaron.
We undertake no obligation to revise or update any forward looking statements or information, except as required by law.
During our call today, we will also reference certain non-GAAP financial measures, we use non-GAAP measures and some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release filed this morning and in our most recent 10.
K when filed which will also be available on our website with that I'll turn the call over to Aaron.
Aaron: Thank you, Dennis. Good morning to everyone, and thank you for joining the call. I'm very pleased with our fourth-quarter results and our achievement of consistent double-digit growth in both revenue and adjusted EBITDA. We remain focused on re-establishing our same-store growth trajectory, improving operating margins, and making prudent investments that build upon our solid foundation, as well as drive long-term success of the overall business. In addition to increasing revenue and adjusted EBITDA, the year included several noteworthy accomplishments. We generated strong free cash flow, which allowed us to pay down debt.
Thank you Dennis good morning to everyone and thank you for joining the call I'm very pleased with our fourth quarter results and our achievement of consistent double digit growth in both revenue and adjusted EBITDA. We remain focused on reestablishing our same store growth trajectory.
Improving operating margins and making prudent investments that build upon our solid foundation as well as drive long term success of the overall business.
In addition to increasing our revenue and adjusted EBITDA. The year included several noteworthy accomplishments, we generated strong free cash flow, which allowed us to pay down debt. We opened five new centers, marking the highest number of openings in the history of the company.
Aaron: We opened five new centers, marking the highest number of openings in the history of the company. We invested in brand building activities that drove a 30% growth in brand awareness. We expanded our product and service offerings by adding Airscope Lift, a facial fat transfer procedure. We also expanded our talent, particularly at the executive level. And finally, we quantified our TAM of nine billion dollars, as well as the potential opportunity for opening hundreds of Airsculpt centers globally. I am proud of the many contributions of our teams and want to personally thank each one of them for their dedication that delivered strong results in 2023. I am also very proud of our strong track record of having safely completed more than 50,000 procedures.
We invested in brand building activities that drove 30% growth and brand awareness, we expanded our product and service offerings by adding her scope lift a facial fat transfer procedure.
We expanded our talent, particularly at the executive level and finally, we quantified our Tam of $9 billion as well as the potential opportunity for opening hundreds of air sculpt centers globally.
I am proud of the many contributions of our teams and want to personally. Thank each one of them for their dedication that delivered our strong results in 2023.
I am also very proud of our strong track record and having safely completed more than 50000 procedures, the safety and wellbeing of our patients is our top priority and we have policies and procedures that have ensured positive outcomes throughout our history.
Aaron: The safety and well-being of our patients is our top priority, and we have policies and procedures that have ensured positive outcomes throughout our history. Our ability to achieve these positive outcomes is directly related to the professionalism of our staff. Our surgeons are respected in their field and, together with our other clinical team members, are deeply committed to the care of our patients and achieving results that are in their best interest. As we look ahead, our strategy continues to focus on strengthening the Airsculpt brand, accelerating our store openings, and further enhancing our profitability as we scale our business both domestically and internationally to further increase shareholder value. With that said, let me now turn things over to Todd.
Our ability to achieve these positive outcomes are directly related to the professionalism of our staff. Our searches are respected in their field and together with our other clinical team members are deeply committed to the care of our patients and achieving results that are in their best interest.
As we look ahead, our strategy continues to focus on strengthening the air scope in accelerating our store openings and further enhancing our profitability as we scale our business both domestically and internationally to further increase shareholder value with that let me now turn things over to Todd.
Todd Magazine: Thank you, Aaron, and good morning to everyone on the call. Our business remains strong in Q4, highlighted by 17% revenue growth and 28% adjusted EBITDA growth compared to the prior year. Our robust top-line performance continues to be driven by our de novo locations that opened over the last two years, with our 2023 centers continuing to ramp very favorably compared to their budgeted objectives. In fact, the average revenue of these centers in their first three months was the highest level in company history, excluding our 2021 de novos, which, as shared in previous calls, had a pronounced benefit from COVID. Our overall Seamstore revenue performance was minus 1.7 percent, which was below our expectations for the quarter.
Thank you Aaron and good morning to everyone on the call. Our business remained strong in Q4 highlighted by 17% revenue growth and 28% adjusted EBITDA growth compared to the prior year.
Our robust top line performance continues to be driven by our de Novo locations that opened over the last two years with our 2023 centers continuing to ramp very favorably compared to their budgeted objectives.
The average revenue of these centers and their first three months was the highest level in company history, excluding our 2021 de novo's, which is shared in previous calls had a pronounced benefit from COVID-19.
Our overall same store revenue performance was minus one, 7%, which was below our expectations for the quarter.
Todd Magazine: Just to put this in perspective, the difference between our actual same-store performance and our expectations represents about one procedure per location per month. I would like to briefly comment on our recent revenue performance. We did see some slight softness as we exited 2023, which carried into January. However, as the quarter has progressed, we are encouraged by what we are seeing and fully expect a robust season. Importantly, our performance in Q1 is built into the 2024 outlook that we issued in our press release earlier this morning and that Dennis will go through later. Our adjusted EBITDA margin for the quarter improved year-over-year by 180 basis points to 21.2%, which was driven by our increased focus on cost management.
