[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of AirSculpt Technologies, Inc. for specific periods, including balance sheets, statements of operations, comprehensive income, equity changes, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific dates | ($000s) | September 30, 2023 (Unaudited) | December 31, 2022 | | :--------------------------------- | :----------------------------- | :------------------ | | **Assets** | | | | Total current assets | $16,410 | $16,676 | | Property and equipment, net | $28,909 | $24,206 | | Intangible assets, net | $47,534 | $51,099 | | Goodwill | $81,734 | $81,734 | | Total assets | $204,123 | $200,759 | | **Liabilities** | | | | Total current liabilities | $19,793 | $22,318 | | Long-term debt, net | $70,603 | $81,420 | | Total liabilities | $119,932 | $129,993 | | **Stockholders' Equity** | | | | Total stockholders' equity | $84,191 | $70,766 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table details the company's revenues, expenses, and net income or loss over specific reporting periods | (in $000s, except per share) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $46,793 | $38,892 | $148,309 | $128,090 | | Total operating expenses | $45,838 | $40,267 | $140,230 | $126,673 | | Income/(loss) from operations| $955 | $(1,375) | $8,079 | $1,417 | | Net (loss)/income | $(1,667) | $(7,377) | $95 | $(7,487) | | Basic EPS | $(0.03) | $(0.13) | $0.00 | $(0.13) | | Diluted EPS | $(0.03) | $(0.13) | $0.00 | $(0.13) | [Condensed Consolidated Statements of Other Comprehensive Income/(Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Other%20Comprehensive%20Income%2F%28Loss%29) This table presents the components of other comprehensive income or loss, which are not included in net income | ($000s) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (loss)/income | $(1,667) | $(7,377) | $95 | $(7,487) | | Change in foreign currency translation adjustment | $(106) | $64 | $(141) | $64 | | Total other comprehensive (loss)/income | $(106) | $64 | $(141) | $64 | | Comprehensive loss | $(1,773) | $(7,313) | $(46) | $(7,423) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines the changes in the company's equity accounts over specific periods, including common stock, additional paid-in capital, and accumulated deficit | ($000s) | Balance at Dec 31, 2022 | Balance at Sep 30, 2023 | | :--------------------------------- | :---------------------- | :---------------------- | | Common Stock (Amount) | $56 | $57 | | Additional Paid-in Capital | $85,858 | $99,328 | | Accumulated Other Comprehensive Loss | $(76) | $(217) | | Accumulated Deficit | $(15,072) | $(14,977) | | Total Stockholders' Equity | $70,766 | $84,191 | - For the nine months ended September 30, 2023, equity-based compensation was **$13,483 thousand**, and net income was **$95 thousand**[23](index=23&type=chunk) - Dividends paid were **$206 thousand**[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the cash inflows and outflows from operating, investing, and financing activities | ($000s) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $19,090 | $17,807 | | Net cash used in investing activities | $(8,092) | $(10,726) | | Net cash used in financing activities | $(11,954) | $(24,828) | | Net decrease in cash and cash equivalents | $(956) | $(17,747) | | Cash and cash equivalents, End of period | $8,660 | $7,600 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [NOTE 1 – ORGANIZATION AND SUMMARY OF KEY ACCOUNTING POLICIES](index=10&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20SUMMARY%20OF%20KEY%20ACCOUNTING%20POLICIES) This note describes the company's formation, business model, and significant accounting policies - AirSculpt Technologies, Inc. was formed on June 30, 2021, and completed its IPO on October 28, 2021[27](index=27&type=chunk)[28](index=28&type=chunk) - The Company operates as a holding company, providing practice management services to professional associations (PAs) in the US, Canada, and the UK, focusing on specialty, minimally invasive liposuction[33](index=33&type=chunk) - Revenue is recognized when specialty, minimally invasive liposuction services are performed, with payment typically received in advance[36](index=36&type=chunk) - Deferred revenue and patient deposits reflect payments for services yet to be performed[38](index=38&type=chunk) Amortization of Deferred Financing Costs | Period | 2023 (approx. $ millions) | 2022 (approx. $ millions) | | :--------------------------------- | :---------------- | :---------------- | | Three Months Ended September 30 | $0.3 | $0.2 | | Nine Months Ended September 30 | $0.8 | $0.7 | Advertising Expenses | Period | 2023 (approx. $ millions) | 2022 (approx. $ millions) | | :--------------------------------- | :---------------- | :---------------- | | Three Months Ended September 30 | $6.5 | $5.4 | | Nine Months Ended September 30 | $19.5 | $15.4 | Effective Tax Rate | Period | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Three Months Ended September 30 | (89.2)% | (134.6)% | | Nine Months Ended September 30 | 96.4% | (119.9)% | [NOTE 2 – GOODWILL AND INTANGIBLES, NET](index=15&type=section&id=NOTE%202%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLES%2C%20NET) This note details the company's goodwill and intangible assets, including their carrying values and amortization - Goodwill remained constant at **$81.7 million** as of September 30, 2023, and December 31, 2022, with no triggering events for impairment during the periods[54](index=54&type=chunk)[55](index=55&type=chunk) Intangible Assets, Net ($000s) | Category | September 30, 2023 | December 31, 2022 | Useful Life | | :--------------------------------- | :----------------- | :---------------- | :---------- | | Technology and know-how | $53,600 | $53,600 | 15 years | | Trademarks and tradenames | $17,700 | $17,700 | 15 years | | Total Intangible Assets (Gross) | $71,300 | $71,300 | | | Accumulated amortization | $(23,766) | $(20,201) | | | Total intangible assets, net | $47,534 | $51,099 | | - Aggregate amortization expense on intangible assets was approximately **$1.2 million** for both the three months ended September 30, 2023 and 2022, and **$3.6 million** for both the nine months ended September 30, 2023 and 2022[56](index=56&type=chunk) [NOTE 3 – PROPERTY AND EQUIPMENT, NET](index=15&type=section&id=NOTE%203%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) This note provides a breakdown of the company's property and equipment, including medical equipment, office equipment, and leasehold improvements Property and Equipment, Net ($000s) | Category | September 30, 2023 | December 31, 2022 | | :--------------------------------- | :----------------- | :---------------- | | Medical equipment | $10,809 | $8,906 | | Office and computer equipment | $833 | $551 | | Furniture and fixtures | $4,054 | $3,457 | | Leasehold improvements | $21,140 | $14,614 | | Construction in progress | $2,158 | $2,854 | | Less: Accumulated depreciation | $(10,085) | $(6,176) | | Property and equipment, net | $28,909 | $24,206 | - Depreciation expense increased to approximately **$1.4 million** for the three months ended September 30, 2023, from **$0.8 million** in the prior year, and to **$3.9 million** for the nine months ended September 30, 2023, from **$2.3 million** in the prior year[57](index=57&type=chunk) [NOTE 4 – DEBT](index=15&type=section&id=NOTE%204%20%E2%80%93%20DEBT) This note details the company's debt obligations, including term loans, revolving credit facilities, and associated costs - On November 7, 2022, the Company entered into a new credit agreement for an **$85.0 million** term loan and a **$5.0 million** revolving loan facility, maturing November 7, 2027[58](index=58&type=chunk)[122](index=122&type=chunk) - Proceeds from the new credit agreement were used to pay off the previous **$83.6 million** credit facility[58](index=58&type=chunk)[122](index=122&type=chunk) - On September 29, 2023, the Company voluntarily prepaid **$10.0 million** of the term loan principal using cash on hand[58](index=58&type=chunk)[122](index=122&type=chunk) Total Borrowings, Net ($000s) | Category | September 30, 2023 | December 31, 2022 | | :--------------------------------- | :----------------- | :---------------- | | Term loan | $73,406 | $85,000 | | Unamortized debt discounts and issuance costs | $(678) | $(1,455) | | Total debt, net | $72,728 | $83,545 | | Less: Current portion | $(2,125) | $(2,125) | | Long-term debt, net | $70,603 | $81,420 | - As of September 30, 2023, the interest rate on outstanding loans was **7.83%**, and the Company had **$5.0 million** available on its revolving credit facility[59](index=59&type=chunk)[60](index=60&type=chunk) [NOTE 5 – LEASES](index=17&type=section&id=NOTE%205%20%E2%80%93%20LEASES) This note provides information on the company's operating lease commitments, primarily for real estate - The Company's operating leases are primarily for real estate, including medical office suites and corporate offices, with initial terms typically ranging from five to ten years[62](index=62&type=chunk)[63](index=63&type=chunk) Rent Expense ($000s) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Medical office suites | $1,500 | $1,300 | $4,400 | $3,400 | | Corporate offices | $91 | $91 | $273 | $254 | Future Minimum Rental Payments ($000s) | Year ended December 31, | Amount | | :------------------------ | :----- | | 2023 (remaining) | $1,387 | | 2024 | $6,226 | | 2025 | $6,395 | | 2026 | $6,025 | | 2027 | $5,422 | | Thereafter | $12,190| | Total lease payments | $37,645| | Less: imputed interest | $(9,479)| | Total lease obligations | $28,166| [NOTE 6 – STOCKHOLDERS' EQUITY AND EQUITY-BASED COMPENSATION](index=18&type=section&id=NOTE%206%20%E2%80%93%20STOCKHOLDERS'%20EQUITY%20AND%20EQUITY-BASED%20COMPENSATION) This note details changes in stockholders' equity and the company's equity-based compensation plans - The Company granted **767,261 Restricted Stock Units (RSUs)** and **674,846 Performance-Based Stock Units (PSUs)** during the nine months ended September 30, 2023[66](index=66&type=chunk)[67](index=67&type=chunk) - RSUs have time-based vesting (1/3 per year over three years), while PSUs have market-based vesting tied to relative Total Shareholder Return (rTSR)[66](index=66&type=chunk)[67](index=67&type=chunk) Equity-Based Compensation Expense ($000s) | Period | 2023 | 2022 | | :--------------------------------- | :----- | :----- | | Three Months Ended September 30 | $4,492 | $7,370 | | Nine Months Ended September 30 | $13,483| $22,000| Dividends and Distributions Paid ($000s) | Category | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Dividends paid to shareholders | $200 | $22,800 | | Distributions to EBS Parent, LLC | $100 | $1,200 | [NOTE 7 – EARNINGS PER SHARE](index=18&type=section&id=NOTE%207%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note provides a breakdown of basic and diluted earnings per share calculations Basic and Diluted EPS and Weighted Average Shares Outstanding | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income/(loss) ($000s) | $(1,667) | $(7,377) | $95 | $(7,487) | | Weighted average shares outstanding - basic | 56,785,087 | 55,640,154 | 56,661,903 | 55,640,154 | | Weighted average shares outstanding - diluted | 56,785,087 | 55,640,154 | 58,329,685 | 55,640,154 | | Income/(loss) per share - basic and diluted | $(0.03) | $(0.13) | $0.00 | $(0.13) | - Potentially dilutive shares, including **661,723 RSUs** and **1,697,842 PSUs** for the three months ended September 30, 2023, were excluded from diluted EPS calculation as their inclusion would have been antidilutive[73](index=73&type=chunk) [NOTE 8 – INCOME TAXES](index=19&type=section&id=NOTE%208%20%E2%80%93%20INCOME%20TAXES) This note details the company's income tax expense and effective tax rates Income Tax Expense ($000s) and Effective Tax Rate | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Income tax expense | $800 | $4,200 | $2,500 | $4,100 | | Effective tax rate | (89.2)% | (134.6)% | 96.4% | (119.9)% | - The primary reason for the difference between the effective and statutory tax rates is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code[74](index=74&type=chunk) - There were no uncertain tax positions as of September 30, 2023, or December 31, 2022[74](index=74&type=chunk) [NOTE 9 – COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note discusses the company's legal actions, medical malpractice claims, and potential financial impacts - The Company is involved in legal actions and proceedings, primarily medical malpractice claims, which are considered ordinary course of business[75](index=75&type=chunk) - Management believes the outcome of these actions will not have a material adverse effect on its financial condition, results of operations, or cash flows[75](index=75&type=chunk) - While the Company maintains liability insurance, there is no assurance that coverage will be adequate for future claims, and liabilities exceeding coverage could materially impact the business[76](index=76&type=chunk) [NOTE 10 – SEGMENT INFORMATION](index=19&type=section&id=NOTE%2010%20%E2%80%93%20SEGMENT%20INFORMATION) This note clarifies that the company operates as a single reportable segment focused on direct medical procedure services - The Company operates as a single reportable segment: direct medical procedure services, which includes facilities and medical staff providing patented AirSculpt® procedures[77](index=77&type=chunk) - The Chief Operating Decision Maker (CODM) reviews consolidated financial information, including revenue, gross profit, and Adjusted EBITDA, for performance assessment and resource allocation[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of AirSculpt Technologies, Inc.'s financial condition and results of operations, highlighting key operational