AirSculpt Technologies Inc (AIRS) 2025 Q3 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the S Corp Technologies Inc. 3rd quarter 2025 earnings score. All participants will be in listen-only mode.

The question-and-answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please key and then 0 on your telephone keypad.

Please note that this event is being recorded.

I will now hand the call over to Alison Malkin of ICR. Please go ahead.

Good morning everyone.

Thank you for joining us to discuss AirScope Technologies results for the 3rd quarter of fiscal 2025. Joining me on the call today are Yogi Jasnani, 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. 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 FEC, all of which can be found on our website at investors.airsoft.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 their 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 10Q, which will also be available on our website. For today's call, Yogi will begin with an overview of our 3rd quarter and share an update on our strategic priorities. Then Dennis will review our financial results in more detail and provide our outlook. With that, I'll turn the call over to Yogi.

Thank you, Alison, and good morning, everyone.

During the quarter, we made strong progress on our key initiatives that focused on new growth opportunities, margin improvement, and debt reduction.

While 3rd quarter revenue was lower than anticipated, this is reflective of timing instead of trajectory of our business.

Most significantly, we are setting the stage to realize a broader market opportunity to provide body contouring solutions that address the unwanted side effects related to GLP1 use.

This represents a long-term growth engine for Scult.

Our capabilities, scale, and brand uniquely position us to capture this major opportunity in aesthetic surgery, which we are calling the GLP1 transformation.

To that end, we have expanded and refined our strategy to focus on 3 key areas.

Introducing new services to capture the GLP-1 opportunity.

Enhancing our sales and marketing strategy and financial discipline in the areas of margin improvement and capital allocation.

First, we are introducing new services to capture our GLP1 market opportunity, which is broader and more durable than I initially expected. We see our skin tightening pilot programs as part of a long-term opportunity that is highly complementary with our core body contouring business.

GLP-1 medications have fundamentally reshaped how consumers approach weight loss and wellness, and we are seeing this change is beginning to create demand for aesthetic procedures that align to our existing brand and capabilities.

In the long-term, we believe these procedures can account for a significant portion of air sculp's revenue and drive meaningful growth.

For context, global GLP-1 prescriptions have grown at roughly 38% annually between 2022 and 2024, with total sales expected to reach $100 billion by 2030, according to a study from McKinsey and Company.

GLP-1 therapies are reshaping the aesthetics landscape, with 63% of GLP-1 patients seeking aesthetic treatments post-use, representing new consumers to the market.

Equally encouraging is that nearly 2/3 of patients that have lost 11 to 30% of their body weight have multiple concerns with GLP-1 medication side effects, driving growth in patient needs for skin tightening and overall reshaping after significant weight loss.

At Scalp we have begun to serve this patient base as our protocols, scale, and brand trust give us a meaningful head start to further capitalize on this opportunity.

While it's still early in our pilots, we are seeing higher conversion rates amongst GLP1 patients.

The first step toward realizing this potential was a successful pilot of skin tightening that began in Q2 and has recently been expanded to multiple centers.

While we saw a lift in tightening services in the 3rd quarter, we found that many clients coming in for this procedure have loose skin beyond what skin tightening can address.

As a result, we have begun to add new procedures to address loose skin when skin tightening alone is not sufficient.

Thus expanding our total addressable market.

This represents a natural extension for us as the scaled player in the space.

Looking ahead, we will continue to invest to capture this meaningful opportunity.

Our second area of focus is enhancing our sales and marketing strategy.

In Q3, we adapted our marketing spend to align with the moderation in our revenue trend and prioritized initiatives that drive higher conversion.

As we move forward, our marketing approach will balance near term lead generation with longer-term brand building with a more diversified media mix, including targeted influencer campaigns and television advertising.

This is designed to strengthen lead quality, improve conversion, and deepen our focus on the affluent consumer base.

With our sales team, we are implementing new training modules and tools as we remain focused on improving conversion.

Finally, we have also improved financing options for our patients.

Our 3rd area of focus is maintaining strong financial discipline both in our margins and capital allocation.

Year-to-date we have generated more than $3 million in annualized cost savings net of investments in new growth initiatives.

We expect to continue unlocking incremental value from our current operations, which we anticipate will expand our operating margin going forward.