Just to put this in perspective, the difference between our actual same store performance and our expectations represents about one procedure per location per month.
I'd like to briefly comment on our recent revenue performance, we did see some slight softness as we exited 2023, which carried into January however, as the quarter has progressed, we are encouraged with what we're seeing and fully expect a robust season.
Importantly, our performance in Q1 is built in to the 'twenty 'twenty four outlook that we issued in a press release earlier. This morning, and then Dennis will go through later.
Our adjusted EBITDA margin for the quarter improved year over year by 180 basis points to 21, 2%, which was driven by our increased focus on cost management.
Todd Magazine: Importantly, our margin expansion would have been even more substantial, but we decided late in the quarter to make additional awareness-building media investments as this initiative continues to achieve its objective of driving brand awareness and brand recognition. With respect to our 2023 revenue guidance, we met expectations of $196 million, which represents 16% growth versus the prior year. Our full-year adjusted EBITDA of $43.2 million, which increased 11.2% versus the prior year, fell below our updated guidance of at least $45 million.
Importantly, our margin expansion would have been even more substantial but we decided late in the quarter to make additional awareness building media investments as this initiative continues to achieve its objective of driving brand awareness and brand recognition.
With respect to our 2023 revenue guidance, we met expectations of $196 million, which represents 16% growth versus the prior year.
Our full year adjusted EBITDA of $43 2 million, which increased 11, 2% versus the prior year fell below our updated guidance of at least $45 million.
Todd Magazine: This shortfall was mostly due to the additional investment in awareness building, which I just referenced. However, we were also anticipating some cost savings in 2024 to accelerate into Q4 2023, which would have put us above our $2.5 million of in-year savings for 2023, but this timing acceleration did not happen. Having recently celebrated my one-year anniversary at Airsculpt, I have come to appreciate even more the impact we have on people's lives. Specifically, the ability to improve self-esteem among people who have had a lifelong battle with excess fat, as well as people who have hit a dead end regarding certain areas of their bodies that can't be addressed by diet, exercise, or even weight loss medications. There is nothing better on planet Earth than Airsculpt for removing stubborn fat and transferring fat to places where people want it.
This shortfall was mostly due to the additional investment in awareness building, which I just referenced.
Wherever we were also anticipating some cost savings in 'twenty 'twenty four to accelerate into Q4, 2023, which would've put us above our $2 $5 million of in year savings for 2023, but this timing acceleration did not happen.
Having recently celebrated my one year anniversary at Air Sculpt I've come to appreciate even more the impact we have on People's lives, specifically the ability to improve self esteem among people who have had a lifelong battle with excess fat as well as people have hit a dead end regarding certain areas or their body.
It can't be addressed by diet exercise or even weight loss medications. There is nothing better on planet Earth and Air School for moving stubborn fat and transferring it to places where people want it.
Todd Magazine: And with a $9 billion TAM, we have only scratched the surface of the huge opportunity that exists. That's why I continue to be extremely optimistic about our future. Just as I did last year, I'd like to share with you my focus areas for 2024, which reflect our learning and our latest thinking. Our first priority is to continue to drive double-digit revenue growth. Like always, we will focus on our de novo openings, an area where we have had a very successful track record.
And with a $9 billion Tam we have only scratched the surface of the huge opportunity that exists. That's why I continue to be extremely optimistic about our future.
Just as I did last year I'd like to share with you my focus areas for 2024, which reflect our learning and our latest thinking.
Our first priority is to continue to drive double digit revenue growth like always we will focus on our de novo openings in area, where we have had a very successful track record.
Todd Magazine: But we will also increase our focus on same-store growth, knowing that we have opportunities to drive productivity across the fleet. Second, we will continue to strengthen our organizational capabilities. We have increased our focus on the broader team of employees in regional offices and across our locations to ensure we have the right structure, talent, and tools necessary to support a larger and more robust fleet of centers. And lastly, we will continue to focus on cost management with an objective of redeploying savings into our growth investments while expanding EBITDA margins. Let me go a little bit deeper on each of these priorities, starting with revenue growth. As previously shared, our work with a third-party real estate analytics company has helped us determine that the runway for Airsculpt locations is in the hundreds, which gives us confidence to continue to increase the number of annual openings.
But we will also increase our focus on same store growth knowing that we have opportunities to drive productivity across the fleet.
Second we will continue to strengthen our organizational capabilities, we have increased our focus on the broader team of employees and regional offices and across our locations to ensure we have the right structure talent and tools necessary to support a larger and more robust fleet of centers.
And lastly, we will continue to focus on cost management with an objective of redeploying savings into our growth investments on expanding EBITDA margins.
Let me go a little bit deeper on each of these priorities starting with revenue growth.
Previously shared our work with a third party real estate analytics company has helped us determine that the runway for air scope locations is in the hundreds which gives us confidence to continue to increase the number of annual openings.
