Q1 2024 AirSculpt Technologies Inc Earnings Call
Okay.
Operator: Hello and welcome to the Airsculpt Technologies Inc. first quarter 2024 earnings call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question 2 at any time by pressing star 1 on your telephone. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Dennis Dean, Chief Financial Officer. Please go ahead.
Speaker Change: Hello, and welcome to the Air Sculpt Technologies, Inc. First quarter 'twenty 'twenty four earnings call. If I didn't watch it require operator assistance. Please press star zero on your telephone keypad.
Speaker Change: Question and answer session will follow the formal presentation. He gave you place into questions you at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: My pleasure to turn the call over to Dennis <unk> Chief Financial Officer. Please go ahead.
Dennis Dean: Good morning, everyone, and thanks for joining us to discuss Airsculpt Technology's results for the first quarter. Joining me on the call today is the company's Founder and Executive Chairman, Dr. Aaron Rollins, and Chief Executive Officer, Todd Magazine.
Dennis: Morning, everyone and thanks for joining us to discuss air Sculpt Technologies' results for the first quarter.
Dennis: Joining me on the call today is the company's founder and executive Chairman, Dr. Ann Rhoads, 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 feature expectations regarding financial results and guidance market opportunities and our growth.
Dennis Dean: 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.
Dennis: 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.
Dennis: All of which can be found on our website at investors Dot elite body Sculpsure dotcom.
Dennis Dean: EliteBodySculpture.com. 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-Q, which will also be available on our website. With that, I'll turn the call over to Todd.
Dennis: 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.
Dennis: 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-Q, which will also be available on our website with that I'll turn the call over to <unk>.
Dennis: Todd.
Todd Magazine: Thanks, Dennis. Good morning, everyone, and thank you for joining the call. We delivered approximately 4% revenue growth in the quarter versus the prior year, which was driven primarily by contributions from the DeNovo Centers Open in 2023. These centers continue to outperform our internal metrics. However, we did experience some softness in our same-store centers, which was related to temporary macroeconomic headwinds that affected a portion of our customer base that tends to be more price sensitive.
Todd Magazine: Thanks, Dan Good morning, everyone and thank you for joining the call.
Todd Magazine: We delivered approximately 4% revenue growth in the quarter versus the prior year, which was driven primarily by contributions from the de Novo centers opened in 2023.
Todd Magazine: These centers continue to outperform our internal metrics.
Todd Magazine: However, we did experience some softness in our same store centers, which was related to temporary macro economic headwinds, which affected a portion of our customer base that tends to be more price sensitive the challenges we are experiencing.
Todd Magazine: The challenges we are experiencing are consistent with those highlighted by others in the aesthetic and high-end consumer retail space. As we noted on our last call, we saw some isolated softness exiting 2023, which carried into the first quarter. Our revenues picked up as a result of our typical seasonal pattern, but the degree of the seasonal increase has not been up to the level we have seen in prior years. This drove overall same-store revenue down approximately 10% during the quarter.
Todd Magazine: Assistant with those highlighted by others in your stomach and high end consumer retail spaces.
Todd Magazine: As we noted on our last call we saw some isolated softness exiting 2023, which carried into the first quarter our.
Todd Magazine: Our revenues are picked up as a result of our typical seasonal pattern, but the degree of the seasonal increase has not been up to the level. We have seen in prior years. This drove overall same store revenue down approximately 10% during the quarter.
Todd Magazine: Our Q1 Adjusted EBITDA was $7.3 million, which is a decline from the prior year period. As we mentioned on our last call, we anticipated the EBITDA decline both due to recent revenue trends as well as higher SG&A. The higher SG&A spending was a result of increases in paid search costs, mostly due to increased competitive spend, as well as our higher investment in customer awareness. As we are now in the early part of Q2, which is the height of our season, we are still tracking behind our internal revenue projections. As a result, we expect our year-over-year revenues for the quarter to be somewhat flat or slightly below the prior year.
Todd Magazine: Our Q1, adjusted EBITDA was $7 3 million, which was a decline from the prior year period as we mentioned on our last call. We anticipated EBITDA declined both due to recent revenue trends as well as higher SG&A spending.
Todd Magazine: The higher SG&A spending was a result of increases in paid search costs, mostly due to increased competitive spend as well as our higher investment in customer awareness building.
As we are now in the early part of Q2, which is the high end of our season, we're still tracking behind our internal revenue projections. As a result, we expect our year over year revenues for the quarter to be somewhat flat or slightly below prior year.
Todd Magazine: Despite our recent trends, we are not making changes to our guidance at this time. That's because we are cautiously optimistic that the trends will improve in the latter part of our season and into the second half of the year. This optimism is related to one, our significant investment in customer acquisition, to changes we've made to our medium, three optimizations we've made to performance marketing, and four, continued outperformance of our 2023 DeNovo class. And five, our confidence in the 2024 DeNovo.
Despite our recent trends, we're not making changes to our guidance at this time.
Todd Magazine: That's because we are cautiously optimistic that the trends will improve in the latter part of our season.