Turning to capital allocation, we have repaid nearly $18 million of our debt year-to-date.

Debt repayment continues to be the primary focus of our capital allocation strategy in the near term.

Beyond that, we will continue to invest in growth initiatives, including new procedures.

In Q3 we made the decision to close our center in London.

As part of a strategic review of all our centers, we saw this was the only unprofitable center and would have required significant investment to turn around.

Instead, we have chosen to focus our resources on delivering growth to our North America locations where we continue to see considerable opportunity.

We are updating our annual outlook and expect 2025 revenue of approximately $153 million as compared to our previous guidance in the range of $160 million to $170 million.

We expect 2025 EBITDA of approximately $16 million the bottom end of our guidance of $16 million to $18 million.

For the 4th quarter we are seeing improving same store sales performance compared to a year-to-date trend.

Additionally, our implied 4th quarter EBITDA guidance highlights stronger margins both sequentially and year over year.

Turning to personnel news this morning, we announced Michael Arthur will be joining Air Sculp as Chief Financial Officer starting January 2026. He assumes the CFO position from Dennis Dean, who will retire as we had previously announced following a transition period.

Michael is a seasoned executive who brings public market experience and has led financial organizations through growth, complexity, and change. I am confident he will add meaningful strength to our leadership team.

Over the next few weeks, Dennis will work closely with Michael to ensure a seamless transition, and I'm looking forward to working with him as we position Air scalp to realize its true growth potential.

Secondly, on Wednesday we filed an 8k announcing that Dr. Aaron Rawlins has resigned from the board, citing personal reasons. He confirmed this was not due to any disagreements between him and the company, its management, or the board on any matter related to the company's operations, policies, or practices. We thank Aaron for all his contributions to Air Cp and wish him all the best.

In summary, we have expanded and refined our strategy to focus on three key areas introducing new services to capture the GLP 1 opportunity, enhancing our sales and marketing strategy, and financial discipline in the area of margin improvement and capital allocation.

While near term revenue reflects a period of transition, a growing suite of procedures, balanced marketing strategy, and disciplined execution give us the confidence in our long-term trajectory.

And with that, I will now pass it over to Dennis.

Thank you, Yogi, and good morning, everyone. As I mentioned in my remarks last quarter, I'd like to thank the team at Air Scope for the opportunity to lead this organization as Chief Financial Officer for the past 4 years. It has been an exciting journey, and I'm certain that Michael is the right choice for CFO. I am committed to ensuring a smooth transition of my responsibilities and look forward to watching Airsculpe reach greater heights after I exit the business.

Now turning to our financial performance.

As mentioned, revenue for the quarter was $35 million a 17.8% decline versus the prior year quarter, with same store revenue down approximately 22%.

Cases declined 15.2% to 2,780, with same store cases down approximately 20%, and average revenue per case for the quarter was 12,587, a decline of approximately 3% from the prior year quarter, but above the midpoint of our historical range of 12,000 to 13,000.

The percentage of patients using financing to pay for procedures was 52%, which is comparable to what we experienced in the second quarter. As a reminder, we received full payment of all procedures up front, and we have no recourse related to patients who finance their procedures with third-party vendors.

Cost of services decreased by $2.9 million compared to the prior year period and as a percentage of revenue increased to 42.5% versus 41.8%. Selling general and administrative expenses decreased $6 million in the quarter compared to the same period in fiscal 2024, which reflects the impact of our cost management activities and reductions in our equity-based compensation.

Our customer acquisition cost for the quarter was approximately $3100 per case as compared to $2900 in the prior year quarter. Adjusted EBITDA was $3 million compared to $4.7 million for the fiscal 2024 second quarter.

Adjusted EBITDA margin was 8.7% compared to 11% in the prior year quarter. The declines in adjusted EBITD and adjusted EBITDA margin is the result of our revenue declines.

Net loss for the quarter was $9.5 million and adjusted net loss for the quarter of $2.4 million or $0.04 per diluted share.

Our net loss included 2 non-cash charges recorded during the quarter.

The first relates to our Salesforce technology project.

