AirSculpt (AIRS) 11 Nov 222022 Q3 Earnings call transcript

Good morning, and welcome to AirSculpt Technologies Third Quarter 2022 Earnings Conference Call. Currently, all participants are in a listen-only mode.

As a reminder, today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Dennis Dean, Chief Financial Officer at AirSculpt Technologies. Thank you.

begin. may You

and Technologies' everyone, joining to us Good for thanks the AirSculpt results third discuss morning, for quarter.

Operating Rollins; Joining me Chief our Aaron and our is Zelhof. Chief and on the Executive call Officer, today Officer, Ron Founder Dr.

to statements growth. to night's projected release file may statements forward-looking materially results are Before you could of on undertake conference differ opportunities and from and statements. statements currently guidance, that except forward-looking revise impact future results information, our SEC, or our obligation remind may at the the described we market which include required will or in would we include future may update Risks expectations website by actual last be law. this that results I These begin, found these and like We our press any reports uncertainties call can as regarding cause all and investors.elitebodysculpture.com. with and financial no to

With filed Rollins. found our non-GAAP measures will I'll During our performance results business. use Dr. be as of true financial website. our can more represent measures. some we recent measures these turn reconciliation of the and to earnings of last also non-GAAP release discussions, financial underlying the accurately over call Aaron? A in report filed, that, in operational available which reference our be on they as in when night call We are certain and quarterly most we our will also believe our today,

today. call for and thank you the morning on Good us joining

Recently, to served be all accomplished the anniversary great the celebrated take do our allocation our to year Canada, dividend your capital procedures a a thank that veterans special you to country deploying country. wanted We year soon this one we a Before that strategy. paying to moment to footprint U.S. expanding performing safe. across our appreciate as our I recognize also company. keeping quarter, you publicly past dedication things meaningful for traded over we and and truly discuss all our a have as many of We've from XX,XXX way the while

third the items impacted three that results. our call to key I out For want quarter,

timing de Philadelphia Boston. opened it the They new novo We of in quarter, opening expected. the second later third. anticipated First, than our specifically opening and location, were had the Boston in

we third are the open While this to quarter. it week, excited had opening we Philadelphia anticipated in

centers larger, of extended Second, several mature vacation. more in surgeons some took our

While We of some these we pronounced we forecasted we seasonality a periods more cases the typically the those of significant deferred fourth return than these cases our to quarter. normal future to vacations quarter, seasonal impact are already in be and caused third effect a see. for do expect number seeing

than well as anticipated. quarter as in costs nursing have run Third, the we higher year-to-date

Dennis provide point more out details While that to made the infrastructure. initiative. to central will our review, we Nurses to financial decision in that increase are clinical like I in investment would the

investment consistent impact believe result longer-term to our is margins with this of near-term a a investment, is a we there Although commitment it to quality. strategic as

bringing and Moving the at excited a AirSculpt to scheduled We number still end globe. is the and of into, strategy, our the month. to center across look de U.S. have to markets we Toronto, Canada forward international expansion further very of that novo across first open move I'm to our this in report vast to

to awareness heavily we As for other brand the and AirSculpt marketing-related brand, activities. invest continue in

meaningful work us new will Officer in our from recall growth July. result future. doing she area in may believe for investments last Marketing Chief started call, the in We this in making the we have quarter's You been and the is

our both very been support for expansion international to growth, team plan. building and rapid our for our also out sites active in have new We domestic

enhance have grow infrastructure protect on not maintaining important reinforcing and capabilities growth clinical us sustain do so plan. It's focused to to training rapidly patients extremely training but to and our while brand. for safety can long-term that quality our and related We only we and nursing our our and teams our oversight so

As mentioned in our the call, continue second to add to enhancements quarter AirSculpt we procedure.