To the second half of the year.
Todd Magazine: This optimism is related to one our significant investment in customer acquisition marketing.
Todd Magazine: Two changes we've made to our media mix.
Todd Magazine: Three optimizations, we've made to performance marketing.
Todd Magazine: For continued outperformance of our 2023 de Novo class and five our confidence in the 2024.
Todd Magazine: Let me double click on our marketing and de novo app. We have seen some very promising improvements to our lead generation as a result of some changes we made to our media mix. This is driving a higher percentage of organic search terms. These leads have high intent and are lower in cost compared to paid services. But given the length of time that it takes to convert leads to actual procedures, these improvements are only now starting to impact our actual procedure volume.
Todd Magazine: Let me double click on our marketing and de Novo efforts.
Todd Magazine: We have seen some very promising improvements toward lead generation as a result of some changes we made to our media mix.
Todd Magazine: This is driving a higher percentage of organic search traffic.
Todd Magazine: We each have higher or lower in cost compared to paid search.
Todd Magazine: Given the length of time that it takes to convert leads to an actual procedure. These improvements are only now starting to impact our actual procedure volume.
Todd Magazine: We have also evolved our celebrity partnership approach to provide a more consistent stream of relevant earned media impressions. Most recently, we worked with Kristen Dowdy, a podcast host, entrepreneur, and star of two Bravo hit shows, The Valley and Vanderpump Rules. Kristen did Stomach Airsculpt, which drove over 3.4 billion earned media impressions and contributed to year-on-year growth in direct and organic traffic to our website. In addition to garnering new leads, celebrity testimonials have also proven to be a strong lever to re-engage and convert existing ones.
Todd Magazine: We have also evolved our celebrity partnership approach to provide a more consistent stream of relevant earned media impressions. Most recently, we worked with Christian dowdy.
Todd Magazine: Our podcast host entrepreneur and star of two Bravo hit shows the valley and Vanda punk rules.
Todd Magazine: Christian good stomach air sculpt, which drove over $3 4 billion earned media impressions and contributor to year on year growth in direct and organic traffic to our website.
Todd Magazine: In addition to garnering new leagues celebrity testimonials have also proven to be a strong lever to reengage and convert existing leads.
Todd Magazine: As for our 2024 DeNovos, we remain on track to open six locations, with four openings projected in Q3, the first of which is Kansas City, Kansas. We remain highly optimistic about these locations, given the improved analytics work we have done on de novos in the last year. Finally, we continue to focus heavily on our cost management. We exited the year with a $5 million run rate in cost savings and have identified further opportunities to achieve even greater efficiency.
Todd Magazine: As far as 2024 de Novo's, we remain on track to open six locations with four openings projected in Q3, the first of which is Kansas City, Kansas, We remain highly optimistic about these locations given the improved analytics work, we have done on de novo's them last year.
Finally, we continue to focus heavily on our cost management efforts, we exited the year with a $5 million run rate in cost savings and have identified further opportunities to achieve even greater efficiencies.
Todd Magazine: We have and will continue to use these savings to further support our customer awareness strategies for the remainder of the year. In summary, we remain focused on the longer-term success of the overall business and are prudently investing in this outlook. We are closely monitoring our performance and will continue to build the Airsculpt brand, open new centers, and enhance our profitability. Now, I'd like to turn the call back to Dennis to provide further details on the quarter. Dennis?
We have and will continue to use these savings to further support our customer awareness strategies for the remainder of the year.
Todd Magazine: In summary, we remain focused on the longer term success of the overall business.
Todd Magazine: Prudently investing in this outlook, we are closely monitoring our performance and will continue to build the <unk> brand opening new centers and enhance our profitability.
Todd Magazine: I'd like to turn the call back to Dennis to provide further details on the quarter.
Todd Magazine: Yes.
Dennis Dean: Thanks, Todd. Our revenue for the quarter was $47.6 million, a 3.9% increase over the prior year quarter. Our growth was primarily due to the contribution of new DeNovo centers versus the prior year base. As of March 31st, 2024, we operated 27 centers versus 23 at the end of the first quarter of 2023.
Dennis: Thanks, Todd our revenue for the quarter was $47 6 million at three 9% increase over the prior year quarter. Our growth was primarily due to the contribution of new de novo centers versus the prior year base.
Dennis: As of March 31, 2024, we operated 27 centers versus 23 at the end of the first quarter of 2023.
Dennis Dean: Our same-store revenue was down 9.8% in the quarter. As Todd mentioned, we attributed the softness to weaker-than-expected performance across the broader aesthetics and consumer retail landscape, particularly related to customers that are more price-sensitive. While we are seeing similar trends in the second quarter, we expect to see some improvement as we move through our later seasonal months and into the second half of 2024. Our average revenue per case for the quarter was $12,712, a 1% increase over the prior year's quarter, and our percentage of patients using financing to pay for procedures was approximately 50%, which is consistent with recent quarters. As a reminder, we received full payment for all procedures up front, and we do not have any recourse related to patients who financed their procedures with third-party vendors.