When we initially started the Salesforce project in Q4 of 2022, we planned for it to cover everything from marketing and sales to operations and clinical processes, but we realized that the strength of the platform lies in marketing and sales. So that is where we are focusing our energy. As a result, we recorded a non-cash impairment charge of $4.6 million during the quarter related to those components we do not expect to be used.

For operations and clinical needs, we are pursuing alternative solutions that are better tailored to those workflows and for our business. We continue to be pleased with the portions of this project that we have implemented related to marketing activities and expect to complete the rest of the salesforce implementation related to the sales function in the first quarter of 2026. We also recorded a loss of approximately $2.3 million related to the closure of our facility in London. This charge primarily relates to an impairment to the long-term assets we have recorded at the center. Additionally, we recorded approximately $1 million to selling general and administrative expense during the quarter related to accelerating the amortization of the right of use asset at this facility. This increase in lease expense had no impact to cash.

During the quarter we generated $400,000 of revenue at the London Center and our adjusted EBITDA was a negative $150,000. For the nine months ended September 30th, 2025, we recorded revenue at our London center of $1.4 million.

And our adjusted EBITDA was a negative $600,000.

Turning to our balance sheet, as of September 30th, 2025, cash was $5.4 million and gross debt outstanding was $57.9 million and our $5 million revolver remains undrawn.

Our leverage ratio, as calculated according to our credit agreement was 3.04 times on September 30th, 2025, and we are in compliance with all covenants under the terms of our credit agreement.

As a reminder, during the second quarter we were paid $16 million of debt, including $5 million on our revolver and a $10 million prepayment as a result of using proceeds from our capital raise and cash from operations. These activities reflect our ongoing commitment to strengthening the balance sheet, which allows us to move forward with an improved capital structure and enhance flexibility.

Cash flow from operations for the quarter was a use of cash of $225,000 compared to an increase of cash of $1.8 million in the third quarter of 2024.

Turning to our outlook for 2025, we are updating our revenue outlook to approximately $153 million versus our previous revenue guidance in the range of $160 to $170 million. We are reiterating the low end of our adjusted EBITDA guidance of approximately $16 million with our range of $16 to $18 million.

For the 4th quarter, our revenue guidance implies a smaller year over year decline, and we are seeing improving same store sales performance compared to our year-to-date trend. At the same time, our implied Q4 EBITDA guidance highlights stronger margins both sequentially and year over year.

I will now turn the call over to the operator to begin the question-and-answer portion of the call.

(Operator instruction)

Joshua Ruskin of Nephron Research.

Hey, good morning. This is actually Marco on for Josh. I appreciate you taking the question. So cost controls actually looked pretty strong, well, relative to our estimates for the quarter. So I was just wondering if you could go a little deeper on the cost cutting measures, you have taken by line, whether it be G&A or cost of service, and then looking forward, how should we think about the sustainability of the savings you're generating? Should we expect those to continue into the 4th quarter and, into next year as well?

Hey, Marco, it's Dennis. Hey, thanks for the question.

Yeah, a lot of our cost controls, as we have kind of communicated over the past couple of quarters has focused primarily in the SG&A, realm. There are some things that we've done within the cost of services, but primarily it's been in our SG&A and our support that we've had at regional positions and things of that nature. So that's been primarily the focus on it. We're continuing to heavily focus on that, clearly it, as we kind of guided our number into the 4th. Quarter, even though we're experiencing some, the revenue, the revenue softness, the cost controls are really kind of helping bridge some of that GAAP for us. So we're really pleased with that. We keep uncovering things as we kind of push on various vendors and those sorts of things and are identifying additional opportunities. So we expect to continue, on this approach, being diligent, but most of that was in the SG&A line.

Great, thanks. That's helpful. And if I could just squeeze one more in. It was good to hear about the progress you're seeing with the stand-alone skin tightening service, but could you just go into a little more detail on what you're seeing there in terms of uptake, and how you envision the pace at which that's expanded across the rest of the centers, and then also if you could just go a little deeper on what new services you're looking to add to address that GLP1 population.

Hey Marco, this is Yogi. Thanks for the question. As it relates to skin tightening, our thesis is proving out in that we are seeing there's demand for solutions that address loose skin. Now what we're also seeing is that the pool of qualified candidates for standalone skin tightening was smaller than we anticipated, mainly because the loose skin was beyond what skin tightening could address.

