Q4 2024 AirSculpt Technologies Inc Earnings Call
NewscastRadio.com
Speaker Change: Unknown Attendee, Aaron Rollins, Todd Magazine, Unknown Attendee, Allison Malkin, Unknown
Speaker Change: . . . . .
Speaker Change: Greetings, welcome to the Airsculpt Technologies Incorporated, Fourth Quarter, 2024 Earnings Call. At this time, all participants are in listen only mode.
A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance today, please press star zero from your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: Is now my pleasure to introduce Allison Malkin with Invest Relations.
Allison, you may now begin.
Allison Malkin: Good morning, everyone. Thank you for joining us to discuss Airsculpt Technology's results for the fourth quarter and full year 2024.
Speaker Change: Joining me on the call today are Yogesh Jashnani, Chief Executive Officer, and Dennis Dean, Chief Financial Officer. Before we begin, I would like to remind you that this conference call may include forward-looking statements.
Speaker Change: and the reports we will file with the FEC, all of which can be found on our website at
Speaker Change: During our call today, we will also reference their non-GAAP financial measures.
Speaker Change: 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.
Speaker Change: A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10K, which will also be available on our website.
Speaker Change: that we are implementing at the start of fiscal 2025. Then, Dennis, we'll review our financial results in more detail and provide our outlook. With that, I'll turn the call over to yogi.
Yogi: Thank you, Allison. Good morning, everyone, and thank you for joining today's call. It is a pleasure to speak with you on my first earnings call as Airsculpt's Chief Executive Officer at a pivotal time for the company.
Yogi: While I have met many of our shareholders and analysts since joining the company in January , for those of you who don't know me, I will begin my remarks by sharing my background and why I believe my experience will enable our transformation and return to growth.
Yogi: Most relevant to Airsculpt, I was at Idol Image Med Spa, where I led a strategy that nearly doubled revenue and expanded margins by transforming marketing sales and our go-to-market model.
Yogi: I was attracted to Airsculpt given its unique strengths and significant expansion opportunity.
Yogi: Airsculpt had a proprietary solution and a decade-long crack record completing more than 70,000 successful body-contouring procedures across 32 centers.
Yogi: and we have meaningful growth potential as we operate in 11 billion total addressable market in the U.S. alone.
Speaker Change: Since joining in January , I have spent time in our centres, speaking with our teams, reviewing performance and assessing what's needed for a successful transformation.
Speaker Change: What is exciting to me is the passion for our business and our team's commitment to embrace the changes that are needed to support our return to growth.
Speaker Change: While challenges remain, I am confident we have the right plan to restore growth and increase profitability as we focus on executing better as a direct-to-consumer healthcare business.
Speaker Change: I will share our priorities and the initiatives we are implementing that we expect will allow us to achieve this objective but first let me review our fourth quarter and fiscal year results.
Speaker Change: For the fourth quarter of 2024, revenue totaled $39.2 million declining 17.7% from the 2023 fourth quarter with case volume down 16.7% from the prior year fourth quarter.
Same store revenue declined 22.6% over the prior year quarter.
Speaker Change: A fourth quarter results were in line with our revised expectations which were updated in January and reflected the challenging consumer backdrop which continues to pressure sales across the aesthetic space.
Speaker Change: However, our performance also highlights internal missteps that we must co-scorrect which is my highest priority.
Speaker Change: As you are aware, Airsculpt is a considered purchase with an average spend between $12 and $13,000 [inaudible]
Speaker Change: In this environment, it is common to see a longer timeframe to convert leads into cases.
Speaker Change: For the second half of 2024, it was closer to 60 days. We also believe are cost-saving efforts that included a reduction in marketing expense resulted in lower lead volumes which further pressured case growth.
Speaker Change: As a result, we did not experience the sales trend we typically see in Q4 and continue to experience sales pressure into Q1 of 2025.
Speaker Change: Adjusted EBITDA was $1.9 million or $4.7% of revenue versus $10.1 million or $21.2% of revenue in the fourth quarter last year.
Speaker Change: The decline in revenue accounted for approximately $6 million of the decrease with the remaining mostly due to cost related to increased marketing and corporate costs to support our recent
Speaker Change: During the quarter, we opened two locations, one in Birmingham, Michigan, a suburb of Detroit and the second in White Clean, New York, giving us five new denobo centers for the year.
Speaker Change: For the full year, revenues were $180.4 million and adjusted EBITDA totaled $20.7 million with adjusted EBITDA margin of 11.5%
Speaker Change: This compares to revenues of $195.9 million and adjusted EBITDA of $43.2 million with an adjusted EBITDA margin of 22.1% for the prior year.