Dennis: Our same store revenue was down nine 8% in the quarter as Todd mentioned, we attributed the softness to weaker than expected performance across the broader aesthetics and consumer retail landscape, particularly related to customers that are more price sensitive.
Dennis: While we are seeing similar trends in the second quarter, we expect to see some improvement as we move through our later seasonal months and into the second half of 2024.
Dennis: Our average revenue per case for the quarter was 12712.
Dennis: A 1% increase over the prior year's quarter, and our percentage of patients using financing to pay for procedures was approximately 50%, which is consistent with recent quarters. As a reminder, we received full payment of all procedures upfront.
Have any recourse related to patients being financed their procedures with third party vendors.
Dennis Dean: Our cost of service as a percentage of revenue was 37.9% versus 39.3% in the same period last year. This improvement was the result of our cost management initiatives, which continue to be a focus for us. As a reminder, we were able to achieve $2.5 million of actual savings in 2023, and our current 2024 outlook includes an incremental $2.5 million of savings for a total of $5 million. And we see additional opportunities to further increase our savings in the second half of 2024.
Dennis: Our cost of service as a percentage of revenue was 37, 9% versus 39, 3% in the same period last year.
This improvement was the result of our cost management initiatives, which continue to be a focus for us as a reminder, we were able to achieve $2 $5 million of actual savings in 2023 and.
Dennis: And our current 2024 outlook includes an incremental $2 $5 million of savings for a total of $5 million and we see additional.
Dennis: <unk> to further increase our savings in the second half of 2024.
Dennis Dean: Our customer acquisition cost for the quarter was $2,990 per case, as compared to $2,360 in the prior year. This increase, as Todd mentioned in his remarks, is due to further investments in our brand awareness activities. We expect our CAC to stay at an elevated level in the second quarter as we expand these initiatives.
Dennis: Our customer acquisition cost for the quarter was 2990 per case as compared to 2000 and 360 in the prior year.
Dennis: This increase as Todd mentioned in his remarks, it's due to further investments in our brand awareness activities.
Dennis: We expect our CAC to stay at an elevated level in the second quarter as we expand these initiatives.
Dennis Dean: For the first quarter, our adjusted EBITDA was approximately $7.3 million compared to $9.5 million from the prior year period, a decrease of 22.4 percent. Our adjusted EBITDA margin during the quarter was 15.4% compared to 20.6% in the prior year quarter. This decrease was primarily associated with our investment in new customer acquisition and brand awareness initiatives. Our adjusted diluted net income per share for the quarter was $0.03. Our cash position, as of March 31st, 2024, remained healthy at $11 million, and our $5 million revolver remains undrawn.
Dennis: For the first quarter, our adjusted EBITDA was approximately $7 3 million compared to $9 5 million from the prior year period, a decrease of 22, 4% or.
Dennis: Our adjusted EBITDA margin during the quarter was 15, 4% compared to 26% in the prior year quarter.
Dennis: This decrease was primarily associated with our investment in new customer acquisition and brand awareness initiatives.
Dennis: Our adjusted diluted net income per share for the quarter was three cents.
Dennis: Our cash position as of March 31, 'twenty 'twenty four remain healthy at $11 million and our $5 million revolver remains undrawn. Our gross debt outstanding is now $71.2 million and our leverage ratio at the end of the quarter as calculated under our credit agreement was 1.47 times.
Dennis Dean: Our gross debt outstanding is now $71.2 million, and our leverage ratio at the end of the quarter, as calculated under our credit agreement, was 1.47 times. Cash flow from operations for the quarter was $3.4 million compared to $6.2 million in the prior year quarter. The decrease is primarily due to a decline in adjusted EBITDA.
Dennis: Cash flow from operations for the quarter was $3 4 million compared to $6 2 million in the prior year quarter.
Dennis: The decrease is primarily due to the decline in adjusted EBITDA.
Operator: Also, during the quarter, we invested $1.6 million, which was mostly related to new center openings. For the quarter, our cash flow from operations to adjusted EBITDA conversion ratio was 46%, which was in line with our expectation for the quarter. As Todd mentioned in his comments, our first quarter was softer than we expected, and the second quarter is seeing similar trends. However, we are seeing positive signs in lead volumes from our recent marketing initiatives.
Dennis: Also during the quarter, we invested $1 6 million, which was mostly related to new center openings for the quarter, our cash flow from operations to adjusted EBITDA conversion ratio was 46%.
Dennis: Which was in line with our expectation for the quarter.
Dennis: As Todd mentioned in his comments, our first quarter was softer than we expected in the second quarter of seeing similar trends. However, we are seeing positive signs in lead volumes from our recent marketing initiatives. Furthermore, we continue to see over performance and recent de Novo centers and expect strong openings and the new fleet of centers that will come online in the second half of the year.
Operator: Furthermore, we continue to see overperformance in recent de novo centers and expect strong openings in the new fleet of centers that will come online in the second half of the year. As a result, we are maintaining our full-year outlook of revenues of approximately $220 million and adjusted EBITDA of approximately $50 million. With that, I'd like to turn the call over to the operator for some questions. Operator?