new began Plus of for we skin of quarter, pride AirSculpt recently our the a study. treatment During status offerings results take tremendous are which offer the interested to centers. at research And that offering in a you provides appearance the and our continuing are reduction most of in of Plus Smooth, rollout of we provide I'm some our effective of service health tightening. offers enhanced cellulite. AirSculpt We the AirSculpt long-term began patients. to sure

a the study to Board we novo completed research expect approval I the on patients. With previously more we procedures will that, which undertaking Review metabolic our parameters the to we over study Ron? plan begin patients, our say to this are happy the de and to in to be effects and call have to that of operations received Ron I'm we activity. from do Institutional XXXX. the our on results As reported, the turn enrolling have discuss month, about of

Thank morning, you, Dr. and good everyone. Rollins,

our mentioned, openings As Dr. de were Rollins to delayed this our year expectations. novo relative

meaningful they expect from as mature. we growth However, sites these

takes center approximately reminder, to it for XX new months reach a full maturity. As a

Philadelphia, opening, first this performed de procedures novo week. recent most Our its

our an thank line. the which bring want opening and ramps guidance across This openings year the center. will to Toronto center number opening it for total about finish than revenue us, month office for XX. Once meaningful getting as our team is that taken be We will the providing has to believe bring excited center of at our typical the longer a end count this efforts opens, with to line will four, center year up. this our for and total Toronto in in their domestic for growth are exceptional I the it market bit our our of

We next two Irvine our be to of centers. Austin new domestic markets announced well. pipeline and quarter Our grow will as that continues last

these to of the expect in centers We first XXXX. open half

to locations to adding strategy in look our Since We call. are our XXXX. open been and And patients we to on Raleigh, year-end growth the expect founding, exceptional as San providing more and quality Jose, committed now North care our we sharing we've California Carolina about we to forward additional serve.

we an As growth. mentioned, margins investments that, we accelerated will clinical year, details prepare achieve Dr. to confident and on it open Rollins we over in while the as new leveraging teams. investments made operational company the it's several costs to these to targeted results. Dennis our turn additional current are These towards our continue to we financial our back grow centers expansion margin this made and on for provide revenues. development had With I'll by year, impact Dennis? And our were

Ron. Thanks,

the revenue The was increased Our primarily increase centers cases footprint quarter XX, quarter, is four our centers approximately expanded a September as of the year de million, XX.X% $XX.X of which XXXX. increase for and prior XX novo over to X%. quarter, adding the over year result our prior the

revenue Our are average sequential quarter consistent. was quarter has and a revenue over previous our per case that increase for we X% basis remained case average on per the $XX,XXX, pleased the year's a

approximately decreased revenue Our prior X% over period. same-center the

impacted physicians deferred took of centers, meaningful these started expect number an see sales we our vacations and growth. a the to quarter of be our periods, into quarter. more many uptick the do fourth we during Dr. to in in extended same-store at cases As Rollins who which future had We remarked, have our mature early

and increase period was the percentage to same Our expectations, to was quarter approximately in hourly XX.X% last our versus and resources year. $XXX,XXX an combined support XX.X% added a cost impact $X.X for as year. we recruit of seek of in retain have plus revenue is in clinical this the related and primarily addition staff. wages approximately the million we of service nursing This Relative the our increase to as third year, the

Ron are of mentioned, we revenue meaningful we costs As fixed and these that nature. some our more as improvement in growth in our margins to expect begin leverage continues

the in novo XXX year. openings in the achieve mature. the And centers impacted Our these were margins de due quarter expansion we points to as basis approximately margin also expect past to

a reminder, we model. a As cost have highly variable

of supply until acquisition as cost a we most was costs incur cost Customer performed. the Our X,XXX approximately are is costs, these expense, case XXX% which don't comprise variable physician of quarter. our and service for

mostly activities result. brand to unchanged. the our cost on and spent cash to meaningful awareness achieve invest acquisition revenue a On increases during was a in continued quarter, basis, as We expect future periods total sequential in

cost So decline. the acquisition the in volume sequential our was due customer increase to

the were year company. approximately EBITDA was Adjusted costs, of quarter not private exist adjusted million quarter. million we did Our public EBITDA $X.X $X.X a company-related in the prior for which as included

that now comparable year. Going public public forward, be a been more company for full should costs have year-over-year we

to adjusted anticipate costs. to As EBITDA our greater XX% margins to we to revenues we be continue continue fixed than leverage grow, overhead return a as

Moving on to liquidity.

