AirSculpt Technologies, Inc. (NASDAQ: AIRS ) Q1 2025 Earnings Call Transcript May 2, 2025
AirSculpt Technologies, Inc. beats earnings expectations. Reported EPS is $-0.02, expectations were $-0.03.
Operator: Greetings, and welcome to the AirSculpt Technologies, Inc. First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Malkin of ICR. Thank you. You may begin.
Allison Malkin: Good morning everyone. Thank you for joining us to discuss AirSculpt Technologies' results for the first quarter of fiscal 2025. Joining me on the call today are Yogi 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. 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 file with the SEC, all of which can be found on our website at investors.airsculpt.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 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 10-Q, which will also be available on our website. For today's call, Yogi will begin with an overview of the first quarter performance 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.
Yogi Jashnani: Thank you, Allison. Good morning, everyone, and thank you for joining today's call. When I stepped into the CEO role earlier this year, we were facing clear headwinds, both from a softening consumer environment and from internal challenges that had built up over time. We approached 2025 with a focused plan to stabilize performance and lay the foundation for long-term growth. Our Q1 results were in line with expectations. And while we are still in the early stages of our transformation, I'm encouraged by the traction we have seen across key initiatives. Importantly, our early efforts around cost discipline marketing efficiency and operational rigor are showing measurable impact. Transformations are never linear, especially in a dynamic consumer environment, but I remain confident that we are taking the right steps to reposition the business for sustained success.
In total, for the first quarter, revenue was $39.4 million, declining 17.3% from the first quarter of 2024, and adjusted EBITDA was $3.8 million for a margin of 9.5% versus $7.3 million and a margin of 15.4% in the first quarter of 2024. The decline in revenue was driven by lower case volume with average revenue per case up slightly. The pressure on cases was anticipated and reflected the decision to pull back marketing spend in the back half of last year and was further compounded by a tough macroeconomic environment. Same-store revenue, which does not include new centers, declined approximately 24% over the prior year quarter and was consistent with our expectation and Q4 trend. We saw an improvement in performance from February into March, and that momentum has continued into April.
We believe this early progress reflects the impact of our go-forward sales and marketing strategy starting to take hold. So, while we continue to operate in a challenging environment, our efforts have led to robust lead generation that our sales team is actively working on to drive consultations as we enter the seasonally strong second quarter. Importantly, our disciplined cost actions in Q1 delivered tangible results. On essentially the same revenue base, we delivered $1.9 million more in adjusted EBITDA versus Q4 2024, demonstrating the early impact of our discipline around spend. We will continue to be laser-focused, allocating and prioritizing investment spend on high-return opportunities, while increasing efficiencies in an effort to lower costs.
In addition to cost savings, the quarter saw additional encouraging signs that tell us we possess a sought-after procedure with growing brand strength and a strategy that has us on the right path. I will share some of the areas that reflect these signs. First, we continue to see strong consumer interest in AirSculpt. Consumers recognize AirSculpt for its effective procedures and decade long and successful track record in the body contouring space. The inherent value we have created is validated by the consistency of our average revenue per case between $12,000 and $13,000. This is an incredible asset that we will capitalize on as we grow our share of market. Second, we generated strong lead volume growth over Q1 last year as we reallocated our marketing dollars to the tactics that we know work.
We increased the efficiency of our marketing, driving significant lead growth without increasing spend versus Q1 last year. This increase in leads has significantly expanded our pipeline. As a result, we have a robust database and will continue to engage with these prospects and convert them over time even as market conditions remain soft. Third, we have strengthened our organization and believe we have the right people in place to drive our transformation. Last quarter, we noted two hires who have hit the ground running. Our new Chief Digital Officer, who joined us prior to the start of the year has spearheaded our lead generation activities that have delivered meaningful year-over-year lead volume growth and our new Chief Sales Officer is improving our consultative sales model with enhanced training, improved sales processes, and a greater focus on lead conversion.
We expect these efforts will help deliver same-store sales improvement as we move through the year. I will now turn to a review of the progress made on our business imperatives that are focused on enhancing our culture and improving our go-to-market strategy. Culture is a key enabler of our transformation. I've had the opportunity to visit many of our locations and have been very encouraged by the level of engagement and willingness to embrace change across the organization. Our teams are motivated and aligned around our business imperatives. They are committed to executing against our strategic priorities. I want to take a moment to thank them for their resilience and focus. They are the driving force behind the progress we've made thus far and the progress still to come.
This cultural push is essential as we keep constructing the groundwork for sustained expansion. Our market-entry approach has been bolstered by five key priorities. The foremost among these focuses on enhancing marketing efforts. Over the past quarter, we redirected our marketing budget towards leveraging established tactics like search engine advertising and social platforms, while also exploring fresh avenues such as web videos. Consequently, we've started observing enhancements in acquiring potential clients. To boost our marketing efficacy, we're channeling resources toward those outlets showing strong performance to ensure better returns. Secondly, we aim at refining our sales process to transform acquired prospects into actual projects. Significant strides have been taken here through robust investments in boosting sales education and fine-tuning operational procedures.
We've extended both our virtual appointment options and in-person consultation times to better fit the hectic schedules of our clients. Additionally, we're rolling out fresh service offerings to cater to growing market demands. Specifically, recognizing the synergy between GLP-1 treatments and the rising interest in skin tightening procedures, we initiated a trial run of our skin-tightening process during Q2. This venture holds significant potential as an additional income source that extends our client base and utilizes our current facilities and surgical know-how. Furthermore, elevating our customer experience continues to be crucial; several projects aimed at improving every aspect of the client’s interaction with us are currently being developed and will launch later this year and through 2026.