metrics, non-GAAP financial measures, and a detailed comparison of financial performance [Overview](index=22&type=section&id=Overview) This section provides a high-level summary of the company's business and key financial highlights - AirSculpt is a fast-growing national provider of body contouring procedures using its proprietary AirSculpt® method[82](index=82&type=chunk) - The company expanded its footprint by opening **five new centers** between March and September 2023, bringing the total to **27 centers** across 18 states, Canada, and the UK as of November 13, 2023[82](index=82&type=chunk) Key Financial Highlights ($000s) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $46,793 | $38,892 | $148,309 | $128,090 | | Revenue Growth | 20.3% | N/A | 15.8% | N/A | | Cases Performed | 3,426 | 2,879 | 11,252 | 9,726 | [Key Operational and Business Metrics](index=22&type=section&id=Key%20Operational%20and%20Business%20Metrics) This section presents key performance indicators related to the company's operations and business growth Total Case and Revenue Metrics | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cases | 3,426 | 2,879 | 11,252 | 9,726 | | Case growth | 19.0% | N/A | 15.7% | N/A | | Revenue per case | $13,658 | $13,509 | $13,181 | $13,170 | | Revenue per case growth | 1.1% | N/A | 0.1% | N/A | | Number of facilities | 27 | 20 | 27 | 20 | | Number of total procedure rooms | 57 | 43 | 57 | 43 | Same-Center Case and Revenue Metrics | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cases | 2,994 | 2,879 | 9,434 | 9,462 | | Case growth | 4.0% | N/A | (0.3)% | N/A | | Revenue per case | $13,679 | $13,507 | $13,194 | $13,142 | | Revenue per case growth | 1.3% | N/A | 0.4% | N/A | | Number of facilities | 20 | 20 | 18 | 18 | | Number of total procedure rooms | 43 | 43 | 38 | 38 | [Non-GAAP Financial Measures—Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Net Income per Share](index=23&type=section&id=Non-GAAP%20Financial%20Measures%E2%80%94Adjusted%20EBITDA%2C%20Adjusted%20EBITDA%20Margin%2C%20Adjusted%20Net%20Income%2C%20and%20Adjusted%20Net%20Income%20per%20Share) This section defines and reconciles non-GAAP financial measures used by management to assess performance - Adjusted EBITDA is defined as net income/(loss) excluding depreciation and amortization, net interest expense, income tax expense/(benefit), restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation[90](index=90&type=chunk) - Adjusted Net Income is defined as net income/(loss) excluding restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, equity-based compensation, and the tax effect of these adjustments[91](index=91&type=chunk) Adjusted EBITDA and Margin Reconciliation ($000s) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (loss)/income | $(1,667) | $(7,377) | $95 | $(7,487) | | Adjustments (e.g., Equity-based comp, D&A, Interest, Tax) | $10,742 | $15,462 | $33,048 | $38,491 | | Adjusted EBITDA | $9,075 | $8,085 | $33,143 | $31,004 | | Adjusted EBITDA Margin | 19.4% | 20.8% | 22.3% | 24.2% | Adjusted Net Income and Per Share Reconciliation ($000s) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (loss)/income | $(1,667) | $(7,377) | $95 | $(7,487) | | Adjustments (e.g., Equity-based comp, Restructuring, Tax effect) | $4,744 | $6,696 | $15,506 | $21,975 | | Adjusted net income | $3,073 | $(681) | $15,601 | $14,488 | | Adjusted net income/(loss) per share - Basic | $0.05 | $(0.01) | $0.28 | $0.26 | | Adjusted net income/(loss) per share - Diluted | $0.05 | $(0.01) | $0.27 | $0.26 | [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance by comparing key income statement items across periods [Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022](index=25&type=section&id=Three%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202022) This subsection compares the company's financial results for the three months ended September 30, 2023, against the same period in 2022 - Revenue increased by **$7.9 million (20.3%)** to **$46.8 million**, driven by the addition of seven de novo centers and **5.3% same-center revenue growth**[97](index=97&type=chunk) - Cost of service increased by **$3.3 million (22.1%)** to **$18.2 million**, primarily due to new center openings, remaining consistent at **38.8% of revenue**[98](index=98&type=chunk) - Selling, general and administrative expenses rose by **$1.6 million (7.0%)** to **$25.0 million**, attributed to increased marketing and corporate support for expansion, partially offset by lower equity-based compensation[99](index=99&type=chunk) - As a percentage of revenue, SG&A decreased from **60.2% to 53.5%**[99](index=99&type=chunk) - Depreciation and amortization increased to **$2.6 million** from **$2.0 million** due to the seven additional de novo centers[102](index=102&type=chunk) - Net loss improved significantly to **$(1.7) million** from **$(7.4) million** in the prior year period[17](index=17&type=chunk) [Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022](index=26&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202022) This subsection compares the company's financial results for the nine months ended September 30, 2023, against the same period in 2022 - Revenue increased by **$20.2 million (15.8%)** to **$148.3 million**, primarily due to the addition of seven de novo centers[106](index=106&type=chunk) - Cost of service increased by **$9.1 million (19.3%)** to **$56.1 million**, mainly due to the new de novo centers[107](index=107&type=chunk) - As a percentage of revenue, cost of service rose from **36.7% to 37.9%**, reflecting higher initial costs for new centers[107](index=107&type=chunk) - Selling, general and administrative expenses increased by **$3.2 million (4.4%)** to **$76.8 million**, driven by marketing and corporate support for expansion, offset by lower equity-based compensation[108](index=108&type=chunk) - As a percentage of revenue, SG&A decreased from **57.4% to 51.8%**[108](index=108&type=chunk) - Depreciation and amortization increased to **$7.5 million** from **$5.8 million** due to the seven additional de novo centers[111](index=111&type=chunk) - Interest expense increased to **$5.5 million** from **$4.8 million** due to rising interest rates[112](index=112&type=chunk) - The Company reported a net income of **$95 thousand**, a significant improvement from a net loss of **$(7.5) million** in the prior year period[17](index=17&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to generate and manage cash, including its sources and uses of funds - The Company relies on cash flows from operations and a **$5.0 million** revolving credit facility for liquidity[114](index=114&type=chunk) - Primary cash needs include payroll, marketing, rent, and capital expenditures for new centers and procedure rooms[114](index=114&type=chunk) - As of September 30, 2023, cash and cash equivalents were **$8.7 million**, with **$5.0 million** available under the revolving