Our position of as $X million, remains was September XX, $X.X undrawn. and XXXX, revolver our million cash

$X was was am that $XX reduce of million we and our I which quarter, announce off the was agreement of were was to also XXXX. a our which week, a maturity It of facility, penalties. October set calculated debt on under agreement, closed $X has consists long-term pay to and the term in million The annually on interest credit credit new to million, approximately a loans leverage proceeds by Our basis. a of prepayment our existing cash facility, new ratio end no our with million will approximately $XX earlier five-year million X.Xx. at credit revolver. used $XX mature pleased go-forward This this

strategic execute we have Cash continue previous economic it the our favorable with to operations than environment, very current was our to this us $XXX,XXX. the for more from plan. to quarter and on positions well Given terms transaction are flow pleased facility, growth completed

cash cash of cash by estimated an was payment quarter rates. saw the Our uptick rise our interest of in operations on $X.X a for approximately basis the We $XXX,XXX sequential in our tax million. from interest quarter third to impacted due approximately

operations we cash special operations the to business. and our We a use from opening primarily fund of grow $X.X AirSculpt+, from our million, to during during forecasting related the While was going due the the quarter. of during to our flow financing are million paying to the was $XX.X continue lower equipment flow purchasing of cash million invested new to centers forward quarter, sufficient quarter, activities as cash rollout our and part primarily dividend and $XX.X of

the lowering range the the to $XXX over $XX outlook represents to increase Operator? a operator Finally, as approximately XX% year, for that, for full the our over we like I'd guidance And call XXXX. few outlook to turn EBITDA $XX With our we a million. million questions. to are adjusted revenue lowering to to which for are of year, XX% million for $XXX to the million

At question. you. time question Our of Thank conducting first with Nephron Research. [Operator Instructions] question-and-answer be comes will session with this Raskin the we Please from line a Josh your proceed

about Sorry that.

You guys me okay? hear

Yes.

can we you. Josh, hear Yes,

Okay. Perfect.

per pay. a procedure, more means many think XQ that. is that, Can were And there versus the understand getting how of are you then there for do I the out days I Is about let's the you vacation The just last do no vacations in would give So, what year year? be, physicians you right? this some assume number specific, vacation they paid guess one, prolonged sense of start the days? base track Sorry the questions physicians only two physicians. causing right? with

Aaron It's you. Rollins. Thank

have needed vacation policy. that is first vacations. So or well-enforced so days physician haven't to time problem, traditionally, we haven't we've a track major vacation them by impacted This physician major and the been a been and

there's we can Now like to sometimes physicians a there's them feel require moving than for do we're days that sometimes for and have plan we MD notice. forward, of do very vacations, sorts on before having all our redundancy to those. miss any family in and about And emergencies, advanced more had But that. we've planned elasticity I account anything don't model commitments asking

We seven our we have have than new onboarded pipeline in is doctors typical. more physicians and in XQ,

job. efforts is team are going our team and well, recruiting the doing physician a Our extremely great internal and

Okay.

follow-up I Josh, real Dennis. going is was just this Josh, quick. to

to Dr. about from last international year. to days open year. we in You Rollins from good was days. just asked about prior quarter, ability very said, third the impossible We overseas. vacations a is really sort significant. like The metric saw light the have if It which And XXX about, was travel substantially almost don't you of some travel physician think

of the our saw XXX can get in an just couple into kind if estimate current we so days at at million you And estimate our you kind rates, average number. to procedures $X of physician of And a look of kind vacations, quarter. of sort of day huge of close that of of a impact of a sort

just conversation million helpful. sequentially. large around down Got it services I And majority Dennis, million variable, of That's variable? fixed revisit you then, of could revenues a versus were you Okay. sequentially. $X.X all you. Cost but super down was say $XX heard the only is

So had I that more previously seems a thought. than lot fixed

Yes.