Finally, we keep investing in technology to speed up these goals. We're working on rolling out extended payment plans to offer our clients greater ease when reserving appointments, anticipated to boost conversions particularly under present circumstances. By the end of Q2, we aim to roll out these new choices at every one of our locations. Moreover, throughout the year, we plan to implement technological upgrades aimed at making our sales force more effective at closing deals. Coming up next, Dennis will outline an annual forecast where we project revenues for FY 2025 to be within $160 million to $170 million, along with adjusted EBITDA ranging from $16 million to $18 million. This projection takes into account today’s economic climate and includes a cautious approach due to unpredictable consumer expenditure patterns.
Despite our current perspective, we do not foresee an economic downturn occurring soon. In terms of tariffs, since our company operates primarily within the service sector where product costs form only a minor part of our expenses, we aren’t immediately affected. Nonetheless, we’re carefully tracking changes in consumer habits due to rising prices from tariff increases and shifts in how consumers feel about spending money—especially because many of our services represent optional purchases subject to careful consideration. To combat potential negative impacts, we're taking proactive steps like offering more flexible payment methods and boosting marketing activities aimed at converting inquiries into actual clients. Our belief remains that adhering steadfastly to executing our key strategies should help enhance our sales performance even amid these challenging conditions.
To summarize, we've achieved significant milestones during the initial three months, observing promising starts for our projects. Our strategies will be sustained over the course of the year to keep progressing toward our key objectives. My belief in our company’s potential remains unshaken along with my confidence in how well-structured our processes are and the prospects they offer us within the expanding $11 billion U.S. target market segment where we operate. We're staying watchful regarding cost control measures and anticipate enhancing both revenue streams and profit margins moving forward into the rest of the fiscal period. This drive includes ensuring financial stability via robust cash flow practices amid ongoing restructuring efforts. It is clear to me that this organization has what it takes to regain momentum towards sustainable expansion coupled with heightened levels of earnings efficiency. Such aspirations guide all our endeavors and form the bedrock of our pledges going forth.
In my view, the finest days are still awaiting AirSculpt and its shareholders. With that said, let me hand things over to Dennis now.
Dennis Dean: Thank you, Yogi, and good morning everybody. As stated earlier, the quarterly revenue stood at $39.4 million, marking a decrease of 17.3% compared to the previous year’s quarter, where same-store revenues dropped around 24%. We saw a dip of 17.9%, bringing the total number of cases down to 3,076. On the bright side, the average revenue per case for the period came out to be $12,799, which is marginally above what we had seen in Q1 of 2024. This drop in earnings primarily stemmed from fewer cases processed due to ongoing tough market conditions, compounded by reduced marketing activities during H2 2024. Nevertheless, starting off 2025, we've redirected our focus towards more aggressive marketing strategies, leading to significant growth in lead generation and an uptick in case volumes moving into March, with these positive trends extending right up until April.
While we've seen an upward shift in our revenue trends, yearly comparisons show a decline in case volumes attributed to weaker consumer expenditure patterns. Approximately 44% of patients utilized financing options—a figure slightly lower than the typical 50% observed during Q4. Moving ahead, we anticipate providing insights into enhanced financing alternatives designed to offer potential clients more choices. It’s worth noting again that payments were collected entirely beforehand from each procedure, leaving us without further liability concerning those opting for third-party financial assistance. Costs associated with services dropped by $2.1 million since last year; however, these expenses rose proportionally to revenues at 40.5%, up from 37.9%. This increase mainly stems from steady costs like lease obligations and staffing wages, which don’t readily adjust according to shorter term changes in income flow.
As revenue trends improve, we expect this metric to align more closely with historical levels. Selling, general, and administrative expenses increased $6 million in the quarter compared to the same period in fiscal 2024, primarily due to an increase in equity-based compensation. The prior year quarter benefited from a $10.4 million reversal in stock compensation related to certain performance-based stock units. On a sequential basis, SG&A decreased by $1.6 million, of which $1 million was from equity-based compensation and the remainder due to our cost reduction initiatives. Our customer acquisition cost for the quarter was $3,130 per case as compared to $2,990 in the prior year quarter. Our CAC was higher year-over-year, driven by a decrease in case volumes as our total advertising spend was $1.2 million less than the prior year quarter.
As our new marketing and sales efforts gain traction, we expect customer acquisition costs to decline. Adjusted EBITDA was $3.8 million compared to $7.3 million from fiscal year 2024 first quarter as a result of our revenue declines. Adjusted EBITDA margin was 9.5% compared to 15.4% in the prior year quarter. Adjusted net loss for the quarter was $1.1 million or a loss of $0.02 per diluted share. Turning to our balance sheet. As of March 31st, 2025, cash was $5.6 million. Our gross debt outstanding was $74.7 million. Our leverage ratio was 3.76 times at March 31st, 2025 and we are in compliance with all covenants under the terms of our credit agreement. We remain focused on reducing our leverage to historical levels. As such, from a capital allocation perspective, we intend to use excess cash generated from operations as well as potential proceeds from any capital raise for this purpose.
Cash flow from operations for the quarter was $0.9 million compared to $3.4 million in the first quarter of fiscal 2024. Turning to our outlook. For 2025, we are guiding revenue in the range of $160 million to $170 million and adjusted EBITDA between $16 million and $18 million. As we prioritize accelerating same-store sales in our existing centers, our guidance continues to assume no new de novo openings this year. Additionally, we anticipate remaining in compliance with the terms of our credit agreement throughout the fiscal year. I will now turn the call over to the operator to begin the question-and-answer portion of the call.
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