AirSculpt (AIRS) 9 Aug 242024 Q2 Earnings call transcript

Greetings, and welcome to the AirSculpt Technologies Second Quarter Fiscal 2024 Earnings Call. [Operator Instructions] I would now like to turn the conference over to your host, Allison Malkin with ICR. Thank you.

You may begin.

Good morning, everyone. us of AirSculpt fiscal joining the results for quarter second XXXX. you to Technologies discuss for Thank

Joining me Interim on Founder and and the Financial call today Chairman, Chief Aaron are Dr. Rollins; Dennis and Officer, Chief Officer Executive Executive Dean. the company's

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

earnings these morning XX-Q, our reconciliation A of website. call, we During in and as filed our We will some be can also and discussions financial which we as of results found be our financial in accurately performance business. the of our underlying our true recent measures measures. certain release use represent operational non-GAAP non-GAAP they in this this more believe also measures reference most available will on

to the Dr. over turn I'll call that, With Rollins.

results, margins. committed our centers Earlier reestablishing morning, results our challenging trajectory, improving below de morning, growth Despite demand a everyone, you quarter ramping we our second and and to Good we expectations announced today's remain thank operating novo same-store joining these this and our opening for amid call. backdrop.

team's current To achieve back to is focus basics. objectives, the on these management

our body procedures which our trained proprietary efforts, and using perform in best-in-class AirSculpt technology. they marketing For the do for experience patients contouring doctors is prudently expertly to performance providing do, letting our best means what investing us, that are our

will our with firm also role search mission This permanent disciplined CEO. to CEO enable and serve addition as morning, improve the executive in passion a acumen, firm's a style leadership changes. proven we work management series our our as ongoing global top-tier Dennis' financial of to Dean Interim search for we for his Dennis announced as approach. CFO today, Effective will pursue back-to-basics we performance a lead patient-centric company our as to

as years gained continue as strategic Founder will role, a I of Chair. executive. XX I'll as provide and In well position in from to my the experience remain company leadership as clinical and my this surgeon industry in Executive guidance a

company I the Dennis, record, turn track would founded call comment XX,XXX having on just procedures in very than since the XXXX. I to I our successfully over strong more to completed like Before

to building we proprietary our forward positive dedicate progress us Our provides opportunity performance the and in long-term look possess updating operate our with We improving large from record, and the with near-term value. as vast to to performance grow. addressable we which on efforts we market technology you to shareholder which a

I'll now details as to to our call on as Dennis more quarter year. for turn well over the outlook provide the the

in ongoing for is today pleasure to with me their CEO to to morning, Interim the role. express as would a appreciation It Good my Aaron. Board speak confidence my and like Directors new in Thanks, everyone. you I also CFO. of

footprint procedures as of experiences as days that our in our my and in in I United best strongly celebrated recently third lie of of And challenging us. spite AirSculpt. I company our I'm national with couple excited on of across contouring lead as our the well Canada XX focus Kingdom. we patient intensify centers delivering XX positive body believe ahead year to past a the quarters, at states

Our difficult results sectors. reflected as increasingly the well as second across being other aesthetics market environment, quarter is which consumer felt the

to cost decisive the We align environment. current our actions base are to taking

on To the including efforts opening while we deliver this centers continued lead are de of that end, will novo marketing and allocate oriented. return a to generative opportunities resources investment, reducing our that marketing longer-term high

EBITDA In inflation. and to year-over-year, quarter same-store $X.X growth with quarter. brand $XX revenue total, awareness prior as decline revenue million, XX% And million decreased compared revenue reflecting second combined lower from resulting marketing advertising activities X.X% a cost in year the to down in adjusted was

results there several the weaker were in quarter the bright of were than expected, While we quarter. spots the

me some Let highlights. share

expectations, and the open novo performed and to of strong procedures our our class for ahead ongoing demonstrating ability centers. First, de demand our identify our XXXX successfully

cohort, a environment. expectations ROI challenging despite our continue consumer locations As the these to exceed

locations. relates targeted will third of quarter it we and one plans. new center to patients to welcome now Kansas The this to As end we to end with and the openings, had additional quarter year City, center sixth expect X following year's XXXX in Kansas the be centers our XX open our in part the fourth in