credit facility[115](index=115&type=chunk) [Cash Flow Summary](index=29&type=section&id=Cash%20Flow%20Summary) This table provides a summary of cash flows from operating, investing, and financing activities Cash Flows Provided By (Used For) ($000s) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $19,090 | $17,807 | | Investing activities | $(8,092) | $(10,726) | | Financing activities | $(11,954) | $(24,828) | | Net decrease in cash and cash equivalents | $(956) | $(17,747) | [Operating Activities](index=29&type=section&id=Operating%20Activities) This subsection details the cash generated or used by the company's core business operations - Operating cash flow increased by **$1.3 million** for the nine months ended September 30, 2023, compared to the same period in 2022, driven by the addition of seven de novo centers[117](index=117&type=chunk) - Working capital improved to **$(3.4) million** at September 30, 2023, from **$(5.6) million** at December 31, 2022[117](index=117&type=chunk) [Investing Activities](index=29&type=section&id=Investing%20Activities) This subsection describes the cash flows related to the acquisition and disposal of long-term assets - Net cash used in investing activities decreased to **$8.1 million** for the nine months ended September 30, 2023, from **$10.7 million** in the prior year, primarily due to expansion of existing facilities and opening of de novo locations[118](index=118&type=chunk) [Financing Activities](index=29&type=section&id=Financing%20Activities) This subsection outlines the cash flows related to debt, equity, and dividend transactions - Net cash used in financing activities decreased to **$12.0 million** for the nine months ended September 30, 2023, from **$24.8 million** in the prior year[119](index=119&type=chunk)[120](index=120&type=chunk) - This decrease was mainly due to a voluntary prepayment of **$10.0 million** on the term loan in 2023, compared to **$22.8 million** in dividends and **$1.2 million** in distributions paid in 2022[119](index=119&type=chunk)[120](index=120&type=chunk) [Long-Term Debt](index=29&type=section&id=Long-Term%20Debt) This subsection provides details on the company's long-term debt obligations and related activities - Total indebtedness, net of unamortized deferred financing costs, was **$72.7 million** as of September 30, 2023, down from **$83.5 million** at December 31, 2022[121](index=121&type=chunk) - The Company voluntarily prepaid **$10.0 million** of the term loan principal on September 29, 2023[122](index=122&type=chunk) - The term loan bears interest based on a base rate or SOFR plus an applicable margin, with the interest rate at **7.83%** as of September 30, 2023[123](index=123&type=chunk) [JOBS Act Accounting Election](index=30&type=section&id=JOBS%20Act%20Accounting%20Election) This section explains the company's election regarding accounting standards under the JOBS Act - As an 'emerging growth company' under the JOBS Act, AirSculpt Technologies, Inc. has irrevocably elected not to use the extended transition period for complying with new or revised financial accounting standards, thus adhering to the same standards as other public companies[124](index=124&type=chunk) [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms that there have been no material changes to the company's critical accounting policies and estimates - There have been no material changes in the nature or application of the Company's critical accounting policies and estimates from those disclosed in its Annual Report on Form 10-K dated March 10, 2023[126](index=126&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, AirSculpt Technologies, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the Company's disclosure controls and procedures, confirming their effectiveness and noting no material changes in internal controls over financial reporting [Management's Evaluation of Disclosure Controls and Procedures](index=30&type=section&id=Management's%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This subsection confirms management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, under the supervision of the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023[129](index=129&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=30&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) This subsection reports on any material changes to the company's internal controls over financial reporting - There were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting during the quarter ended September 30, 2023[130](index=130&type=chunk) [Limitations on the Effectiveness of Controls](index=30&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) This subsection acknowledges the inherent limitations of any control system, providing only reasonable assurance of achieving control objectives - Management acknowledges that any control system has inherent limitations, providing only reasonable, not absolute, assurance of achieving control objectives[131](index=131&type=chunk)[133](index=133&type=chunk) - Factors such as faulty judgment, simple error, circumvention by individuals, collusion, or management override can affect control effectiveness[131](index=131&type=chunk)[133](index=133&type=chunk) [PART II OTHER INFORMATION](index=33&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses the Company's involvement in legal actions and proceedings, primarily medical malpractice claims, which are considered routine - The Company is involved in pending and threatened legal actions, mostly medical malpractice claims, which are considered ordinary and routine[135](index=135&type=chunk) - Management believes these will not have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows[135](index=135&type=chunk) - Claims are generally covered by insurance beyond deductibles, but there is no assurance that coverage will be adequate for all future liabilities[135](index=135&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 - There were no material changes to the risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[136](index=136&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - None[137](index=137&type=chunk) [Item 3. Defaults Upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports that there were no defaults upon senior securities during the period - None[138](index=138&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Not applicable[139](index=139&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report for the period - None[140](index=140&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[143](index=143&type=chunk)[145](index=145&type=chunk) [Signatures](index=35&type=section&id=Signatures) This section confirms the official signing of the report by the company's Chief Financial Officer - The report was signed on November 13, 2023, by Dennis Dean, Chief Financial Officer (Principal Accounting and Financial Officer) of AirSculpt Technologies, Inc.