Todd Magazine: That said, we also need to make sure that we have the organizational bandwidth and capability to open more locations each year. As such, we will expand our DeNova program in a thoughtful and measured way. As announced previously, we have increased our DeNova openings to six in 2024. We previously announced Birmingham, Michigan; Deerfield, Illinois; and Kansas City, Kansas. I'm happy to share that we will also open locations in White Plains, New York, and Columbus, Ohio.
That said, we also need to make sure that we have the organizational bandwidth and capability to open more locations each year.
As such we will expand our de Novo program, and a thoughtful and measured way.
As announced previously we have increased our de novo openings to six in 2024, we previously announced Birmingham, Michigan, Deerfield, Illinois, and Kansas City, Kansas I'm happy to share that we will also open locations in White Plains, New York and Columbus, Ohio are six de Novo location will be announced.
Todd Magazine: Our sixth DeNova location will be announced at a later date. It's important to note that our guidance is based on all of these centers opening in the second half of 2024, the timing of which is driven by the additional analytics work we did last year with third-party real estate companies. While we are excited about all these locations, three of which are in new states, I'm particularly excited about our Chicagoland and New York Metro locations.
At a later date.
It's important to note that our guidance is based on all of these centers opening in the second half of 2020 for the timing of which is driven by the additional analytics work. We did last year with the third party real estate company.
While we are excited about all of these locations three of which were new states I'm, particularly excited about our Chicago, Atlanta, and New York Metro locations.
Todd Magazine: Expanding in existing markets represents an evolutionary step in our growth strategy as these centers will give us a tremendous opportunity to leverage scale in these markets, something we have not been able to do with our previous approach of one location per market. We fully expect to take advantage of the awareness building opportunities and the operational efficiency benefits these multi-site markets will provide. Sticking with revenue, let me now turn to same-store performance. As noted earlier, same-store growth will be a key focus area for the company, particularly given the size and maturity of our fleet. A key aspect of this will be our patient acquisition efforts. We have been working on new approaches related to our paid search efforts in order to maximize the return on investment.
Landing in existing markets represents an evolutionary step in our growth strategy. As these centers will give us a tremendous opportunity to leverage scale in these markets something we have not been able to do with our previous approach of one location per market we.
We fully expect to take advantage of the awareness building opportunities and the operational efficiency benefits. These multi site markets will provide.
Sticking with revenue, let me now turn to same store performance as <unk>.
Note. It earlier same store growth will be a key focus area for the company, particularly given the size and maturity of our fleet.
A key aspect of this will be on our patient acquisition efforts, we have been working on a new approaches related to our paid search efforts in order to maximize the return on investment.
Todd Magazine: We are already starting to see an improvement in our total leads, our lead quality, and our console-to-case conversion rate. Let me now turn to my second priority of strengthening organizational capabilities. As shared previously, we are in the throes of transitioning from our legacy systems to an enterprise-wide Salesforce CRM implementation, which will take our sales and marketing processes to a completely new level. Historically, our processes have been very manual, and tracking relevant KPIs has been very challenging.
We are already starting to see an improvement in our total leads our lead quality and our console to case conversion rate.
Yeah.
Let me now turn to my second priority of strengthening organizational capabilities I shared previously we're in the throes of transitioning from our legacy systems to an enterprise wide Salesforce, CRM implementation, which will take our sales and marketing processes to a completely new level.
Historically, our processes have been very manual and tracking relevant kpis has been very challenging salesforce will provide us more real time data and will allow us to better analyze our sales and marketing performance as well as our patient experience all of which will help drive growth.
Todd Magazine: Salesforce will provide us with more real-time data and will allow us to better analyze our sales and marketing performance, as well as our patient experience, all of which will help drive growth. We anticipate this implementation to take the balance of 2024 to complete. In addition to Salesforce, we are focusing on improving talent acquisition and talent development with a goal of increasing employee retention, as well as increasing the percentage of highly seasoned field-level staff. We will do this by building in-house capabilities for talent acquisition, as well as for learning and development.
We anticipate this implementation to take the balance of 'twenty 'twenty four to complete.
In addition to sales force, we are focusing on improving talent acquisition and talent development with a goal of increasing employee retention as well as increasing the percentage of highly seasoned field level staff. We will do this by building in house capabilities for talent acquisition as well as for learning and development.
Todd Magazine: Finally, let me share some thoughts on our cost management priority. Our organization did a good job in 2023 in this area, and we are reiterating our previously shared objective of delivering $5 million in in-year savings for 2024. But we know we need to push for more.
Finally, let me share some thoughts on our cost management priority.
Organizationally did a good job in 2023 in this area and we are reiterating our previously shared objective of delivering 5 million of in year savings for 2024, but we know we need to push for more.
Todd Magazine: One of our most important areas of focus will be on Customer Acquisition Costs, or CAC. As noted previously, we continue to see good outcomes from the investments we made in our Celebrity Program, which has helped increase our brand awareness by 30% over the prior year. The next phase of this effort is to couple the Celebrity Program with a top-of-funnel investment in local media, which can include initiatives such as over-the-top media marketing, also referred to as OTT, as well as radio, billboards, or direct mail, just to name a few.