provided Second, volumes. activities lead generation lead sequential increase in a XX%

we conversion attribute environment. difficult experienced macro to rates, which the we However, lower-than-expected

in others scheduling mind time a higher-end range base. aesthetic consumer spending consistent in us believe taking are our $XX,XXX, our needs makes is evaluate in for the a consumers before considered by and procedures, that $XX,XXX highlighted Keep to and We retail the to which which more customer is average spaces. of purchase theme procedure cost their

a customer going interact continue which as provide target from with robust to these with profile We to leads forward. us they

management efforts. Third, accelerated cost we our have

In compared which customer a first typically activities expected from a provides focus brand to fact, marketing attention to our away as awareness year procedure spend to a search, conversion paid by intent. over decline quicker pivot we million half and to the in back second are $X half as the the due costs to of higher

to expenses to and openings million That due $X.X for continue lead inflationary search cost said, half competitive we second higher in paid will factors. grow and generation by new marketing year-over-year we as expect support other approximately center incur

reduce portion generate will costs, which we $X a the an expense mitigate overhead million of corporate to the second additional in expense expect savings We year. of of further as this half

base. our opportunities expense We further will continue to evaluate streamline to

solid continue balance And in sheet a at we modest a and lever to approximately $XX ratio cash fourth, million X.XXx. with possess

Let me highlights some quarter. of the specific now second share

As prior decline our same-store second of since novo de for and opened revenue year quarter was the revenue of X incremental year. mitigated last X.X% end by mentioned, XXXX from an down over the a quarter with million, performance quarter centers XX% revenue new the $XX that by strong class generated

earlier. quarter of today, I versus XX operated XXXX. And centers at the end XXXX, As we of XX, we of June XX as second mentioned of as XX the operate

per financing the over end a XX%, high range the approximately our quarter pay at procedures was at percentage the consistent quarter. recent $XX,XXX. This Average was year of of case which represented is for using to prior for The quarters. patients revenue X% decline with

we recourse a full all have procedures As who and to upfront, do we any with not of payment finance patients their procedures related receive reminder, third-party vendors.

from as costs last percentage deleverage decline. Our but service from a to sales XX.X% revenue to of certain the increased second quarter declined cost fixed of of our million XX.X%, due year $X.X reflecting the

increased severance to driven changes. and XX.X% period in related increase quarter million expenses same to charge administrative by XXXX. and was or our a second general fiscal leadership This the the in expense Selling, $X.X marketing compared growth

have made. year corporate As savings overhead we million been related continue half more I mentioned, reductions, reductions. will as expect the which headcount in we an of these the increase to on focus recently to previously realize incremental cost in savings And back we even $X to

activities. prior case the compared This year. Our $X,XXX due was to is $X,XXX customer in investments brand per acquisition awareness cost as for to further the our quarter increase in

our these would $X,XXX CAC case. per been Excluding activities, approximately have

expect brand return second of paid focus total activities. awareness we initiatives and shift decline We our to into the primarily move from to half as and sequentially year we away our search CAC social as the

EBITDA Adjusted was decrease compared $XX.X quarter million of EBITDA of million. prior was in quarter. fiscal XX.X% a XX.X% $X.X the million $X.X Adjusted in second to the compared to year margin XXXX,

Adjusted $X.X costs. the and excludes or in per for Adjusted income was compensation net million diluted severance and share. related million $X.X $X.XX restructuring $X.X equity-based net in income million quarter

We our end. balance healthy maintain at a to sheet balance sheet. Turning quarter

available As of was XXXX, and $X facility. $X.X XX, our June million on had we credit cash million, revolving

million, $XX.X the to for credit million adjusted $X.X agreement debt is in period The quarter million decrease EBITDA. compared Also mostly XXXX. X.XXx. Cash calculated our flow center $X.X X the first openings. outstanding was to million, now was months of $XX.X the ratio same operations related under our first was which leverage the the to Our as the year, at of invested primarily we decline for the of from the X new year and of during end is gross due months

for now Let's our outlook XXXX. discuss

modest into result lower the improvements same-store impacting as centers to quarter continue We quarter near-term and some as the of move third see expect fourth a we comparative. a headwinds in