So while that meant Q3 revenue was muted, we see this as a broader and more enduring opportunity for a suite of procedures to further address, additional loose skin that comes in the form of skin excisions or skin removals, for example, and many of those can be done in our. In our clinics under local, it fits within our model pretty perfectly, so we have started to pilot some of that already.

Skin tightening has been expanded to multiple centers. Skin excisions is in pilot right now and even without marketing it, we are starting to see good demand for that. So we will continue to expand on that just as a quick reminder for all of these procedures it takes. 3 to 6 months for patients to see full results and so while we are while we're starting off on these it will take us a few months to get the before and after and then turn those around into marketing and expand it from there.

Thanks, very helpful.

SAM Eber of BTIG.

Hi, good morning. Thanks for, taking the questions here. Maybe I can start on a Q3 question, then I definitely want to come back to the GLP1 opportunity. But, Yogi, you talked about a timing issue this quarter. Would love, I guess, your thoughts on exactly maybe what happened here. I know, last quarter leads and consultations were stepping up a bit, so we just love to better understand the timing issue in Q3.

Yeah, SAM, thank you for the question. So for Q3, that we continue to operate in a challenging consumer environment, especially for considered purchasers, that hasn't changed since Q2. While we saw leads and consoles continue to remain strong, they were strong in Q2 and they continue to remain strong in Q3. We continue to see that consumers are hesitant to go from. I'm interested. I want to talk to you guys. I want to get a quote to purchasing.

However, we are seeing Q4al stores sales trends are better than year-to-date and. As we are transforming the business, we realize there is a bigger opportunity with GLP1 users than we initially thought. We initially thought skin tightening would be able to address a broader sliver, but we're seeing that the demand is bigger and the needs are broader, which. We can address and we're already starting to see that GLP1 users are converting better than non GLP1 users so the strategic play is with introducing the new procedures adapting our marketing and sales to capitalize on that so.

In summary, while short-term revenue is lower than expected, we are excited about the broader GLP opportunity in front of us.

Okay, that makes sense very helpful, Yogi. Alright, maybe coming to the GLP one, opportunity, I would love to.

I guess better understand, surgeon interest in, the skin excision opportunity within Air sculpt centers, right? .

Their ability to capture, maybe some of the economics, for these procedures, among these patients, and then maybe as a follow-up to that how you're thinking about any shifts in marketing or or brand awareness for Airsculpt, to go after this opportunity, does that need to change at all as you kind of go after this this new subsegment of patients?

Yeah, SAM, I'll address both parts of your questions, as it relates to surgeon interest and expertise, I think you were asking about both if I understood your question correctly. Look, there is, both are actually a pretty strong positive for us. I, had to.

At a couple of points slow things down and make sure that we are doing a pilot in fewer locations than where I had surgeon interest. So surgeon base is definitely interested in in doing skin excisions and that's that is evident in our pilot as well. And surgeons are more than capable that we have an elite network of over 80 surgeons.

Plastic and cosmetic who provide excellent care, and many of them have the abilities and have been doing this in their whether it's in their private practice or in their past lives as well, so no concerns from that perspective. Now there will be to your, to your other question, there will be changes in marketing and sales. It is much more about making sure that we get the messaging right to, people who are GLP one users or who have loose skin, so.

That's where we are testing into what is the right messaging, what is the right targeting, and what is the right, place in the cycle of GLP1 use that people are looking for, loose skin as a as a problem. Remember we've been talking about loose skin and also fat removal is another is another big idea here because with GLP1 there is uneven weight loss.

An uneven volume loss, so we continue to see people coming in for removing those stubborn deposits that GLP1 was unable to address as.

Well.

Really helpful, thanks for taking the questions.

Thank you ladies and gentlemen. We have reached the end of the Q&A session.

I will now hand back to Hergi Jashnani the closing remarks.

Thank you again for joining us. I also want to thank the EAT team and a network of over 80 surgeons that provide excellent care and results to our patients.

Together we are powering the next chapter in Air Sculp's growth. We look forward to share our progress when we report Q4 results and wish you a happy and healthy holiday season.

Thank you, sir. Ladies and gentlemen, that concludes today's event.

Thank you for attending, and you may now disconnect your line.