Business Overview AirSculpt Technologies, Inc. (NASDAQ: AIRS) is a leading provider of premium body contouring procedures in the United States. The company was founded in 2012 by Dr. Aaron Rollins, a renowned plastic surgeon, with the mission of delivering innovative, minimally invasive solutions for body transformation. Over the past decade, AirSculpt has established a strong presence in the cosmetic surgery industry, setting itself apart through its proprietary AirSculpt technology and commitment to patient-centric care.
AirSculpt Technologies, Inc. was formally established as a Delaware corporation on June 30, 2021, though its operations as a predecessor company date back to 2012. Dr. Aaron Rollins, the founder, brings over 20 years of experience in the industry as both a surgeon and company executive. The company completed its initial public offering (IPO) on October 28, 2021, selling 8.05 million shares of common stock at an initial public offering price of $11 per share. Following the IPO, AirSculpt's total outstanding shares stood at 55.64 million.
AirSculpt's business model is unique in that it provides practice management services to professional associations (PAs) located throughout the United States, Canada, and the United Kingdom. The company owns and operates non-clinical assets and provides management services to the PAs through management services agreements (MSAs). Under these agreements, the PAs are responsible for all clinical aspects of the medical operations, while AirSculpt focuses on the business and operational side.
Since its inception, AirSculpt has faced and overcome various challenges. In 2022, the company recorded a $1.08 million loss on the disposal of long-lived assets, which was partially offset by a $212,000 gain on the sale of property and equipment in 2023. The transition to becoming a public company has also led to increased expenses, including higher legal, accounting, and insurance costs. Additionally, like many businesses in the healthcare sector, AirSculpt has had to navigate the impacts of the COVID-19 pandemic on its operations.
Despite these obstacles, AirSculpt has demonstrated impressive growth. As of August 9, 2024, the company operated 28 centers across 19 states in the United States, as well as in Canada and the United Kingdom. This represents an increase from the 25 centers operated as of June 30, 2023. Since its founding in 2012, AirSculpt has successfully completed over 60,000 procedures, showcasing its strong track record and growing popularity in the body contouring industry.
AirSculpt is an experienced, fast-growing national provider of body contouring procedures delivering a premium consumer experience. The company provides custom body contouring using its proprietary AirSculpt method that removes unwanted fat and tightens skin in a minimally invasive procedure. In the second quarter of 2024, the company performed 3,950 cases, compared to 4,190 cases in the same period of 2023. The company's revenue per case was $12,916 in Q2 2024, compared to $13,310 in Q2 2023, representing a 3% decline.
The company is focused on reestablishing its same-store growth trajectory, opening and ramping its de novo centers, and improving its operating margins. The management team's current focus is on a "back to basics" approach, including prudent investment in performance marketing efforts and providing the best experience for patients.
Financial Overview AirSculpt's financial performance has been mixed in recent years, reflecting the company's successful growth strategy as well as the challenges posed by macroeconomic headwinds.
For the fiscal year ended December 31, 2023, the company reported total revenue of $195.92 million, up from $168.79 million in the prior year. However, net income for the period was a loss of $4.48 million, compared to a net loss of $14.68 million in 2022. The company's operating cash flow for 2023 was $23.96 million, with free cash flow of $14.04 million.
More recently, in the second quarter of fiscal 2024, AirSculpt reported revenue of $51 million, down 8.4% from the same period in the prior year. The decline was primarily attributed to weaker-than-expected performance across the broader aesthetics and high-end retail industries. Net income for the quarter was a loss of $3.21 million. Operating cash flow for Q2 2024 was $3.44 million, with free cash flow of -$0.58 million.
AirSculpt's cost of service, which includes expenses related to the delivery of the AirSculpt procedures such as physician and clinical staff compensation, medical supplies, and facility rent, decreased 5.6% to $18.8 million in the second quarter of 2024 compared to the prior year period. This decrease was consistent with the decline in overall case volume.
Selling, general, and administrative expenses, which include marketing, advertising, corporate support, and other overhead costs, increased 22.9% to $34.3 million in the second quarter of 2024. This increase was driven by additional expenses for marketing and corporate support to facilitate the company's growth through new center openings, as well as $3.7 million in severance costs.