our we are on the in to headwinds performance the year experiencing, adjusting million. for $XXX are first of revenue a and our EBITDA guidance million in of our mind that flow-through environment $XX the typically a in we EBITDA. and change $XX to Therefore, revenue full current $XXX,XXX year line million range to top adjusted from million $XXX adjusted half $X base, macro change based to cost Keep in of a has variable range of given highly a million the

will continue successfully EBITDA return believe as our business. growth, I revenue XX% is initiatives, centers new achieve we strongly reprioritize And EBITDA historical be positioned to our margin to and we marketing margin same-store a AirSculpt to out roll rates.

and platform summary, focus delivers taking value dynamic navigate our environment execute enable strengthened contain shareholders. increased on us and core to provide profitable for the we the the growth and to expect In with strategy long-term us a to that I will consistent are actions current costs

I'd operator questions. like for that, over call some the to the Operator? turn to With

comes question Sandler. Korinne [Operator Instructions] Our with line Piper first the of from Wolfmeyer

Is there point I'd also, be general to you any it fluctuate a quarter. Are than the volume you on is bulk once great. of worse? the macro? you attribute really more The would decline the color the consumer all projecting? seeing like Did saw get pressure progressively at to? becoming what any first the Did it you Just competitive trends of touch pressures? just Are And GLP-Xs were more the would throughout one just month-to-month?

Sure, Korinne.

typically little into see sort We bit little So see off as we fall month we quarter, a kind the and to as see. season unusual a moved started little April in was from That it May. throughout we bit of pick relates the June. of to what a up of trend the did bit of

We was Clearly, lead experience. than volume the June did what muted of actually that much sort slack June off. But thing comparatively cadence less it it. was have is that improved. normally it of season, interesting about but did a we The our very speaking. that was

volume So increased our lead quarter. throughout the

AirSculpt. us So us gives continued still there's gave significant in and about that optimism interest

just are bit right back customers the that is finding holding a we're what But now. little

And our spite so conversion that in the declined saw of increase even we rates volumes. in lead

It's is now, what consumer. feeling we're the -- right

but And lot so a of to the, the pull we're schedule the just of volumes experiencing cases. ready kind just not trigger lead and again,

as conversion rates continue those And of and so primarily over that was that we but the impacted we've things we expect return past, the to that kind time to what in numbers. will back improve experienced

causing GLP-Xs GLP-X a are the relates the having done. seeing customers it's standpoint, lot the the not possibly factors. it's right it enter time when to they procedure additional relates But a as some it really, as macro a It's office. economic the of we From factor we're seeing on primarily it's really from sort something again, that But that patients to as decision-making. of that now, are

really some implementing? new you're of past are what changing, sure can A&P tactics called on quarters. the helpful. promos marketing you strategies how us And those you now incremental but the We to and out some and walk through then that have some seen of that you're That's Great. stuff not

And help improve? to gives embedding expectations And that to then improve? you are is for confidence you what then what going that conversion really in timing your that, that conversion

obviously, activities the standpoint say, much the brand and our the nature. X.X awareness around from paid years marketing, that I of So that very we've of have been things continued, over shifting search We've last, would activities. of sort been doing things to

that quarter, much, for convert. longer million, the $X saying But they do, actually not cases the we are those have million brand in to to tail those regards we initiatives. in brand but little a thing when -- -- a over much invested wrong other $X awareness I'm

saw we investments we future. that historically so long-term are making a in And those as

let's very is traditional things shared. we trying. of some so as a -- have And converting the the or what than that cases. relates it to We that Those patients brand as typically decided do intent generate to have basics, awareness know we've the paid go effective of higher been less for traditional has to search us been back method to Aaron a

awareness we've going that to in to back that's remove the focus past. rates. to has time, brand believe the we're the So on been begin for that search us go doing And know improve we activities, worked activities over conversion going our the paid basics, to, we

do of to the up quarter more at the work just in I in down aren't in we our going When We that the quarter, most related said, in lower quarter. third approximately expect we improvement to to XX% second the if it? against. keeping in change. outlook things modeling somewhat something as were third improvement fourth the -- comparative As looking the that quarter same-store to have in significantly some we're fourth, We're with similar we're but is a

lead in. with really team we're really our doing on our and realigning some excited around trying there. standpoint the and of improving from incent came We're that sales working and conversion improving things sales team the rates again, that way conversions. focusing we to about We're So kind volume the

we into next out And are of think help so we through going of this kind going and rest year. the year move us to as those