So a perform And on service doctor physicians a are of we pay obviously, XXX% if a case, the side, don't the we perform and incur supply. the We case. variable. cost the don't unless they won't supplies

We which have structure and Rollins enhanced around types those has Dr. our as the talked cost quality, fixed our on and about sort nursing the of costs, additional built that, in of safety, things.

of more somewhat of that item. item fixed a developed So, has a line into

also We marketing have costs.

We of EBITDA we in down did was Well, the cost we But in down to way a that amount work spent wanted and to third you highly structure. advertising, do the you decision up to in as again, our could we It's a advertising. based extremely a definitely made. variable variable that. line move quarter If marketing that same the can number way second what item. choose if we cash choice what we and your expect. see the and and the And all reduce line, we quarter on

it. Got

now. So your salaried are nurses

them the of there center doctor or So, regardless three the in day? you're or to is for paying two whether one

structures are nurses an on this standpoint. more we've year regional added are The type salary a base. overhead that They from

are salary-based. they So

Okay.

in kind of falling are that centers are more position. the salary-based individuals And a that managing of added itself certain we've site when under

four better But Okay. on pausing And end of centers? year. year. for or for this sort market to three any sense the new last one in third you typical until next of then cash? high sense sorry just you Any just about got That's pipeline sort on know of the I heard a a thought four. preserve one, pausing here. you've I trends of get of talked

absolutely No, not.

we're We de and going full intention our pausing have of no strategy, development force. novo

think here, volume steady. though forecasted, one than was I has Josh, we very softer thing important remained activity note even quarter to our too, that's lead the

lead a of us we are say out put potentially lot So not there pause. would to a need indicators there that to

accelerate building As we there's a of future. to infrastructure fact, in there the we're matter an think so opportunity much potentially that

positive. Yes, Alright, alright, that’s thank you.

Thank you.

line proceed SVB the Please with from of your comes question with next question. Our Whit Mayo Leerink.

that around close to on there last just anything is And that that Dennis follow-up when elevated sort at then of But us rates, you trending. metrics that any around consultation, data are maybe too. consult that that have of give Yes, vacation the could time question, you impacts you you close share can any physician leads? rates the negatively rates the look can additionally, how share so sense presumably a the just

remained to metrics have volume what again, has Yes, that, consistent. necessarily but is don't lead share say our so can we any we publicly,

remained close rates very at, of has of our A factors percent financing remained other look consistent. XX%. too, business rates as consistent, around Our couple a our for that consults we remained consistent, our have

about sort nothing of So changed. other impact doctors quarter has all taking the business, Again, time the indicators than off. just significant these from in the

bringing Okay. staff on you A around recruiting, some earlier physician ago, two guys think, board your that. referenced in some of or the investments support that, to made quarter prepared help remarks you I additional

around on the could brought feel about new those how novos seven many those you centers? legacy quarter. investments. you of any said progress you versus think I Just you the are in de physicians How staffing share

physicians have have staffing coming we our more we a good novos have pipeline surgeons for of the have really I seven have in such legacy a and very do backfilling you, we number exact But already centers. typically – center we doing don't in Sure. the job. mix physician good new a than And because also team that but team Of have de is play. online our where

was And XX%. about Whit it

Okay.