Speaker Change: In addition, we continue to be pressured by the difficult macro environment.
Speaker Change: That said, as we have increased our marketing spend in 2025, we have seen an improvement in lead volumes
Speaker Change: This along with additional actions that are underway are expected to improve our ability to convert leads to cases as we move through the year.
Speaker Change: With that in mind, to accelerate our return to growth, we have two business imperatives.
Speaker Change: First, to enhance our culture and drive alignment on one vision with a singular voice across all aspects of our business.
Speaker Change: There are five key priorities that underpin our business imperative. One, marketing to drive more consumer interest and generate leads. Two, sales to convert those leads to cases.
Speaker Change: Free new services to tap into more consumer demand for customer experience to ensure we consistently provide premium results and five is the technology that accelerates these priorities.
Let me provide some perspective on each first marketing.
Speaker Change: We are focused on marketing spend on techniques that have proven successful for us in the past using a returns based approach.
Speaker Change: We are also testing new areas such as online video and other social marketing channels.
Speaker Change: This effort began in January under a new Chief Digital Officer and has already driven a significant increase in lead water.
Second Sales [inaudible]
Speaker Change: Under a new Chief Sales Officer, we are strengthening our Consultative Sales Model with enhanced training, improved sales processes and a greater focus on lead conversion.
Speaker Change: Early results show encouraging signs and we expect momentum to build throughout the year.
Code, new services.
Speaker Change: Today we provide fat removal, fat transfer and skin tightening services.
Almost always, they are done within the same procedure.
Speaker Change: There is an opportunity for us to look at each of these services individually as well as introduce new services.
Speaker Change: The opportunity exists to leverage our centers and people to further capture our addressable market.
Speaker Change: An example of this is skin tightening services which we plan to pilot in the second quarter.
Speaker Change: This way, we tap into the complimentary impact of GLP1, which has led to an increased demand for skin tightening.
Speaker Change: We believe this can be a sizable opportunity for us to expand our customer reach and generate incremental revenues with the procedure that we already do.
Speaker Change: This will be an ongoing focus, especially in the back half of the year and into 2026.
Speaker Change: We are introducing new solutions to help our sales team close deals better and faster.
Speaker Change: For example, we plan to add new payment options that give consumers added flexibility to finance procedures.
Speaker Change: We believe this would be an effective way to drive incremental revenue and improve our margins while meeting consumer needs.
Speaker Change: Later this year, we will expand the use of our Salesforce platform to more efficiently and effectively convert leads to cases.
Speaker Change: We are also planning to test solutions that can improve the experience of our clinic teams allowing them to spend even more time on patient care.
Speaker Change: All of these initiatives will enable us to improve our go-to-market strategy with a direct to consumer approach.
Speaker Change: I am convinced in Airsculpt's ability to return to sales growth and generate strong free cash flow aided by our asset life business model.
Speaker Change: As always, we will operate with rigor and adapt our strategy as needed, but our focus is clear. Execution and efficiency around culture and return to revenue growth.
Speaker Change: We have already begun to see an increase in our lead volume in the first quarter with the marketing changes. That said, this lead growth takes time to materialize to revenue.
Speaker Change: As I mentioned, we expect our Q1 same-store revenue decline to be similar to Q4 2024 with an expected sequential improvement in quarterly sales trends as we move through the year.
Speaker Change: We expect to provide a full year outlook when we release first quarter results in May.
Speaker Change: Additionally, we have amended our credit agreement which enhances our ability to invest in the business while the transformation takes its course.
Speaker Change: Importantly, we have evaluated the various scenarios that may occur throughout the year and expect to be compliant with our bank covenants throughout 2025.
Speaker Change: Additionally, we are actively pursuing initiatives to reduce our leverage ratio to be closer to historical levels.
Speaker Change: Overall, I remain convinced that Airsculpt is an attractive business with a competitive mode.
Speaker Change: I believe the best years lie ahead for Sculpt and its shareholders.
Speaker Change: And now I will turn the call over to Dennis to review our fourth quarter and fiscal year results in more detail.
Dennis: Thank you, Yogi, and good morning, everyone. As mentioned, revenue for the quarter was $39.2 million, a 17.7% decline versus the prior year quarter, with the same store revenue down 22.6%.
Dennis: The decline in revenue this quarter was mainly driven by lower case and lead volume, due to reducing our marketing span and the challenging consumer spinning environment.
Dennis: The percentage of patients using financing to pay for procedures was 50%, which is below the 53% rate we have experience in recent quarters. We remain pleased with the financing partnerships in place and are adding to our base of lenders to expand choices for prospective patients as part of our return to growth strategy.