Dennis: As a result, we are maintaining our full year outlook of revenues of approximately $220 million and adjusted EBITDA of approximately $50 million 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 be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. Our first question today is coming from Josh Raskin from Neffern Research. Your line is now live.
Thank you well now be conducting a question and answer session, if you'd like to be placed into the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Operator: Press Star two if he likes to move your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing star one. Our first question today is coming from Josh Raskin from different research. Your line is now live.
Joshua Richard Raskin: Hi, thanks. Good morning.
Joshua Richard Raskin: Hi, Thanks. Good morning, So you know I understand why you seasonally lower and you talked about some of the pressures, but I guess you know you look at the full year guidance EBITDA you know implies once you meet with that only 15% of the full year. Historically first quarter has been closer to 22% and then I hear sort of you know assuming cautious optimism in guidance I guess.
Joshua Richard Raskin: So, you know, I understand 1Q is seasonally lower, and you talked about some of the pressures, but I guess, you know, if you look at the full-year guidance EBITDA, it implies 1Q EBITDA is only 15% of the full year. Historically, the first quarter has been closer to 22%. And then I hear sort of, you know, assuming cautious optimism and guidance. I guess, why are you assuming cautious optimism if we've seen softness in procedures, you know, for the last two quarters? And I guess what guidance would look like if that cautious optimism doesn't come through, right? If you sort of just run right where we are.
Joshua Richard Raskin: Why are you assuming cautious optimism if we'd seen softness and in procedures you know for the last few quarters and I guess, what does guidance look like.
Joshua Richard Raskin: That cautious optimism doesn't come through right. If you sort of just run rate, where we are in Q2.
Dennis Dean: Hey Josh, it's Dennis. So yeah, one of the optimistic aspects of what we're looking at really, really hinges on the Marketing Endeavors that we've been implementing during the quarter. It takes a while for leads to convert to cases, and we're seeing a fairly sizable uptick in our lead volumes as a result. So that gives us one portion of optimism. Our 2023 DeNovos are significantly outperforming where we had expected them to perform, so we're very excited about that, and we're basically using a very similar plan for the 2024 deals that are coming online.
Dennis: Hey, Josh it's Dennis.
Dennis: So yeah, one of the optimistic aspects of what we're looking at really really hinges on marketing endeavors that we've.
Dennis: Been implementing during the quarter it's.
Dennis: Again, it takes a while for leads to convert the cases and we're seeing a fairly sizable uptick in our lead volumes as a result, so that that gives us one portion about anthem.
Dennis: Our 2023 de novo's are significantly outperforming where we had.
Dennis: Expected them to perform so we're very excited about that and we're basically using a very similar plan for the 2024 deals that are coming online do you remember are probably remember a year or so ago, we kind of started implementing sort of what we call a quick ramp from our de novo's and I believe that's what's accelerating these things to to open up.
Dennis Dean: As you remember, or probably remember, a year or so ago, we kind of started implementing sort of what we call a quick ramp from our DeNovos, and I believe that's what's accelerating these things to open up and perform better than we had originally expected. So those three things, the 2024 class all coming in the second half of the year. I mean, years.
Dennis: And perform better than we had.
Originally expected so those three things the 'twenty 'twenty four class all coming on in the second half of the year I mean, that's obviously going to drive.
Dennis: Both differences from what we've seen in previous years.
Dennis Dean: And I guess, Dennis, embedded in that, what are your assumptions for same-store case growth, maybe starting just in 2Q but even for the full year?
Speaker Change: And I guess, that's embedded in that what are your assumptions for same store case growth, maybe starting just into Q, but even for the full year.
Dennis Dean: Sure, sure. So what we're looking at from that standpoint is kind of seeing a consistent case aspect for the second quarter. High single-digit declines, you know, somewhat similar to where we finished the first quarter. We start to see that, you know, improving in the third quarter, getting close to flat, and then getting toward the mid, you know, mid single digits in the fourth quarter. One of the things, if you recall, last, you know, in the fourth quarter of last year, we had a couple of centers that hit a pretty large hiccup in the process.
Speaker Change: Sure sure. So what we're looking at from that standpoint is kind of saying a consistent case.
Speaker Change: Case aspect for the second quarter, a high single digit decline somewhat similar to where we finished the first quarter.
Speaker Change: We start to see that improving in the third quarter getting close to flat and then getting toward that mid mid single digits in the.
Speaker Change: In the fourth quarter, one of the things if you recall last you know in the fourth quarter of last year, we had a couple of centers that that.
Speaker Change: Hit the pretty large hiccup in the process and so we've been we've done some things there done some recruiting and those things are improving so we think we'll be able to to not have that issue. So think comp for Q4 of last year is is is relatively it's a.
Dennis Dean: And so we've done some things there, done some recruiting, and those things are improving. So we think we'll be able to not have that issue. So I think comp for Q4 of last year is relatively, from a low standpoint, so it's a lower comp.