One of our most important areas of focus will be on customer acquisition cost or CAC. As noted previously we continue to see good outcomes from the investments we made in our celebrity program, which has helped increase our brand awareness by 30% over the prior year.
The next phase of this effort is decoupled to celebrity program with a top of funnel investment in local media, which could include initiatives such as over the top media marketing also referred to as OTT as well as radio Billboards or direct mail just to name a few we.
Todd Magazine: We will be testing this approach in different markets in 2024 with the goal of driving more organic leads and reducing our reliance on paid search. While we are not building in any tax savings in 2024, given the cost we are seeing related to paid search, we believe our top-of-funnel marketing tests will provide valuable learning that will help drive future CAC reductions. We'll keep you posted as this initiative progresses. To summarize, I'm very proud of our performance in 2023 and continue to be bullish on our ability to drive double-digit top and bottom line performance in 2024 and beyond. Now, I will turn the call over to Dennis to provide further details on the quarter and our 2020 plans. Thanks, Todd.
We will be testing this approach in different markets in 2024 with the goal of driving more organic leads and reducing our reliance on paid search.
While we are not building in any tax savings in 2024, given the cost we are seeing related to paid search we believe our top of funnel marketing tests will provide valuable learning that will help drive future cost reductions we will keep you posted as this initiative progresses.
To summarize I'm very proud of our performance in 2023 and continue to be bullish on our ability to drive double digit top and bottom line performance in 2024 and beyond.
Now, let me turn the call over to Dennis to provide further details on the quarter and our 2024 guidance. Thanks.
Thanks, Todd our revenue for the quarter was $47 6, million% to 17% increase over the prior year quarter. Our growth was primarily due to the addition of five de novo centers versus the prior year base as of December 31, 2023, we operated 27 centers versus 22 at the end of the fourth quarter of 2022.
Dennis Dean: Our revenue for the quarter was $47.6 million, a 17% increase over the prior year quarter. Our growth was primarily due to the addition of five DeNovo centers versus the prior year base. As of December 31, 2023, we operated 27 centers versus 22 at the end of the fourth quarter of 2022.
Dennis Dean: Our same store revenue was slightly negative in the quarter. Average revenue per case for the quarter was $12,937, a 6.1% increase over the prior year's quarter. As we have said previously, rates can vary from quarter to quarter, mostly from procedure mix fluctuations, and we expect our rates to range from $12,000 to $13,000. We are pleased that our rates continue to pace on the high end of our expected range, which reflects the fact that our core consumer is in a higher socioeconomic group, which provides us more insulation from some of the economic volatility in the market. Our percentage of patients using financing to pay for procedures was 48% during the quarter, which was consistent with the prior quarter. As a reminder, we received full payment for all procedures up front, and we did not have any recourse related to patients who financed their procedures with third-party vendors.
Our same store revenue was slightly negative in the quarter.
Average revenue per case for the quarter was $12937, a six 1% increase over the prior year's quarter. As we have said previously rates can vary from quarter to quarter, mostly from procedure mix fluctuations and we expect our rates to range from 12 to $13000.
We are pleased that our rates continue to pace on the high end of our expected range, which reflects the fact that our core consumer is at a higher socioeconomic group, which provide us more insulation from some of the economic volatility in the market.
Our percentage of patients using financing to pay for procedures is 48% during the quarter, which was consistent to the prior quarter. As a reminder, we received full payment of all procedures upfront and we did not have any recourse related to patients who finance their procedures with third party vendors.
Dennis Dean: Our cost of services as a percentage of revenue was 37.5 percent versus 38.7 percent in the same period last year. This improvement was a result of certain cost management initiatives that were implemented during the quarter. Our customer acquisition cost for the quarter was approximately $2,600 per case, as compared to $2,300 in the prior year.
Cost of services as a percentage of revenue was 37, 5% versus $38 seven in the same period last year. This improvement was a result of certain cost management initiatives that were implemented during the quarter.
Our customer acquisition cost for the quarter was approximately $2600 per case as compared to 2300 in the prior year.
Dennis Dean: This increase, as Todd mentioned in his remarks, is due to further investments in our brand awareness activities above what we originally forecasted. For clarity, our calculation of customer acquisition costs includes both our advertising and media spend plus the full salaries and commissions of our sales and marketing teams. For the quarter, our adjusted EBITDA was approximately $10.1 million compared to $7.9 million from the prior year period, an increase of 27.9%. As you know, our adjusted EBITDA results now exclude the impact of pre-opening costs for de novo centers in our calculation. This impact was approximately $100,000 in the quarter.
This increase as Todd mentioned in his remarks is due to further investments in our brand awareness activities above what we originally forecasted for clarity our calculation of customer acquisition costs includes both our advertising and media spend plus the full salaries and commissions of our sales and marketing teams.
For the quarter, our adjusted EBITDA was approximately $10 $1 million compared to $7 9 million from the prior year period, an increase of 27, 9%.