Dennis: Cost of services decreased 1.1 million compared to the prior year period. However, as a percentage of revenue increased to 42.7 percent versus 37.5 percent due to our inability to flex certain fixed costs such as rent and nursing.
Dennis: As revenues begin to rebound, we expect this percentage to return to previous levels.
Dennis: On a sequential basis, SGNA decreased 2.1 million, of which 1.1 million was from equity-based compensation and the remainder due to our cost reduction initiatives we initiated in the back half of 2024.
Dennis: Adjusted EBITDA was $1.9 million compared to $10.1 million for the fiscal 2023-4th quarter. Driven by our revenue declines.
Dennis: or two sats per diluted share compared to 16.3 million or 28 sats per diluted share in fiscal 2023.
Dennis: Turning to our balance sheet, as of December 31, 2024, cash was $8.2 million. We drew down our revolving credit facility during the quarter and our gross debt outstanding was $75.8 million.
Dennis: Cash flow from operations for the year was $11.4 million, compared to $24 million in fiscal 2023, and we invested approximately $9 million in 2024 into NOVO facilities.
Dennis: We are confident that these new terms will provide us with the added flexibility to invest and support our return to growth.
Dennis: Turning to our outlook. As Yogi mentioned, we are not providing a fiscal year outlook for revenue and adjusted EBITDA. With expectations ever introducing guidance when we report first quarter results in May.
Dennis: I will now turn the call back over to Yogi for some closing remarks.
Yogi: Thank you, Dennis. In summary, while we recognize that fiscal 2024 was a challenging period for our company, we remain confident in our strategy and are intently focused on enhancing our culture and improving our go-to-market strategy.
Yogi: We expect the execution of our five business priorities, along with the actions to increase our liquidity and financial flexibility will enable us to return to same-store sales growth.
Yogi: We look forward to sharing our progress with you as we move through the year. With that I'd like to turn the call over to the operator for some questions. Operator?
Yogi: Thank you. We'll now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question at this time, please press star one on your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing star keys.
Speaker Change: To allow as many as possible to ask questions, please ask one question and one follow-up. You may then re-cute for any additional questions.
Speaker Change: That question comes from the line of Josh Raskin with Neffron Research. Please receive your questions.
Josh Raskin: Thanks, a good morning. So I certainly understand you want some time to implement new strategy and sort of see how trends are going before you get full your guidance, but
in 2Q to be higher, and then 3Q to be higher than 2Q next year. I'm just curious to get sort of a little bit more color on what you mean by the sequential improvements.
Josh Raskin: Josh, this is Yogi. Thank you for your question. So, as I mentioned, the reason for not giving guidance, I've been in the role for a couple of months, I'm continuing to deepen my understanding of the business.
Josh Raskin: The decision is not a reflection of business performance but I want to make sure that our guidance is well informed and reflects a comprehensive view of our strategy and early execution results.
Josh Raskin: So we would expect Q2 to be higher than Q1 just on an absolute basis because that is historically our seasonal strength and then the rest of the year follow the similar seasonal curve.
Josh Raskin: Okay, so you were talking, the sequential improvement is same store revenue growth. It's not necessarily overall top line and certainly not EBITA. Okay, so I think I get that. And then just the follow up, can you speak to the liquidity improvement actions that you are taking? I'd be curious why you drew on the revolver during the quarter and then? Okay, so that's all for today.
Speaker Change: You know when you're stopping the marketing or slowing down the marketing and then you're not opening up to novos that seems incongruent with you know what would be driving. [inaudible]
Revenue, right, unless those are ROI negative. You know, my understanding is the nobo used to be performing better than the, you know, the same store business, so I just be curious, like, you know, sort of the juxtaposition of all those pieces.
Speaker Change: Hey Josh, it's Dennis. So a couple of things, you know, one, we did, as you know, open up.
John Raskin, John Raskin, John Ransom, Korinne Wolfmeyer,
Speaker Change: But just not quite to the degree as we would expect them to, based on how the de novo's have historically performed. So we use the significant amount of capital.
Speaker Change: and as Yogi mentioned in his remarks, our Q4 results were a little bit liar than we had to expect it. That sort of caused some challenges there that...
Speaker Change: As we were looking forward in the Q1, we wanted to make sure that we didn't have to significantly reduce our marketing so we drew down on the revolvers so that we could kind of maintain our ability to market as we kind of move towards season so that was kind of the thought process around that
Speaker Change: And just to add to that, on your question on Denowos, we continue to be excited about the long-term center opportunity and will open Denowos at the appropriate time. In the short term.
Speaker Change: My focus is on improving same centers sales growth. We strongly believe that is the right place for us to be spending our energy for the long term health for the business.