Speaker Change: From a low standpoint, so it's a lower comp.
Todd Magazine: Are you at the point where you're thinking about more aggressive promotion or discounting specifically just because price is holding up better? So I'm just curious, are you guys thinking about, you know, sort of, a supply and demand curve and taking down the price and seeing if that increases case volume?
Okay and then maybe just last one are you at the point, where you're thinking about more aggressive promotion or discounting specifically just on the you know cause pricing is holding up better. So I'm. Just curious are you guys thinking about you know sort of supply and demand curve and taking down the price and seeing if that increase in case volume.
Todd Magazine: Hey, Josh, this is Todd. I would say we're doing it very selectively and targeted. We don't want to obviously devalue the brand and go out with kind of broad price reductions, but we're very selectively and very specifically using those in kind of retargeting and through email and text offers, et cetera, et cetera. So we are doing that. I mean, as you know, we've relied heavily on the kind of buy more, save more, and that's been very beneficial for us, but we don't want to go down too much.
Speaker Change: Hey, Josh this is Todd.
Todd Magazine: I would say we're doing it very.
Todd Magazine: Selectively and targeted we don't we don't want to obviously devalue the brand and go out with you know kind of broad price reductions, but we're very selectively and very.
Todd Magazine: Very specifically using those in kind of re targeting and through email and text offers etcetera etcetera. So we are doing that I mean, we've as you know we've relied heavily on the you know kind of buy more save more and that's been very beneficial for us, but we don't want to we don't want to go down too much I just think it ultimately we want the value of the brand.
Todd Magazine: I just think, ultimately, we don't want to devalue the brand, and we start bumping into other types of competitors, which I don't think really makes a lot of sense for us. So I think we want to continue to be very selective in those. Price Discounting
Todd Magazine: And we start bumping into other types of competitors, which I don't think really makes a lot of sense for us. So I think we want to continue to be very selective in those are priced.
Todd Magazine: Price discounting.
Joshua Richard Raskin: Okay, that makes sense. Thanks.
Speaker Change: Okay makes sense. Thanks.
Speaker Change: Okay.
Operator: Thank you, the next question today is coming from Korinne Wolfmeyer from Piper Sandler. Your line is now live.
Speaker Change: Thank you. Your next question today is coming from Craig both Meyer from Piper Sandler Your line is now live.
Korinne N. Wolfmeyer: Hey, good morning team. Thanks for the question. I'd like to touch a little bit on the CAC and the lead generation you're seeing from this, your increased marketing. So the CAC was really high this quarter. At what point will that start coming down a little bit more? And then can you provide us some color on these early customer leads you're getting from all this heightened marketing spend, just to give us a little bit of confidence that maybe once we get to the back half of the year, that case volume will improve? And how are you changing your marketing strategy over the course of the year? Thank you.
Hey, good morning, Thanks for the question I'd like to touch on that the CAC and.
Speaker Change: The lead generations, you're seeing from.
Speaker Change: You're increasing marketing in terms of the CAC was really high this quarter at what point will that start coming down a little bit more and then can you provide us some color on these early customer leads you're getting from all of this heightened marketing spend just to give us a little bit of confidence that maybe once you get to the back half of the year that case volume.
Speaker Change: Well improve on it.
Speaker Change: And how are you shifting our marketing strategy over the course of the year. Thank you.
Todd Magazine: Yeah, hey Korinne, this is Todd. So, what I would say is, obviously, we believe in the business long term, which is why we're heavily investing in lead gen. You know, our cost basis has definitely gone up. A lot of that is due to just competitive activity. But there are a few changes that we've made that seem to be really, the early signs are very, very promising, which is what is giving us the optimism.
Speaker Change: Yeah, Hey, Chris This is Tod so what I would say is obviously, we believe in the business long term, which is why we're heavily investing in lead Gen cost our cost basis has definitely gone up a lot of that is due to their just competitive activity.
Tod: But there's a few changes that we've made that seem to be really are the early signs are very very promising which is what is giving us the optimism remember one week.
Todd Magazine: Number one, we've kind of historically relied very heavily on paid search. It's been kind of the majority of our lead gen efforts. We're starting to diversify away from that solely, and so we've been experimenting with, you know, connected TV, display media, and retargeting.
Tod: We've kind of way historically, we've relied very heavily on paid search it's been kind of the majority of our kind of lead Gen efforts, we're starting to diversify away from that are solely and so we've been experimenting with.
Tod: <unk> TV display media re targeting.
Todd Magazine: In some markets, we've done some radio and outdoor, and what we're seeing is actually more organic search, which obviously is, you know, very promising for us. So ultimately, you're seeing more people come to us as opposed to us having to ultimately go out and kind of buy those leads, if you will. So that's very encouraging, and we're seeing that part of it. The second is a new initiative or kind of doubling down on an initiative, which is what we call existing or aged leads.