[147](index=147&type=chunk)[148](index=148&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q3 2023 was $46.8 million, representing a 20.3% increase year-over-year, driven by a 19% increase in case volumes [15][6] - Adjusted EBITDA for the quarter was $9.1 million, up 12.2% from $8.1 million in the prior year [18] - Adjusted EBITDA margin decreased to 19.4% from 20.8% in the prior year, impacted by brand initiative investments and executive team costs [19][12] Business Line Data and Key Metrics Changes - Same-store revenue growth was 5.3%, indicating a return to normal levels post-COVID [15][6] - Average revenue per case increased to $13,658, a 1.1% rise year-over-year [16] - The company opened five new de novo centers in 2023, with all performing at or above expectations [8][9] Market Data and Key Metrics Changes - The broader filler market is valued at over $4 billion, expanding the total addressable market (TAM) for AirSculpt to over $11 billion with the introduction of AirSculpt Lift [4][5] - The company anticipates a meaningful impact from AirSculpt Lift in 2024 as it rolls out in more centers [5][4] Company Strategy and Development Direction - The company is focused on strengthening the AirSculpt brand, accelerating store openings, and enhancing profitability [5][6] - Plans to open at least six new centers in 2024, including locations in Detroit and Kansas City, are in place [9][8] - Investments in brand awareness initiatives are expected to drive long-term growth, despite short-term cost increases [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for services, indicating no adverse impact from broader economic concerns [10][26] - The company expects to achieve mid-single digit same-store growth in Q4 2023 [15] - Future cash flow generation is projected to remain healthy, with a conversion ratio of cash flow from operations to adjusted EBITDA expected to be around 65% for the full year [21] Other Important Information - The company has increased its full-year revenue guidance to $196 million, reflecting a 16% growth rate for 2023 [22][7] - Cash position as of September 30, 2023, was $8.7 million, with a leverage ratio of 1.6 times [20][19] Q&A Session Summary Question: Pricing and Add-on Services - The percentage of consumers adding additional services remains consistent at about 20%, primarily driven by fat transfer additions [25] - Demand remains strong, with consumers willing to pay higher price points for multiple procedures [26] Question: Future Center Openings - There is significant opportunity for opening centers with comparable average unit volumes (AUV) to historical levels, with exploration of lower AUV markets planned for the future [28][29] Question: AirSculpt Lift Expectations - Most patients are expected to be candidates for AirSculpt Lift, priced attractively at $1,500 per area, with significant marketing efforts underway [34][33] Question: SG&A and Customer Acquisition Costs - Recent brand awareness initiatives impacted SG&A and customer acquisition costs, which are expected to fluctuate with seasonality and volume [36][37] - The company anticipates improved leverage in operating expenses as revenue grows, with recent executive team costs now becoming fixed [38]

Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $55.7 million, a 12.2% increase year-over-year, driven by a 13% increase in case volumes due to the addition of six de novo centers [16][22] - Average revenue per case was approximately $13,300, a 1.1% decrease year-over-year but a 700% increase from Q1 2023, attributed to procedure mix [17] - Adjusted EBITDA was $14.6 million, compared to $14 million in the prior year, with an adjusted EBITDA margin of 26.2%, a decline of 190 basis points year-over-year [19][20] Business Line Data and Key Metrics Changes - The company has performed over 40,000 procedures historically and is now offering AirSculpt in three countries, with the recent introduction of AirSculpt Lift, a facial fat transfer procedure [6][7] - The new AirSculpt Lift procedure is expected to broaden the company's offerings and competitive moat, with significant benefits over artificial fillers [7][8] Market Data and Key Metrics Changes - The broader filler market is valued at over $4 billion, expanding the total addressable market (TAM) for AirSculpt to over $11 billion [6] - The company expects to open at least six new locations in 2024, with a global opportunity of around 500 locations, indicating a 20x increase over the current fleet [13][50] Company Strategy and Development Direction - The strategy focuses on strengthening the AirSculpt brand, accelerating store openings, and enhancing profitability as the business scales domestically and internationally [8] - The company is also focused on improving operational capabilities and cost management, targeting $2.5 million in cost savings for 2023 [15][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving the upper end of the 2023 revenue guidance range of $187 million to $192 million, driven by strong first-half performance and de novo centers [22] - The company anticipates mid-single-digit same-store growth in the second half of 2023, moving beyond the COVID-related noise in comp calculations [18][25] Other Important Information - The liquidity position remains strong, with a cash position of $20.8 million and undrawn revolver of $5 million [20][21] - The company has made significant progress in hiring, with a robust referral network among surgeons and a strong in-house recruiting team [40] Q&A Session Summary Question: What are the expectations for same-store case growth moving forward? - Management expects mid-single-digit growth for the back half of the year, acknowledging the impact of pent-up demand from the previous year [25] Question: What is the rationale for ramping up the number of centers? - The company feels confident in ramping up to six new centers due to operational capabilities and a clear pathway for expansion [27] Question: How do GLP-1 prescriptions impact patient demographics? - Management sees GLP-1 weight loss drugs as complementary to AirSculpt, creating a tailwind for demand as patients seek body contouring after weight loss [32] Question: How is the hiring environment for new centers? - The company has improved its hiring process, successfully recruiting surgeons and utilizing allied health professionals to broaden the workforce [39][40] Question: What is the pricing and uptake for the new AirSculpt Lift procedure? - The procedure can be done alongside other AirSculpt procedures, with pricing between $1,500 and $2,000 per area, and is expected to become meaningful in revenue in 2024 [46][47]