As you know our adjusted EBITDA results now exclude the impact of Preopening costs for de Novo centers in our calculation. This impact was approximately $100000 in the quarter.
Dennis Dean: Our pre-opening costs will fluctuate from quarter to quarter based on the number of centers that are in the process of opening. Our adjusted EBITDA margin during the quarter was 21.2%, compared to 19.4% in the prior year's quarter. Much of this increase was from our cost of management initiatives. As Todd pointed out, we were able to achieve $2.5 million of in-year savings, and our 2024 outlook includes an incremental $2.5 million of savings for a total run rate of $5 million. Our adjusted net income per share diluted for the quarter was $0.01 and $0.28 for the full year. From a liquidity standpoint, our cash position as of December 31, 2023, was $10.3 million, and our $5 million revolver remains undrawn. Our gross debt outstanding is now $72.9 million, and our leverage ratio at the end of the quarter, as calculated under our credit agreement, was 1.4 times. Cash flow from operations for the quarter was $4.9 million compared to $6.6 million in the prior year quarter.
Our preopening costs will fluctuate from quarter to quarter based on the number of centers that are in the process of opening.
Our adjusted EBITDA margin during the quarter was 21, 2% compared to 19, 4% in the prior year's quarter.
Much of this increase was from our cost management initiatives.
As Todd pointed out we were able to achieve the $2 $5 million of in year savings and our 2024 outlook includes an incremental $2 5 million of savings for a total run rate of $5 million.
Our adjusted net income per share diluted for the quarter was one cent and 28 <unk> for the full year.
From a liquidity standpoint, our cash position as of December 31, 2023 was $10 $3 million and our $5 million revolver remains undrawn. Our gross debt outstanding is now $72 9 million and our leverage ratio at the end of the quarter as calculated under our credit agreement was one four times.
Cash flow from operations for the quarter was $4 9 million compared to $6 6 million in the prior year quarter.
Dennis Dean: The decrease related to the timing of working capital payments primarily related to lease deposits on upcoming DeNovo projects. Also, during the quarter, we invested $1.8 million, which was mostly related to the new center opening. For the quarter, our cash flow from operations to adjusted EBITDA conversion ratio was 48.2%, which was slightly below our expectations and primarily due to the leased deposits previously mentioned on our upcoming de novo centers. Our 2024 Revenue Guidance of approximately $220 million represents a 12% increase over 2023 and contemplates the trends that Todd noted in his comments. We expect contributions from our six DeNovo centers to drive the magnitude of the year-over-year revenue growth. We anticipate flat to slightly positive full-year growth in our same-store sales, while revenue from our DeNovos will be weighted to the back half of the year, with three centers opening in the third quarter and three in the fourth quarter.
The decrease related to timing of working capital payments, primarily related to lease deposits on upcoming de novo projects.
Also during the quarter, we invested $1 $8 million, which was mostly related to new center openings for the quarter, our cash flow from operations to adjusted EBITDA conversion ratio was 48, 2%, which was slightly below our expectations and primarily due to the least deposits previously mentioned on our upcoming de Novo centers.
Yeah.
Our 2020 for revenue guidance of approximately $220 million represents a 12% increase over 2023 and contemplates the trends that Todd noted in his comments we.
We expect contributions from our six de Novo centers to drive the magnitude of the year over year revenue growth we.
We anticipate flat to slightly positive full year growth in our same store sales while revenue from our de novo's will be weighted to the back half of the year with three centers opening in the third quarter and three in the fourth quarter.
Dennis Dean: Our adjusted EBITDA guidance for 2024 is approximately $50 million, which represents year-over-year growth of 15.6% and margins of 22.7%. Due to the DeNovos coming on later in the year, the 2024 DeNovos will have a negative impact on our margins of approximately 1.5%. Additionally, included in our outlook is approximately $4 million in de novo pre-opening costs. With that, I'd like to turn the call over to the Operator for some questions. Operator?
Our adjusted EBITDA guidance for 2024 is approximately $50 million, which represents year over year growth of 15, 6% and margins of 22, 7%.
Due to the de novo's coming on later in the year. The 2024 de Novo's will have a negative impact to our margins of approximately one 5%.
Additionally included in our outlook is approximately $4 million in de Novo preopening costs with that I'd like to turn the call over to the operator for some questions operator.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. Confirmations on 1Decay Airline are, or you may press star two if you'd like to remove your question.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Joshua Richard Raskin: For participants using speaker equipment, it may be necessary to pick up, One moment, please, while we poll for questions. Our first question is from Josh Raskin with Nephron Research. Please proceed with your, Hi, thanks. Good morning. I guess I'll just have to start with any response to the short report that we saw last. Hey Josh, this is Todd. How are you doing?
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while I pull for questions.
Thank you. Our first question is from Josh Raskin with Nephron Research. Please proceed with your question.
Hi, Thanks, Good morning, I guess I'll just start with any response to that short report that we saw last week.
Yeah, Hey, Josh This is Todd how are you doing.