Tod: In some markets, we've done some radio and outdoor and what we're seeing actually is more organic search, which obviously is very promising for us. So ultimately you're seeing more people come to us as opposed to ours to ultimately go out and kind of buy those leads if you will so that's very encouraging and we're seeing that part of it.
Tod: Is what.
Tod: A new initiative, but kind of doubling down on an initiative, which is our what we call existing our age leads we have a lot of people kind.
Todd Magazine: We have a lot of people kind of in our databases that, you know, obviously are interested but have not converted. You know, a lot of our effort over the last year or so has been put against people that are first coming in, those kind of fresh leads. We have all these leads that, you know, we can go after and try to convert. So now, with some of our analytics tools, we're able to get to them a little bit more selectively, and we're seeing some very promising improvement there.
Kind of in our database says that you know obviously are interested but if not converted.
Tod: A lot of our effort over the last year or so has been put against people that are first coming in those kind of fresh leads will you have all these leads that we you know we can go after and try to convert so now with some of our analytics tools, we're able to get to them a little bit more selectively and we're seeing some very promising improvement there and then lastly, just on.
Todd Magazine: And then lastly, just optimization of our paid search. I mean, it will remain a, you know, a key lever for us. Excuse me, but we're always trying to kind of optimize the spending and make sure that it's more efficient and more targeted. We're doing things with zip codes to get to, you know, the right people and getting the right messages to the right people. So there are a lot of changes that we've made, and again, the early signs, as Dennis pointed out, leads are really just kind of a leading indicator.
Tod: Optimization of our paid search I mean, it will remain a.
Tod: A key lever for us excuse me, but.
Tod: You know, we're always trying to kind of.
Tod: Optimize the spending to make sure that it's more efficient and more targeted we're doing things with zip codes get to the right people and getting the right messages to the right people. So there's a lot of changes that we've made and again the early signs as Dennis pointed out leads or really just kind of the leading indicator. Obviously those ultimately have to convert to sales and then eventually to proceed.
Todd Magazine: Obviously, those ultimately have to convert to sales and then eventually to procedures. So the early indication on leads, which we're improving, but it's also just the quality of the leads that we're seeing, a lot of them are coming from organic search, which tend to be kind of higher intent consumers. So that's kind of the headline, I would say, on your question related to CAC. You know, in the short term, our CAC is going to remain high.
Tod: <unk>. So the early indication on leads which are improving but it's also just the quality of the leads that we're seeing which are a lot of them are coming from organic search which tend to be kind of higher intent consumers. So that's kind of the headline I would say on your question related to CAC in the short term our CAC is going to remain high we are keeping our foot down on the pedal.
Todd Magazine: We are keeping our foot down on the pedal to drive that, you know, that revenue. But over time, all of these changes that we're making should ultimately enable us to be much more efficient in our spending. In general, if you're going to get more organic search as opposed to paid search, that is going to be much more efficient. So a lot of the diversifying that we're doing in media that's driving more of this kind of organic lead generation over time will enable us to start to take our CAC down over time. And, you know, obviously, that will ultimately be our goal.
Tod: To drive that.
Tod: You know that that revenue, but over time all of these changes that we're making should ultimately enable us to be much more efficient in our spending in.
Tod: In general if youre going to get more organic search as opposed to paid search that is going to be much more efficient. So a lot of the diversified and that we're doing in media that's driving more of this kind of organic.
Tod: Lead Gen over time will enable us to start to take our cat down over time, and obviously that that will ultimately be our goal.
Dennis Dean: You know, one thing I would add to, Korinne, is that, you know, our cost initiatives, rather than just kind of keeping those, you know, at the EBITDA level, we're kind of reinvesting back that into marketing, so, you know, that's, again, the initiative that we've done, we've just said, hey, this is a good opportunity to use these excess resources and to put back into the marketing efforts, and we expect, as we continue to identify initiatives through the year from a cost standpoint, we'll likely do a similar process.
Tod: One thing I would add to Korean is is that you know.
Tod: Our cost initiatives.
Tod: Rather than just kind of keeping those at the EBITDA level, we're kind of reinvesting back into marketing. So that's again the initiatives that we've done. We've just said hey, this is a good opportunity to use these excess resources to put back into the to the marketing efforts and we expect as we continue to identify initiatives through the year from a cost standpoint.
Tod: We'll likely do a similar a similar process.
Korinne N. Wolfmeyer: Very helpful. Thank you so much for all that color.
Speaker Change: Very helpful. Thank you so much for all that color.
Speaker Change: And then just.
Speaker Change: Touch on the <unk>.
Speaker Change: One issue.
Speaker Change: We are seeing more offerings or more.
Speaker Change: Better accessibility for people and they've got a G. L P wines.
Korinne N. Wolfmeyer: And then just to touch on the GLP one issue. You know, we are seeing more offerings and more, you know, better accessibility for people to get GLP one. Do you still view that as more of an awareness driver versus demand taker for Airsculpt, or is there any change in thinking there? Thank you. All of our resources are available on our website at www.airsculpttech.com.
Speaker Change: Are you still view that as more of an awareness driver firstly.
Speaker Change: Hey, Eric.