Josh Instructions] Raskin comes Our next of from [Operator question Nephron line Research. the with

So the quarter. the excluding still expenses just in over SG&A $XX stock were million comp,

just marketing? million of us was specifically maybe the much give sales awareness. So on? color can spent you maybe marketing on $X or what that brand some heard how that I on was And and

is you How of variable? much view of much that fixed? how And personnel? that as do how then that of is total G&A truly then much And

Thanks, Josh.

to to So little $X items goes SG&A that SG&A One, the from charge out a a made. a a from an it a want the make number management of that X some we've on. you're over that when couple call at activities against we looking severance standpoint, related -- there's up -- had large of changes you million we

will which So It that's from one away will standpoint. that component, be variable. go XXX%

brand also, $X then the to out, we had in was is And awareness the had as is That you go marketing, quarter. as going over away. little which called million spoke of a

those both So items variable that XXX% are from of standpoint.

professional and those of increase removed increase again, we fees legal that some the of sorts those marketing of sort largest that that, remaining SG&A The forward. were things. around primarily, the of of fees sort But saw was going severance the X be and both drivers will

Okay.

count just That's what of the discounting sensitivity So there's this that? just that juxtapose you that be same-store? And especially fact helpful. really seems in well Okay. do can to you think Do real consumer consumer up to rate then no sort you holding drops, work? while price the behavior think doesn't the case explains

quarter a discounting say years, work. discounting were wouldn't doesn't couple did some of we go We if back the -- heavy in fourth I you XXXX. to of

some And so it I volumes. think, generated,

far of well. sort we now said, standpoint, really are as as our a doing rate up really as profitability not we a right from that targeting saw And something held you has there. reduction But It's discounts.

the it frankly, to, think offer. speak does that value I we quite

the consumers do the that AirSculpt brings think table. to value I the see

a of And why we rates so charge reasons they're them. that we're to is getting the one I because the comfort people value in level think offering that believe that's there's the

a I now. think stretched our is, right little again, bit consumer

are as cases. conscious that are And cash far the population right more little maybe so a portion that the delaying is of their activities now scheduling that ones as

volume. that drive just doesn't might this point route. we not that to might has in offer some up. things time, not at the we've But we held chosen go pleased that are rate promotional It But additional that mean

Okay.

for me. last Just one

XX% off from the But same-store is XX%. that Just last quarter. wasn't terribly down decline far case

rewind guidance, when months? you think changed if guys X ago was months in going what did what maybe you X So you snap like Or confirmed to back? last the

So volumes. to our sharing sort was were lead one of starting that the of our earlier we I in things see is increase sequential normal

that you we believe that, back. of sort snap going to, with begin so to And we said, are as

were probably same-store to accelerate some Now we little It were expecting call from we we first more. in quarter. to somewhat think, I if the a declines, did that go saw quarter our we out, first the did as similar notes back bit

out where coming and we're going the in, coming these. of leads quarter convert able be again, is are we But first of felt to our to kind

we saw what so And macro rates was just And the just conversion dropped. consumer-related. believe that's again, we

low point, But in one high a -- and too, a price of we are we're we are the things, keep I -- mind, volume. a

lower take the those of move saw other, doesn't significant way it So a obviously cases one the the we in direction. move cases amount to and or needle

getting that realigned the a gets up. can how take we things want of we're again, marketing, things around some volumes few this. to the those significant of come bring of regards cases team But we on, to sales on we changing think conversions, it to basics our a out back focus case to back in amount how And doesn't

Mr. no moment. other the the floor turn I'll final back Dean to any at seeing comments. for questions I'm

to Well, when and speaking we I with third we report for look call the to you forward thank today, quarter you results. want joining

Thank you. This call. concludes today's conference

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