Todd Magazine: In our view, the short seller report contains multiple inaccuracies and misleading information, and we advise shareholders to consult the company's public filings rather than third parties for accurate information about the company. With that said, let me share three things. First, we take the safety and well-being of our patients seriously, and we're proud of our safety track record. Second, our ability to achieve positive outcomes for our patients is directly related to the professionalism of our staff, and in particular, our surgeons. And third, our team strives to be transparent and honest in how we market our business, and they consistently work hard to earn the trust of our patients. We do not intend to address the allegations in this report any further.
In our view the short seller report contains multiple inaccuracies and misleading information.
And we advised shareholders to consult the companys public filings rather than third parties for accurate information about the company with that said, let me share three things first we take the safety and wellbeing of our patient seriously and we're proud of our safety track record.
Second our ability to achieve positive outcomes for our patients is directly related to the professionalism of our staff and in particular, our surgeons and third our teams strive to be transparent and honest in how we market our business and they consistently work hard to earn the trust of our patients.
We do not intend to address the allegations in this report any further.
Joshua Richard Raskin: If you have another question, Josh, we'd be open to taking that question. Otherwise, we'll go ahead and move on to another call. Now, I appreciate that.
If you have another question, Josh we'd be open to taking that question otherwise, we'll go ahead and move onto another color.
I appreciate that I'll ask a business question and then I guess on the case any actual part of the cases came in a little bit better than we expected the rate was a little bit lower I know up 6% on a year over year basis. Just curious is there any sort of seasonality just after particularly strong quarters and <unk> was there any change in discounting or sort of anything.
Joshua Richard Raskin: I'll ask a business question then. I guess on the case, you know, in the actual quarter, the cases came in a little bit better than we expected. The rate was a little bit lower, I know, up 6% on a year-over-year basis. So I'm just curious, is there any sort of seasonality just, you know, after particularly strong quarters in 2Q and 3Q? Was there any change in discounting or sort of anything like that that impacted the quarter? Josh, this is Dennis.
Like that that impacted the quarter.
Okay.
Josh It's Dennis no nothing really from that standpoint, I mean, we are very comfortable with kind of where our rates landed we were pretty close to 13000 for the quarter and for the full year. So.
Dennis Dean: No, really nothing from that standpoint. I mean, we were very, you know, comfortable with kind of where our rates landed. We were pretty close to $13,000 for the quarter and for the full year. So, rates held up very consistently from quarter to quarter. There wasn't really any kind of seasonal impact as it relates to that.
Rates held up very consistent from quarter to quarter, there wasn't really any kind of seasonal impact as it relates to to that again, we kind of called out in our remarks that we still target a consumer that's in a higher socio economic class and so I think that helped us kind of keep our rates where they were and.
Todd Magazine: Again, we kind of called out in the remarks that, you know, we still target a consumer that's in a higher, you know, socioeconomic class, and so I think that helped us kind of keep our rates where they were. And Josh, just to add to that, also, we've talked about this kind of bundling, you know, kind of strategy to help us kind of push up the ASP, and that continues to be a lever that we use, and it is definitely working, giving people, you know, more discounts as they do more procedures, and that's clearly been, I think, one of the strategies that's gotten us to that higher end of the range in And I need to sneak in one more, just for clarification.
And Josh just to add on that also you always talked about this this kind of bundling kind of strategy to help us kind of push up the ASP and that continues to be our labor.
We use and it is definitely working giving people more discount as they do more procedures and that's clearly been I think one of the strategies that has gotten us to that higher end of the range and that 13000 ASP range.
And then I can just sneak in one more just a clarification just you talked about these costs that came in late in the quarter for brand awareness I'm. Just curious if you well one if you could give us some specifics on that in two maybe talk a little bit about the decision process. There you know I was sort of as you were tracking towards your full year guidance and then you know.
Joshua Richard Raskin: Just, you know, you talked about these costs that came in late in the quarter for brand awareness. I'm just curious if you and Joshua Raskin, Airsculpt Tech. Simeon Gutman, Joshua Raskin, Airsculpt Tech, Thanks for the question.
Accelerating cost in the quarter I Didnt know if there was an ability to defer that or if there was something that had to be done.
Todd Magazine: So when we reiterated guidance early in November, we actually were seeing revenue come in even higher than where we netted out. And so really, the strength of what we were seeing in terms of demand is what gave us the desire to go ahead and make that additional investment. As we noted, some of that demand and some of that performance softened a little bit as we exited the quarter, but we decided to keep that investment. It was really an awareness-building investment, which for us is obviously very important and more of a long-term benefit for us. So we decided to keep that investment rather than pull back elsewhere.
Yes. Thanks for the question. So when we reiterated guidance early in November we actually were seeing revenue come in even higher than ultimately, where we netted out and so really the strength of what we were seeing in terms of demand is what gave us the desire to go ahead and make that additional investment.
We noted.
Some of that.
Demand in some of that performance.
Performance softened a little bit as we exited the quarter, but we decided to keep that investment.