In terms of geographic performance, for the three months ended June 30, 2024, revenue from international locations (Canada and UK) was $1.80 million, with a net loss from international operations of $0.20 million. For the six months ended June 30, 2024, revenue from international locations was $3.20 million, with a net loss from international operations of $0.80 million.
In response to the challenging macroeconomic environment, AirSculpt has taken decisive action to align its cost structure, including reducing marketing expenses and corporate overhead. The company expects these measures to generate an additional $1 million in savings in the second half of 2024.
Guidance and Outlook For the full year 2024, AirSculpt is guiding for revenue in the range of $180 million to $190 million and adjusted EBITDA of $23 million to $28 million. This revised outlook reflects the company's expectation of continued near-term headwinds impacting same-store centers, with modest improvements anticipated in the fourth quarter as comparisons become more favorable. The company notes that a $1 million change in top line typically has a $650,000 change in adjusted EBITDA.
AirSculpt believes it is a 30% EBITDA margin business, and as it returns to same-store revenue growth, opens new centers, and reprioritizes marketing, it will be positioned to achieve its historical EBITDA margin rates.
Despite the current challenges, the company remains confident in its long-term growth prospects. AirSculpt believes it is well-positioned to capitalize on the growing demand for minimally invasive body contouring procedures, driven by its innovative technology, strong brand recognition, and dedication to patient satisfaction.
Risks and Considerations While AirSculpt's innovative approach and national expansion strategy have undoubtedly contributed to its success, the company faces several key risks that investors should consider.
The cosmetic surgery industry is highly competitive, with both established players and emerging disruptors vying for market share. AirSculpt's ability to maintain its competitive edge and continue to attract patients will be crucial to its long-term success.
Additionally, the company's reliance on third-party financing options for its patients introduces an element of credit risk that must be carefully managed. Any disruptions or changes in the availability of consumer financing could have a material impact on AirSculpt's operations.
Furthermore, as a provider of medical services, AirSculpt is subject to various regulatory and legal risks, including potential malpractice claims and changes in the regulatory landscape governing the practice of medicine.
On August 8, 2024, Todd Magazine stepped down from his role as Chief Executive Officer of AirSculpt Technologies, Inc., effective as of August 8, 2024. Dennis Dean, the Company's Chief Financial Officer, was appointed as the Interim Chief Executive Officer. This leadership change may introduce some uncertainty and potential shifts in company strategy.
Financials AirSculpt's financial performance has shown both growth and challenges in recent years. The company's revenue increased from $168.79 million in 2022 to $195.92 million in 2023, demonstrating strong top-line growth. However, the company reported a net loss of $4.48 million in 2023, although this was an improvement from the $14.68 million net loss in 2022. The company's operating cash flow for 2023 was positive at $23.96 million, with free cash flow of $14.04 million, indicating a healthy cash-generating ability despite the net loss.
Liquidity As of June 30, 2024, AirSculpt maintained a strong liquidity position with $9.9 million in cash and an additional $5 million available under its revolving credit facility. This liquidity provides the company with a financial buffer to navigate near-term challenges and invest in growth opportunities. The company's ability to generate positive operating cash flow further supports its liquidity position.
AirSculpt's debt-to-equity ratio stands at 0.898, indicating a balanced capital structure. The company's current ratio and quick ratio are both 0.863, suggesting that while the company may face some short-term liquidity challenges, it is not in immediate danger of being unable to meet its short-term obligations.
Conclusion AirSculpt Technologies, Inc. has established itself as a premier provider of innovative, minimally invasive body contouring procedures in the United States, Canada, and the United Kingdom. The company's proprietary AirSculpt technology, coupled with its commitment to clinical excellence and patient satisfaction, has enabled it to carve out a unique niche within the highly competitive cosmetic surgery industry.
While the company has faced headwinds in recent quarters due to broader macroeconomic challenges, AirSculpt remains well-positioned to navigate these challenges and capitalize on the growing demand for its services. With a strong balance sheet, a focused cost management strategy, and a clear vision for the future, the company is poised to continue its growth trajectory and deliver long-term value for its shareholders.
However, investors should remain mindful of the recent leadership change, ongoing industry challenges, and the company's need to return to same-store growth. AirSculpt's ability to execute its "back to basics" approach, effectively manage costs, and drive growth in its expanding network of centers will be crucial factors in determining its future success.