About novo. were were half de them half of of them legacy,

I around gave of bit you Yes. here. that? a remind think just that pressure. you full-time you elaborate me commentary just last one just on some little contract? the Can versus your And And maybe are Can wage increased nurses percent

we're again and I salary We don't from year, just this full-time XX safety the basis monitor to XX on a able to which regional close have nurses the structure a have exact that past, paramount. added number, growth, probably quality overhead we didn't the keep but in are perspective. to be our a in to

in of I don't have me. the in a exact So of that's kind FTE ballpark, count front

We also hired trainer. physician another

each so now coast, we one physicians So efficiently. we more can onboard on have

guys. thanks Okay,

you. Thank

of question John your comes James. line with proceed Please next from with Ransom question. the Our Raymond

Good morning.

of guess. ask a kind and I to back-up question, more Just meta

we're I up what mean, So seeing didn't and costs we're in. your seeing obviously, go come as revenue

you the know out. to in have do picture confidence But but confidence picture, So of get been are in that a some some this leads have your visibility to the week demand leads I demand continued have you two only or spending? generated to able intermediate-term what work to or

Thank It's Aaron you. Rollins.

Hi.

We the are be to consistency we with strong lead continues demand given really believe seeing volume.

in volume lead as guidance you on about really right comment from We guidance, excited trends, momentum. can don't it fourth suggests some but the track seeing. momentum So sequential see and our clearly is our we're on quarter XQ, we're intra-quarter contemplates improvement and

to as The due Our well resilient should softening? business our structure other our fixed as be to low thing low any leverage. model is, we tends cost see

softening see demand. are well we believe any not. a are But we we we if positioned So indicators in of

target more higher-end also that resistant. recession we is and – demographic So a

Okay.

physician sorry, But spiked a shortfall, the you've the and revenue back of schedule? just call do joined mean you think minutes at third versus late. just what's doctors I'm clear, this look not pulling mix, if out, I having to if versus people I few outages on be quarter the So we deferrals,

the about So the us, vacations the doctors' the it out when schedule we've go back the in things, Ron John, of in think, one that about their that million Boston, little $X timing, too, for – de and Glad million we and to impact shared, get we quarter impact and to about quarter Rollins, expected was obviously, comments days for what come a on both then we'd we novo bit sooner. hit Dr. were open, from spoke saw number but to they of to forecasted relate impact was And had at the the there's from novos as those. the look and de Philadelphia it them $X million and I $X

also We the wanted sometimes the actually procedure where the patient from to and the want that saw fourth procedure, XXXX. wanted and demand quarter but XQ consult the have didn't was until into

So vacation a plan. we the procedures because had many deferred saw patient big times

Got it.

right. All Thank Okay. you.

you. Thank

Our next Sandler. of question comes Please with from the Piper Wolfmeyer with proceed question. line your Korinne

for thanks and guys, taking morning the question. Good Hey.

you maybe like to why time? So giving I Thanks. come about color confidence center you on – and what's for to then the first any supply was think Just you these months any you struggling mean, me, any planning the this pieces? online Philly on I caused just maybe seems parts it was there. on and delay anything can color further is one you're can XXXX, And macro-wise? provide that in Was chain centers Was get build-outs? of as on mean, mean what color like about I it it provide delayed. new X-or-so these happening?

are especially How location whether bit site is some just permitting Every and that at typically as hit in it lead little construction, bit chain, that's a two permitting – times, every items look some and out little Ron. of You biggest you actual it you it's things Korinne, a different. the our millwork And on manpower out delays head, remains then in is on you? Hey, some our lead said. but control. of supply times different, it's if

in County terms well because us. second and part on correct to staff in and We in the we as Austin San that's in our road prior opening confidence, of Jose have the place are we will and first follow-up as we've ensure the and And Orange Raleigh in operational what question confident your our part extremely in of the well. set of out opening year XXXX clinical

Just color maybe capacity bit? on And delayed centers helpful. back could were the at vacation, deferred those all if can then capacity QX, patients come we be take pushed additional any what provide a the over that see That's QX? in on here those QX QX? spread on of that patients your that this to very the got QX, excess Will were QX, demand back? what of take kind Like to on you is they due centers is maybe of in to