It was in really awareness building investment, which for US is obviously very important in more of a long term benefit for us. So we decided to keep that investment rather than pulling back elsewhere. The other thing in my remarks, I would tell you that there was some cost savings that we thought we were going to be able to pull in from Q1 into Q.
John Ransom: The other thing in my remarks, I would tell you that there were some cost savings that we thought we were going to be able to pull in from Q1 into Q4, and that would actually have put us over the $2.5 million that we had committed to for full year 2023, but that didn't materialize. So those were really the two components of that, and it was really a strategic decision at the end of the year whether we make some cuts just to get to our number, or do we leave the investment in awareness-building, which we believe is the right long-term decision for the business. Hi, Our next question is from John Ransom with Raymond James. Thanks for tuning in. Hey, good morning. This one's for Dennis.
Four.
And that would actually put us over the $2 5 million.
We had committed to for full year 2023, but that didnt accelerate so so those were really the two components of that and it was really a strategic decision at the end of the year, whether we make some cuts just to get to a number or do we leave the investment in awareness building, which we believe is the right.
Long term decision for the business.
Hi, Thanks for all the questions.
Our next question is from John Ransom with Raymond James. Please proceed with your question.
Hey, good morning.
For Dennis.
Dennis Dean: So, you know, the company is a bit behind its IPO forecast, particularly same store revenue growth, but can you point out any other variances in the model? I'm taking kind of a longer-term view here, but just variants of the model versus your original forecast. Yeah, well, you did call out the same store.
So you know the company is.
A bit behind it.
Oh forecast, particularly same store revenue growth, but just.
Can you point out any other variances in the model.
You know over and I'm, taking a kind of a longer term view here, but just variance in the model versus your original forecast.
Yeah, well you called out you did call out the same store same store has been a little bit softer than what we had originally put in the IPO model a couple of years ago, and I would say probably the second area. John is we have made significant investments in our in our corporate executive teams are kind of building infrastructure around the <unk>.
Dennis Dean: The same store has been a little bit softer than what we had originally put in the IPO model a couple of years ago. And I would say probably the second area, John, is that we have made significant investments in our corporate executive teams, kind of building infrastructure around the business. And I think that's probably come in a little bit higher than the original model.
<unk> and I think that's probably come in.
Little bit higher than the original model, then and I think the last area is in the area of the brand awareness, we kind of kept sort of a consistent sort of percent of revenue.
Dennis Dean: And I think the last area is in the area of brand awareness. We kind of kept a consistent sort of percent of revenue kind of model, if you will, as it relates to how we looked at advertising spend. And as we've gotten more and more into digging into it, it's more of a we've got to look at brand awareness investments, if you will. And I think, if I were to kind of layer them out there, it'd probably be the brand awareness is higher from a marketing spend. Second, there's a little bit of softness from the same store that was in the model.
Kind of model, if you will as it relates to how we looked at advertising spend and as we've gotten more and more digging more into it. It's more of a we've got to look at brand awareness investments. If you will and I think probably if I were to kind of layer them out there would probably be the brand awareness is higher from a marketing spend second would be theirs.
A little bit of softness from the same store that was in the model and then lastly would be the corporate aspect of it.
Todd Magazine: And then lastly, there would be the corporate aspect of it. And, secondly, it strikes me that the new markets you're going into... secondary.
And just secondly, it strikes me that the new markets, you're going into or I.
I guess secondary markets.
Todd Magazine: Do you have any concerns like, you know, some of these markets you burned through the first group of patients, and then there's just not enough growth or population to support, you know, long-term growth? Yeah, I mean, first of all, I'm not sure I would consider what definition of primary or secondary. I mean, we're in many markets today. We opened in Raleigh last year, Austin last year, and San Jose. These are performing, as I said in my prepared remarks, well above our expectations. So, you know, the markets that we're opening, we feel very, very good about. And, you know, as I noted, I'm particularly excited about the markets where we're going with these second locations because, you know, we're a brand that today really only has one location in any given market. And the ability to have any kind of critical mass in that market from, you know, operationally and awareness building, etc., etc., is very limited. So it's going to give us an opportunity to really, we think, you know, command a lot bigger share of voice. And obviously, a lot bigger awareness in that market, and that'll help.
Do you have any concern like some of these markets you burn through the first group of patients and then Theres just not enough growth there.
Population to support long term growth.
Yes.
First of all I'm not sure I would consider.
You know what definition of primary secondary I mean, where in many markets today I mean, we opened in Raleigh last year Austin last year San Jose.
Those are performing as I said in my prepared remarks, well above our expectations. So.
The markets that we're opening we felt very very good about.
As I noted I'm, particularly.
I'm excited about the markets, where we're going with the second locations because we're a brand that today really only has one location in any given market and the ability to have any kind of critical mass in that market from operationally and awareness building et cetera et cetera is very limited so it's going to give us an opportunity.
<unk> to really we think.
Command, a lot bigger share of voice and obviously a lot bigger awareness in that market that will help but we have a lot of runway of markets and I mentioned, Columbus, Ohio, and Birmingham, Michigan. I mean, these are very very good and robust markets that we feel very good about it and theres. Many many more markets on the docket to come that looked like that as well.