Speaker Change: Any change in thinking okay. Thank you.
Eric: Well all of our research would say that G O P ones are ultimately.
Todd Magazine: All of our research would say that, you know, GLP-1s are ultimately, you know, a tailwind for us. We're seeing a lot of patients come to us who are either interested in weight loss medication, but they, and we've been doing a lot of marketing on this as well, the combination of weight loss medication and Airsculpt seems to be very, very powerful. So, you know, are there some people that maybe, you know, would have come to us and they went on weight loss medications? Possibly.
Eric: A tailwind for us we're seeing a lot of patients come to us.
Eric: Who are either interested in weight loss medication.
Eric: But they they and we've been doing a lot of marketing on this as well the combination of weight loss medication and air sculpt seem to be very very powerful so.
Eric: Are there some people that maybe would have come to us and they went to weight loss medications, possibly there's also a lot of people coming to us and they discovered us because they started to investigate weight loss medications and so.
Todd Magazine: There are also a lot of people coming to us, and they discovered us because they started to investigate weight loss medications. And so, you know, ultimately, what we're seeing is a very symbiotic relationship, and so far, we're looking at it very much as an opportunity and as a tailwind as opposed to, you know, something that is a major risk for us. So, you know, we continue to look at it as something that's going to ultimately help us over time.
Eric: Ultimately, what we're seeing is a very symbiotic relationship and it's so far we're looking at it very much as an opportunity and as a tailwind as opposed to something that is that as a major risk for us. So we continue to look at it as something thats going to ultimately help us over time.
Speaker Change: Great. Thanks, so much.
Speaker Change: Yeah.
Operator: Thank you. The next question is coming from John Ransom from Raymond James. Your line is now live.
Speaker Change: Thank you. Your next question is coming from John Ransom from Raymond James Your line is now live.
John Wilson Ransom: Hey, good morning. Just talking about the second quarter. This is your big quarter historically. Do you usually see this late of a start? Is the quarter back on track, or are you kind of like-for-like off to a slower start versus, say, the last couple of years?
John Wilson Ransom: Hey, good morning.
John Wilson Ransom: Just talking about the second quarter. This is your big big quarter.
John Wilson Ransom: Shortly.
John Wilson Ransom: Do you usually see this later the start.
John Wilson Ransom: The quarter back end loaded or are you kind of like for like off to a slower start versus say the last couple of years.
Dennis Dean: Yeah, so John, the timing of when the quarter or when the season starts is always difficult to manage. Last year, it started in March. This year, it is more of a delayed start, and so that's a little bit of a difference from a timing perspective. And so, as we talked about, the lead generation and the impact that we're seeing there, it's a little bit later in the typical season flow that we've seen in the past.
Yeah, So John I mean.
John Wilson Ransom: The timing of when the quarter one season start.
John Wilson Ransom: Always difficult to manage last year it start in March.
John Wilson Ransom: This year it is more of a delayed start and so so that's a little bit of a difference from a timing perspective, and so yes.
John Wilson Ransom: As we talked about is the lead gen and the impact that we're seeing there it's a little bit later in the typical seasonal flow.
John Wilson Ransom: <unk> seen in the past so.
Dennis Dean: So will that allude to maybe a season that moves further into the summer? Right now, we just don't know. But if the season is seasoned for the number of months, then one would suggest that would be the case.
Speaker Change: Well that kind of allude to maybe a season that kind of moves further into the summer right. Now we just don't know, but that's if the season is season for the number of months and one would suggest that would be the case.
Speaker Change: Okay.
John Wilson Ransom: OK. And then secondly, on marketing, I mean, I appreciate all the comments you're making about that, but we've been hearing for a couple of years now about how you're pivoting from the Instagram channel to something more around brand awareness and celebrity endorsements. You know, just looking in the rear view mirror, how would you critique your own performance in terms of that transition and what, what, maybe, should have been done that hasn't been done so far? Thanks.
Speaker Change: And then secondly on marketing on the I appreciate all the comments, you're making about that but we've been hearing for a couple of years now about how you.
Speaker Change: You're pivoting from the Instagram channel to something more around brand awareness and celebrity endorsements hedge.
Speaker Change: Just looking in the rearview mirror, how would your critique your own performance in terms of that transition and what what.
Speaker Change: What maybe you should have been done that hasn't been done so far.
Todd Magazine: Yeah, look, good question. I would say, you know, generally, these are changes that have to be made over time. We historically have been heavily, heavily reliant on paid search as our driver. As you know, last year, we started to do some celebrity marketing, which definitely helped. We saw some definite improvements in awareness building. But what we saw, particularly as we were using some of these bigger celebrities, was that we would get the spike, and then it would come, you know, kind of come back down.
Speaker Change: Yeah.
Speaker Change: Good question I would say generally.
Speaker Change: These are changes that have to be made over time, we've historically had been heavily heavily reliant on paid search is our driver.
Speaker Change: As you know last year, we started to do some celebrity marketing, which definitely health. We saw some definite improvements in awareness building, but what we saw particularly as we were using some of these bigger celebrities as that we would get the spike and then it would come kind of come back down.