Speaker Change: And as we improve those, the benefit of those activities will come into the Tinovos and allow us to turbocharged Tinovos when we get that to opening them.
Okay, thanks.
Speaker Change: Our next questions are from the line of Korinne Wolfmeyer with Piper Sandler. Please as you see with your questions.
Speaker Change: Good morning. Thanks for taking the question. I want to touch a little bit on what's going on with the marketing spend versus the CAC. So it sounds like the marketing went...
Allison Malkin: Down or was cut out or some of cut back a little bit.
Speaker Change: in the quarter, but the CAC went up. Was that just the dynamic of the softer case volumes that you saw in the quarter? And then how should you be thinking about that going forward and in the level of pick-up of marketing spend we should expect here in 2025 and how that should translate into CAC. Thank you.
Speaker Change: Hey Korin, Dennis, I'll pick up and kind of give sort of the fourth quarter commentary and then I'll let Yogesh supplement as it relates to as we kind of think through 2025.
Speaker Change: Yes, our CAC was continued to be elevated. The softness and case volume was the key driver there. One of the things that we noticed and that we noted in previous calls is in the back half of last year we were cutting our marketing cost pretty significantly from where we were spending in the first half of the year. [inaudible]
Speaker Change: And by doing that it kind of reduced our lead volumes from that standpoint which impacted our case volume, case results there from a revenue standpoint.
Speaker Change: Sequentially, our actual advertising expense stayed somewhat the same Q3 to Q4 significantly less than the average span in the first half of the year.
Speaker Change: But what you also have to see is that we opened up those five new centers and we're marketing those centers. So on a same store type picture of centers, we actually spent significantly less from that standpoint. [inaudible]
and the NQ-4.
and then just on the go-forward basis.
Speaker Change: Certainly we have reversed in some of those pullbacks in marketing spend on a on a center basis, but it's not just about spending more, it's also about spending differently. So as we go back to a returns based focus and innovate in a marketing, we expect that our marketing investments will
Speaker Change: Get the set of in terms of the facts that we would see as the your progresses.
Speaker Change: Great, thank you so much for all that helpful color. And then can you just give us a little bit more context around the cost savings program. It sounds like there's going to be about 3 million in annual savings. One, where is that all coming from? And then two, do you have a projection as to when those savings will start to be realized? Thanks.
For more information visit www.FEMA.gov
Yeah.
Yogi: Sir Karin, this is Yogi. The cost out for us, look as we set the strategy that I talked about, we realized that there were areas within the business where we which were
For example, the lorfic was in...
Yogi: That is a neck number because there is cost art but then there is also investments that we have made.
Great things tonight.
Speaker Change: Thank you. As a reminder, if you like to ask a question, you may press star one from your telephone keypad. We ask you please ask one question and one follow-up. You may recieve for additional questions.
Yogi: The next question at the time comes from the line of Sam Eiver with BTIG. Please just use your questions.
Hi, good morning. Thanks for taking the questions here.
Speaker Change: Maybe it can start on some of the new efforts on the marketing side to drive those leads and you know, I heard you mention online video and...
Speaker Change: Spending heavily on paid search and paid social as we have done in the past.
Speaker Change: The difference is, we are with a return space approach that we are taking. We're looking at every sub-segment, for example, within those.
Speaker Change: and how those are performing and making sure that we are rebalancing whether it's across centers, whether it's across areas. We're seeing pockets where there is opportunity for us to reach more customers and be more efficient with our spend.
Speaker Change: We are keeping our spending dynamic to make sure that we are able to...
Speaker Change: You know, from my understanding, there were already a few centers that were maybe implementing...
Speaker Change: Those skin tightening procedures, so this may be more of an effort to expand that throughout the 32 centers you have as adding additional types of skin tightening.
Speaker Change: I want to understand that as well. Thank you.
Speaker Change: Capture that not just from a center performance perspective, but align the entire organization from marketing to sales.
to clinics.
Speaker Change: and everything in between so that end to end we are making that offering available. This is, in many ways, our efforts to capitalize on trends we are seeing with the consumers. We continue to see skin tightening is a pretty big area of interest for consumers.
Some of that we see as a-
Speaker Change: Outcome from GLP1s, where customers who pen on GLP1s tend to have many of them tend to have loose skin and they are looking for solutions for the act.
Great. Thanks for taking the questions here.
Speaker Change: Thank you. At this time, I would like to turn the floor back to Yogesh Jashnani for closing remarks.
Speaker Change: Thank you everyone for joining and look forward to providing an update on our next quarterly call.
Speaker Change: Thank you. This will conclude today's conference. Let me disconnect your lines at this time. Thank you for your participation. Have a wonderful day.