Todd Magazine: But we have a lot of runway for markets, and I mentioned Columbus, Ohio, and Birmingham, Michigan. I mean, these are very, very good and robust markets that we feel very good about. And there are many, many more markets on the docket to come that look like that as well.
Todd Magazine: So right now, we feel very good about it. And, you know, as we stated before, our de novo performance has been very, very strong. So, we continue to fuel that pump hard. And we're just going to get smarter now that we have more analytics to pair with all of the work that the team has done historically.
Well so right now we feel very good about it.
As we stated before our de Novo performance has been very very strong so.
We continue to fuel that pump hard and we're just going to only get smarter now that we have more analytics to pair with all of the work that the team has done historically.
Todd Magazine: Okay, and then lastly, I'm not going to get into the short report, but I'd be curious. Do you guys have KPIs around for more information? Thank you. Simeon Gutman, Joshua Raskin, Airsculpt Tech, over the past couple of years, and is there any work to be done?
Okay, and then lastly, like I am not going to get into the short report, but I'd be curious.
Sure you guys have kpis around.
Or complication rates.
Maybe after the bad complaints about lack of follow up could you just you get a high level tell us how those have trended over the past couple of years and is there any work to be done there.
Todd Magazine: Look, I don't want to get into kind of the short report and kind of the back and forth. You know, we can take some of the more detailed questions offline if you'd like. So you know, as we stated before, we just think it's best to kind of leave it at that and not give it any more airtime. We just don't think it has much credence given all the inaccuracies and the misleading nature of the information.
Look I don't want to get into kind of the short report and kind of the back and forth.
We can take some of the more detailed questions offline if you'd like.
So you know as.
As we stated before we just think it's best to kind of leave it at that.
<unk> not given any more airtime, we just don't think it's up.
Has much credence given all the inaccuracy is misleading nature of the information.
Operator: Our next question is from Corinne Wolfmeyer with Piper. Please proceed, dear. Hi, good morning. This is Sarah from Korean. Just one question for us today on pricing: what is your willingness to take further pricing in the near to intermediate term to drive comp? And then have you done any work on what those levels would start to discourage potential patients?
Okay.
Great.
Our next question is from Karen Walkman with Piper Sandler. Please proceed with your question.
Hi, Good morning. This is Sarah on for Anna.
Just one for us today on pricing what is your willingness to take further pricing in the near to intermediate term to drive comp look like and then have you done any work on what those levels.
If those would start to discourage potential patients.
Todd Magazine: Yeah, thanks for the question. Pricing is somewhat complicated when you say take pricing, you know, unlike a traditional retailer where you have a proposition or product that you're selling and you have the opportunity to take pricing, because of the bespoke nature of our procedure and the fact that every person who walks in the door, you know, obviously has different needs in terms of what we're removing or transferring and the number of body parts that they're doing. So, pricing, straight pricing, is not as linear as it might be in other kinds of retail businesses.
Yeah. Thanks for the question pricing.
It's a somewhat complicated when you say take pricing you know unlike a traditional retailer where you have a.
A proposition of a product that you're selling and you have the opportunity to take pricing because of the bespoke nature of our procedure and the fact that every person who walks in the door.
Obviously has different needs in terms of what we're removing or transferring.
The number of body parts of their doing so pricing straight pricing is not as linear as it might be in other retail businesses. All that being said, we do believe at some point that there might be opportunity for us there just given the kind of uncertainty of the economic environment and everything that's going on in the marketplace. We think right now.
Todd Magazine: All that being said, we do believe that at some point, there might be opportunity for us there, just given the kind of uncertainty of the economic environment and everything that's going on in the marketplace. We think right now it's best for us to continue down the path we're going on, but it's certainly something that we discuss and talk about, and we think, you know, particularly given the quality of our procedure and the nature of the consumer who we're going after, we believe there probably is some opportunity there, but it isn't quite as linear as you would think in a retail business. And again, I think at some point, you know, we may choose to do something, but right now, I think we're being measured by how we think about RASP.
It's best for Us to continue down the path were going on but it's certainly something that we we discussed and talked about and we think particularly given.
The quality of our procedure and the nature of the consumer who we're going after we believe there probably is some opportunity there, but it isn't a.
Kind of quite as linear as you would think in our retail business and again I think at some point.
We may choose to do something but right now I think we're being measured in how we think about our asps. So that's kind of how we're thinking about it right now.
Todd Magazine: So, that's kind of how we're thinking about it right now. Okay, very helpful. Thank you. Thank you. There are no further questions. I'll hand the floor back over to Todd Magazine for any closing remarks. Well, thanks everybody for your time today, and we look forward to speaking with you in the near future. Have a great Tuesday afternoon. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Okay very helpful. Thank you.
Oh.
Thank you there are no further questions at this time I'll hand, the floor back over to Todd magazine for any closing comments.
Yeah.
Well thanks, everybody for your time today, and we look forward to speaking with you in the near future have a great Tuesday afternoon.
Yeah.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.