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section covers the unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents AirSculpt Technologies' unaudited condensed consolidated financial statements and related notes for the specified periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity | Metric | June 30, 2023 ($000s) | December 31, 2022 ($000s) | Change ($000s) | Change (%) | | :-------------------------- | :----------------------- | :------------------------ | :-------------- | :--------- | | Cash and cash equivalents | 20,779 | 9,616 | 11,163 | 116.1% | | Total current assets | 26,829 | 16,676 | 10,153 | 60.9% | | Total assets | 217,284 | 200,759 | 16,525 | 8.2% | | Total current liabilities | 23,948 | 22,318 | 1,630 | 7.3% | | Total liabilities | 135,812 | 129,993 | 5,819 | 4.5% | | Total stockholders' equity | 81,472 | 70,766 | 10,706 | 15.1% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric | 3 Months Ended June 30, 2023 ($000s) | 3 Months Ended June 30, 2022 ($000s) | Change ($000s) | Change (%) | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | Change ($000s) | Change (%) | | :---------------------------------- | :----------------------------------- | :----------------------------------- | :-------------- | :--------- | :----------------------------------- | :----------------------------------- | :-------------- | :--------- | | Revenue | 55,703 | 49,654 | 6,049 | 12.2% | 101,516 | 89,198 | 12,318 | 13.8% | | Total operating expenses | 50,341 | 45,691 | 4,650 | 10.2% | 94,392 | 86,406 | 7,986 | 9.2% | | Income from operations | 5,362 | 3,963 | 1,399 | 35.3% | 7,124 | 2,792 | 4,332 | 155.1% | | Net income/(loss) | 1,776 | 583 | 1,193 | 204.6% | 1,762 | (110) | 1,872 | N/A | | Basic EPS | 0.03 | 0.01 | 0.02 | 200.0% | 0.03 | (0.00) | 0.03 | N/A | | Diluted EPS | 0.03 | 0.01 | 0.02 | 200.0% | 0.03 | (0.00) | 0.03 | N/A | [Condensed Consolidated Statements of Other Comprehensive Income/(Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Other%20Comprehensive%20Income%2F(Loss)) This section presents net income alongside other comprehensive income or loss items not recognized in net income | Metric | 3 Months Ended June 30, 2023 ($000s) | 3 Months Ended June 30, 2022 ($000s) | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Net income/(loss) | 1,776 | 583 | 1,762 | (110) | | Change in foreign currency translation adjustment | (57) | — | (35) | — | | Comprehensive income/(loss) | 1,719 | 583 | 1,727 | (110) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines changes in the company's equity components, including common stock, additional paid-in capital, and accumulated deficit | Metric | June 30, 2023 ($000s) | December 31, 2022 ($000s) | Change ($000s) | Change (%) | | :-------------------------- | :----------------------- | :------------------------ | :-------------- | :--------- | | Common Stock (Amount) | 57 | 56 | 1 | 1.8% | | Additional Paid-in Capital | 94,836 | 85,858 | 8,978 | 10.5% | | Accumulated Deficit | (13,310) | (15,072) | 1,762 | -11.7% | | Total Stockholders' Equity | 81,472 | 70,766 | 10,706 | 15.1% | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | Change ($000s) | Change (%) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :-------------- | :--------- | | Net cash provided by operating activities | 18,455 | 17,478 | 977 | 5.6% | | Net cash used in investing activities | (5,976) | (6,139) | 163 | -2.7% | | Net cash used in financing activities | (1,316) | (1,433) | 117 | -8.2% | | Net increase in cash and cash equivalents | 11,163 | 9,906 | 1,257 | 12.7% | | Cash and cash equivalents, End of period | 20,779 | 35,253 | (14,474) | -41.1% | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 – ORGANIZATION AND SUMMARY OF KEY ACCOUNTING POLICIES](index=10&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20SUMMARY%20OF%20KEY%20ACCOUNTING%20POLICIES) This note details AirSculpt Technologies' organizational structure as a holding company, its practice management services, and key accounting policies - Company formed June 30, 2021, completed IPO on October 28, 2021, issuing **8,050,000 shares at $11.00 per share**[32](index=32&type=chunk) - AirSculpt is a holding company with **100% ownership** in EBS Intermediate Parent LLC, concentrating revenues in the specialty, minimally invasive liposuction market[32](index=32&type=chunk)[38](index=38&type=chunk) - Provides practice management services to professional associations (PAs) in the US, Canada, and UK, consolidating them as variable interest entities[33](index=33&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk) - Revenue is recognized when patented AirSculpt® procedures are performed, with payment typically rendered in advance[40](index=40&type=chunk)[42](index=42&type=chunk) - Cost of service includes compensation for doctors, nurses, clinical staff, supply costs, and facility rent[43](index=43&type=chunk) [NOTE 2 – GOODWILL AND INTANGIBLES, NET](index=14&type=section&id=NOTE%202%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLES,%20NET) Goodwill remained constant at $81.7 million for both periods. Intangible assets, primarily technology and know-how, and trademarks, decreased slightly due to accumulated amortization - Goodwill remained at **$81.7 million** as of June 30, 2023, and December 31, 2022[59](index=59&type=chunk) | Metric | June 30, 2023 ($000s) | December 31, 2022 ($000s) | | :------------------------------------ | :----------------------- | :------------------------ | | Technology and know-how | 53,600 | 53,600 | | Trademarks and tradenames | 17,700 | 17,700 | | Accumulated amortization of technology and know-how | (16,973) | (15,186) | | Accumulated amortization of tradenames and trademarks | (5,605) | (5,015) | | Total intangible assets, net | 48,722 | 51,099 | - Aggregate amortization expense on intangible assets was approximately **$1.2 million** for both Q2 2023 and Q2 2022, and **$2.4 million** for both H1 2023 and H1 2022[60](index=60&type=chunk) [NOTE 3 – PROPERTY AND EQUIPMENT, NET](index=15&type=section&id=NOTE%203%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT,%20NET) Net property and equipment increased to $28.9 million as of June 30, 2023, from $24.2 million at December 31, 2022, primarily due to investments in leasehold improvements and medical equipment | Metric | June 30, 2023 ($000s) | December 31, 2022 ($000s) | | :-------------------------- | :----------------------- | :------------------------ | | Medical equipment | 10,088 | 8,906 | | Leasehold improvements | 20,286 | 14,614 | | Property and equipment, net | 28,917 | 24,206 | - Depreciation expense was approximately **$1.3 million** for Q2 2023 (vs. **$0.8 million** in Q2 2022) and **$2.5 million** for H1 2023 (vs. **$1.5 million** in H1 2022)[61](index=61&type=chunk) [NOTE 4 – DEBT](index=15&type=section&id=NOTE%204%20%E2%80%93%20DEBT) The company entered into a new credit agreement in November 2022, comprising an $85.0 million term loan and a $5.0 million revolving facility. Total debt, net, slightly decreased to $83.0 million as of June 30, 2023, and the company remains in compliance with all debt covenants - New credit agreement entered on