Todd Magazine: And, you know, as I mentioned in my prepared remarks, some of the changes that we're making now is kind of doing this rather than kind of a couple of big celebrities, relationships, or partnerships over a year. How do we do this is kind of more of a string of pearls. So, you know, maybe, you know, smaller celebrities, but more frequent. And we're also finding that some of these smaller celebrities have a huge social following.
Speaker Change: I mentioned in my prepared remarks, some of the changes that we're making now is kind of doing this rather than kind of a couple of big celebrity.
Speaker Change: Our relationships our partnerships over a year how do we do this is kind of more of a string of pearls. So maybe smaller celebrities, but more frequent and we're also finding with some of these smaller celebrities have a huge social following and.
Speaker Change: That's actually been very beneficial to us. So I think it's been an evolution I think we've been moving it in the right direction.
Todd Magazine: And that's actually been very beneficial to us. So I think it's been an evolution. I think we've been moving in the right direction. I don't think anybody would have anticipated the, you know, kind of market changes that have happened.
Speaker Change: I don't think anybody would have anticipated.
Speaker Change: Kind of market changes that have happened so that I think has been the biggest factor, but I think generally we were moving in the right direction and I think we're kind of now in the optimization.
Speaker Change: We are continuing to diversify our media and I think that's proving to be very beneficial as well so.
Todd Magazine: So that I think has been the biggest factor. But I think, generally, we were moving in the right direction. I think we're kind of now in the optimization process, and we're, you know, continuing to diversify our media. And I think that's proving to be very beneficial as well. So, you know, these are not changes that could happen absolutely overnight, but I think we're moving in the right direction, and we'll continue to evaluate as we make these changes, and hopefully, it'll continue to drive the growth that we need.
Speaker Change: These are not changes that could happen absolutely overnight, but I think we're moving in the right direction and will continue to evaluate as we make these changes and hopefully it will continue to drive the growth that we need.
Speaker Change: Okay.
John Wilson Ransom: Just lastly, I mean, we're calculating some pretty grim same-store numbers. Are there any locations now that are unprofitable? Do you foresee any closures? Are all your locations still profitable, even if the volume's down?
Speaker Change: Just lastly, I mean, we're calculating some pretty grim same store numbers are are there any locations now that are.
Speaker Change: Unprofitable do you foresee any closures or all your locations still profitable even if the volume is down.
Dennis Dean: Yeah, all of our locations, John, are still generating a profit. So there's nothing from that standpoint.
Speaker Change: Yeah, all of our locations Jon are still generating a profit so nothing from.
Speaker Change: From that standpoint, I would say the London center is slower from a ramp standpoint, as we continue to learn through that market. So it's not ramping up from a profitability standpoint like a typical a center that we have.
Dennis Dean: I would say, you know, the London center is slower from a ramp standpoint as we continue to learn through that market. So it's not ramping up from a profitability standpoint like a typical center that we have, you know, take the rest of the 2023 cohorts. It's not ramping up to the same degree as those are, but all the centers continue to be profitable. And so there are no reasons at all to consider closing them all.
Speaker Change: Take take the rest of the 2023 cohorts, it's not ramping up to the same degree as those are but all of the centers continue to be profitable and so no no no reason at all to consider to consider closing any.
Todd Magazine: The only comment I'd make on London, I mean, it's definitely looking to international markets, particularly in Europe. I mean, there's definitely a learning curve. I think there's a lot of things that we've definitely learned. But we continue to be incredibly optimistic about the market. It just might take us a little bit longer to kind of get it all figured out. But once we do, we think that it is going to be a very strong center for us.
Speaker Change: Yeah, the only comment I'd make on London, I mean, it's definitely outlook international markets, particularly.
Speaker Change: In Europe, I mean, there's definitely a learning curve I think there's a lot of things that we've we've definitely learned but we continue to be incredibly.
Speaker Change: Optimistic about the market it just might take us a little bit longer to kind of get it all.
It out but once we do we think that is going to be a very strong center for us.
John Wilson Ransom: I mean, in my editorial comment, the next healthcare company on the services side that has a good outcome in London might be the first. It's been a trail of tears for a lot of your peers that have gone into that market.
Speaker Change: I mean, my editorial comment that the next a health care company and on the services side that has a good outcome and bundle it might be.
Speaker Change: It's been a.
Speaker Change: It's been a trail appears to be a lot of your peers they've been in that market, but you're not you're not alone Oh editorial comment. Thank you.
John Wilson Ransom: You're not alone. So, an editorial comment. Thank you.
Operator: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments.
Speaker Change: Thanks, John.
Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over to management for any further or closing comments.
Dennis Dean: Thanks everybody. We will talk to you in a few months. Have a great weekend.
Speaker Change: Thanks, everybody.
Operator: Thank you. That does conclude today's telecoverage. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Speaker Change: We'll talk to you in a few months and have a great weekend.
Speaker Change: Thank you that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.