We have capacity. excellent

It's in why quarter. surgery can was Thanksgiving building just came it wants schedule, that patient the it get to the our New lead is of for patients centers two said, the to or normal. and that all gives we're whenever makes we when lot rooms, surgeon model at in vacation if surge redundancy do them. into third that have least in and so Year operating meet when want – work Christmas that of sense Demand or or them have then a was demand, it around at our Now demand. quarter, can I a color more elasticity us the there again, we they we as that the the normal volume on scheduling, that's third And

deferral trailing So the quarter, see next in it both we into fourth also year. see that and we

few could months? how then perspective bit AirSculpt one I like color you of if the or AirSculpt+ utilization uptake those Smooth? provide a and squeeze And of little just Just of bit those? you can picked helpful. some has on very just Have up Can any been, of in over the more. on provide add-ons a That's past color

on Dennis, that? numbers do you have any

can it, much numbers specific Smooth that very was don't we is for QX Well, AirSculpt but on say we what a training provide quarter.

yet. actual So performed not lot a of cases

most again, this due of training. is but to Some,

You have everyone. train to

sales the You have train to team.

nurses. have train You to the

it so out doctors understand turn surgical to procedure. roll to you new have type undertaking a can to takes the You

into we will, again, from rollout, didn't a the as move get that particularly AirSculpt+, quarter we improvement centers of expect and fourth the So into it. that. for somewhat to have XXXX if you

are there. steady our giving think, impacting I a in AirSculpt seeing continued which We us rates, the Smooth, good, results is rate, touch

of going centers, meaningful expect it's going quite We've from them we So and rolled the some next growth XXX% well. to into now out year it.

I'd PR thing of on did and excited it. feel AirSculpt I think, you see mention thing existing to table be great cellulite, and awake unprecedented. Smooth, removal new Another patients. that our like while something campaign I relevant it. a I going is one marketing that it building market. demand launch really yesterday about around – we're for I can is is we really permanent doing just about it, actually you're our did something to there's and around this and for that immediately and the PR think about to And I'm incredible And

you. Thank

Thank you.

Stanley. Please question question. with Morgan comes Gutman of your the final with morning proceed line this Simeon from Our

Pittock hearing Hannah Thanks lot consumer for Simeon. kind spend, concentrated the high-ticket slowing in discretionary especially of actually We're is about This taking purchases. a question. in on for the

patients on you rate. toward way, within that run of income or high reflect areas to are attachment any pretty skew lower any consultation But that's sound rates, conversion revenue procedure? kind customer from fewer higher per any whether your that You the patient, lower constructive trends base in your body seeing

consistent. meaningful moreover, whether in seen rates, a any but financing follow-on approval price patients. right we've no rates higher-end really the get not We really of a aren't. affect financing XX% of to question? gas our remains target that demographic, and our or to for change around there's rate isn't to the going makeover, and mommy We do One at they way And look is answer question

too, that say, can be nicely. it's to would I had XX,XXX good rate, Hannah, I held case around. in But the I rate. continued range. again, a you XX,XXX quite that QX bounce mean, again, a rate pricing. The is up XX about to sequential mean Yes. has talked QX to

year? pricing temporarily? about of you follow-up. as do squeeze patient-to-patient, think to you offset you philosophically, can maybe or "taken that? I kind it Or all do have of if varies have maybe quick case to a of but do some this Obviously, more lower space this price" And quarter rates kind at way a how in And

We're confident.

for Our our anywhere great XX,XXXs the to current pricing price value offers between patients XX,XXX. an at average

Got it. Thanks guys.

to this Thank turn concludes you. Roland gentlemen, for Ladies floor our Dr. session. comments. question-and-answer I'll final back and the

We look Thank so forward much. reporting and we our interest your appreciate next and everyone's really you questions, to quarter.

Thank you. conference. This today's concludes

You disconnect your time. participation. you may at lines Thank your this for