November 7, 2022, maturing November 7, 2027, includes an **$85.0 million term loan** and a **$5.0 million revolving loan facility**[62](index=62&type=chunk) | Metric | June 30, 2023 ($000s) | December 31, 2022 ($000s) | | :-------------------------- | :----------------------- | :------------------------ | | Term loan | 83,937 | 85,000 | | Unamortized debt discounts and issuance costs | (937) | (1,455) | | Total debt, net | 83,000 | 83,545 | | Long-term debt, net | 80,875 | 81,420 | - Interest rate as of June 30, 2023, was **7.23%**[63](index=63&type=chunk) - The company had **$5.0 million** available on the revolving credit facility and was in compliance with all covenants as of June 30, 2023[64](index=64&type=chunk)[65](index=65&type=chunk) [NOTE 5 – LEASES](index=16&type=section&id=NOTE%205%20%E2%80%93%20LEASES) The company's operating leases are primarily for real estate, including medical office suites and corporate offices. Operating cash outflows from leases and right-of-use assets increased, reflecting ongoing expansion and new lease obligations | Metric | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Operating cash outflows from operating leases | 2,544 | 2,026 | | Right-of-use assets obtained in exchange for lease obligations | 8,991 | 6,138 | - Rent expense for medical office suites was **$1.4 million** for Q2 2023 (vs. **$1.0 million** in Q2 2022) and **$2.9 million** for H1 2023 (vs. **$2.0 million** in H1 2022)[66](index=66&type=chunk) | Year ended December 31, | Total Lease Payments ($000s) | | :------------------------------------ | :--------------------------- | | 2023 (excluding H1 2023) | 2,696 | | 2024 | 6,240 | | 2025 | 6,413 | | 2026 | 6,043 | | 2027 | 5,441 | | Thereafter | 12,273 | | Total lease obligations | 29,423 | [NOTE 6 – STOCKHOLDERS' EQUITY AND EQUITY-BASED COMPENSATION](index=17&type=section&id=NOTE%206%20%E2%80%93%20STOCKHOLDERS'%20EQUITY%20AND%20EQUITY-BASED%20COMPENSATION) The company granted both time-based restricted stock units (RSUs) and market-based performance stock units (PSUs) to executive officers and employees. Equity-based compensation expense decreased significantly for both the three and six months ended June 30, 2023, compared to the prior year - Granted **158,306 RSUs** (Q2 2023) and **767,261 RSUs** (H1 2023) with time-based vesting conditions[70](index=70&type=chunk) - Granted **89,258 PSUs** (Q2 2023) and **674,846 PSUs** (H1 2023) with market-based vesting conditions (rTSR)[71](index=71&type=chunk) | Metric | 3 Months Ended June 30, 2023 ($000s) | 3 Months Ended June 30, 2022 ($000s) | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Equity-based compensation expense | 4,603 | 7,316 | 8,991 | 14,591 | - Paid dividends of approximately **$0.2 million** for the six months ended June 30, 2023[73](index=73&type=chunk) [NOTE 7 – EARNINGS PER SHARE](index=17&type=section&id=NOTE%207%20%E2%80%93%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per share significantly improved for both the three and six months ended June 30, 2023, reflecting the company's return to profitability. Potentially dilutive shares were excluded from calculations when their inclusion would be antidilutive | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.03 | $0.01 | $0.03 | $(0.00) | | Diluted EPS | $0.03 | $0.01 | $0.03 | $(0.00) | | Weighted average shares outstanding - basic | 56,753,498 | 55,640,154 | 56,599,291 | 55,640,154 | | Weighted average shares outstanding - diluted | 58,511,766 | 58,360,685 | 58,095,736 | 55,640,154 | - Potentially dilutive shares (RSUs and PSUs) were excluded from diluted EPS calculation when antidilutive, particularly for the six months ended June 30, 2022, due to a net loss[76](index=76&type=chunk)[77](index=77&type=chunk) [NOTE 8 – INCOME TAXES](index=18&type=section&id=NOTE%208%20%E2%80%93%20INCOME%20TAXES) The company reported income tax expense for both the three and six months ended June 30, 2023, with effective tax rates of 48.8% and 49.6%, respectively. The primary factor causing the difference between the effective and statutory rates is non-deductible executive compensation | Metric | 3 Months Ended June 30, 2023 ($000s) | 3 Months Ended June 30, 2022 ($000s) | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Income tax expense/(benefit) | 1,695 | 1,821 | 1,736 | (149) | | Effective tax rate | 48.8% | 75.7% | 49.6% | 57.5% | - The main driver of the difference between the effective and statutory tax rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code[78](index=78&type=chunk) - No uncertain tax positions were identified as of June 30, 2023, or December 31, 2022[78](index=78&type=chunk) [NOTE 9 – COMMITMENTS AND CONTINGENCIES](index=18&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company is routinely involved in legal actions, primarily medical malpractice claims, which are considered ordinary and not expected to have a material adverse effect on its financial condition. While liability insurance is maintained, there is no guarantee that coverage will be adequate for all future claims - Involved in pending and threatened legal actions, mostly medical malpractice claims, in the ordinary course of business[79](index=79&type=chunk) - Believes the outcome of current legal actions will not have a material adverse effect on its business, financial condition, results of operations, and cash flows[79](index=79&type=chunk) - Maintains liability insurance coverage, but cannot assure its adequacy for all future claims[80](index=80&type=chunk) [NOTE 10 – SEGMENT INFORMATION](index=18&type=section&id=NOTE%2010%20%E2%80%93%20SEGMENT%20INFORMATION) The company operates as a single reportable segment, 'direct medical procedure services,' which provides patented AirSculpt® procedures. The Chief Executive Officer, as the chief operating decision maker, reviews consolidated financial information, including revenue, gross profit, and Adjusted EBITDA, to assess performance and allocate resources - The company has one reportable segment: direct medical procedure services, offering patented AirSculpt® procedures[81](index=81&type=chunk) - The Chief Operating Decision Maker (CODM), the CEO, reviews financial information on a consolidated basis, focusing on revenue, gross profit, and Adjusted EBITDA[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes AirSculpt's financial condition and operational results, highlighting revenue growth, expense changes, and liquidity [Overview](index=21&type=section&id=Overview) This section provides a high-level summary of AirSculpt's business, its growth strategy, and key operational highlights - AirSculpt is a fast-growing national provider of minimally invasive body contouring procedures under the Elite Body Sculpture brand[86](index=86&type=chunk) - Opened new centers in Orange County, CA (March 2023), Austin, TX (May 2023), London, UK (June 2023), and San Jose, CA (July 2023)[86](index=86&type=chunk) - Operates **26 centers** across **18 states**, Canada, and the United Kingdom as of August 11, 2023[86](index=86&type=chunk) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change (%) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Cases performed | 4,186 | 3,691 | 13.4% | 7,826 | 6,847 | 14.3% | | Revenue ($000s) | 55,703 | 49,654 | 12.2% | 101,516 | 89,198 | 13.8% | [Key Operational and Business Metrics](index=21&type=section&id=Key%20Operational%20and%20Business%20Metrics) This section presents key performance indicators, including cases performed, revenue per case, and facility count, for overall and same-center operations | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change (%) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Cases | 4,186 | 3,691 | 13.4% | 7,826 | 6,847 | 14.3% | | Revenue per case | $13,307 | $13,453 | (1.1)% | $12,972 | $13,027 | (0.4)% | | Number of facilities | 25 | 19 | 31.6% | 25 | 19 | 31.6% | | Number of total procedure rooms | 53 | 38 | 39.5% | 53 | 38 | 39.5% | | Metric (Same-Center) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change (%) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Cases | 3,589 | 3,691 | (2.8)% | 6,638 | 6,724 | (1.3)% | | Revenue per case | $13,249 | $13,452 | (1.5)% | $13,005 | $12,994 | 0.1% | | Number of facilities | 19 | 19 | 0.0% | 18 | 18 | 0.0% | | Number of total procedure rooms | 40 | 38 | 5.3% | 38 | 35 | 8.6% | [Non-GAAP Financial Measures—Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Net Income per Share](index=23&type=section&id=Non-GAAP%20Financial%20Measures%E2%80%94Adjusted%20EBITDA,%20Adjusted%20EBITDA%20Margin,%20Adjusted%20Net%20Income,%20and%20Adjusted%20Net%20Income%20per%20Share) This section defines and presents non-GAAP financial measures, including Adjusted EBITDA and Adjusted Net Income, providing insights into underlying business performance - Adjusted EBITDA is defined as net income/(loss) excluding depreciation and amortization, net interest expense, income tax expense/(benefit), restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation[96](index=96&type=chunk) - Adjusted Net Income is defined as net income/(loss) excluding restructuring and related severance costs, IPO related costs, (gain)/loss on long-lived assets, equity-based compensation, and the tax effect of these adjustments[97](index=97&type=chunk) | Metric | 3 Months Ended June 30, 2023 ($000s) | 3 Months Ended June 30, 2022 ($000s) | Change ($000s) | Change (%) | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | Change ($000s) | Change (%) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :-------------- | :--------- | :----------------------------------- | :----------------------------------- | :-------------- | :--------- | | Adjusted EBITDA | 14,612 | 13,977 | 635 | 4.5% | 24,068 | 22,919 | 1,149 | 5.0% | | Adjusted EBITDA Margin | 26.2% | 28.1% | (1.9)pp | -6.8% | 23.7% | 25.7% | (2.0)pp | -7.8% | | Adjusted Net Income | 7,643 | 8,158 | (515) | -6.3% | 12,528 | 15,169 | (2,641) | -17.4% | | Adjusted Net Income per Share (Basic) | $0.13 | $0.15 | $(0.02) | -13.3% | $0.22 | $0.27 | $(0.05) | -18.5% | | Adjusted Net Income per Share (Diluted) | $0.13 | $0.14 | $(0.01) | -7.1% | $0.22 | $0.26 | $(0.04) | -15.4% | - Pre-opening de novo and relocation costs were **$1.4 million** for Q2 2023 (vs. **$1.2 million** in Q2 2022) and **$2.7 million** for H1 2023 (vs. **$2.1 million** in H1 2022)[100](index=100&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance for the current and prior reporting periods [Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022](index=25&type=section&id=Three%20Months%20Ended%20June%2030,%202023%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202022) Revenue increased by 12.2% to $55.7 million, primarily driven by the addition of six de novo centers. Operating expenses also increased, but income from operations grew by 35.3%, and net income surged by 204.6% to $1.8 million | Metric | Q2 2023 ($000s) | Q2 2022 ($000s) | Change ($000s) | Change (%) | % of Revenue (Q2 2023) | % of Revenue (Q2 2022) | | :------------------------------------ | :-------------- | :-------------- | :-------------- | :--------- | :--------------------- | :--------------------- | | Revenue | 55,703 | 49,654 | 6,049 | 12.2% | 100.0% | 100.0% | | Cost of service | 19,952 | 17,492 | 2,460 | 14.1% | 35.8% | 35.2% | | Selling, general and administrative | 27,893 | 26,010 | 1,883 | 7.2% | 50.1% | 52.4% | | Depreciation and amortization | 2,514 | 1,962 | 552 | 28.1% | 4.5% | 4.0% | | Income from operations | 5,362 | 3,963 | 1,399 | 35.3% | 9.6% | 8.0% | | Net income | 1,776 | 583 | 1,193 | 204.6% | 3.2% | 1.2% | - Revenue increase is attributed to the addition of **six de novo centers**, expanding the footprint from **19 to 25 centers** and procedure rooms from **38 to 53**[103](index=103&type=chunk) - Selling expenses increased by **$1.8 million** to **$9.4 million**, with customer acquisition costs rising from **$2,000 to $2,250 per customer**[106](index=106&type=chunk) - Interest expense increased to **$1.9 million** from **$1.6 million** due to rising interest rates[109](index=109&type=chunk) [Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022](index=26&type=section&id=Six%20Months%20Ended%20June%2030,%202023%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202022) Revenue increased by 13.8% to $101.5 million, driven by the opening of six de novo centers. The company transitioned from a net loss of $0.1 million in H1 2022 to a net income of $1.8 million in H1 2023, despite increased cost of service and interest expenses | Metric | H1 2023 ($000s) | H1 2022 ($000s) | Change ($000s) | Change (%) | % of Revenue (H1 2023) | % of Revenue (H1 2022) | | :------------------------------------ | :-------------- | :-------------- | :-------------- | :--------- | :--------------------- | :--------------------- | | Revenue | 101,516 | 89,198 | 12,318 | 13.8% | 100.0% | 100.0% | | Cost of service | 37,969 | 32,154 | 5,815 | 18.1% | 37.4% | 36.0% | | Selling, general and administrative | 51,775 | 50,177 | 1,598 | 3.2% | 51.0% | 56.3% | | Depreciation and amortization | 4,850 | 3,848 | 1,002 | 26.0% | 4.8% | 4.3% | | Income from operations | 7,124 | 2,792 | 4,332 | 155.1% | 7.0% | 3.1% | | Net income/(loss) | 1,762 | (110) | 1,872 | N/A | 1.7% | (0.1)% | - Revenue per case decreased by **0.4%** year-over-year, indicating that the overall revenue increase was volume-based[112](index=112&type=chunk) - Cost of service as a percentage of revenue increased due to the addition of **six de novo centers**, which typically have higher costs in their initial years[113](index=113&type=chunk) - Selling expenses increased to **$18.0 million**, with customer acquisition costs rising from **$2,150 to $2,300 per customer**[116](index=116&type=chunk) - General and administrative expenses decreased primarily due to a reduction in equity-based compensation expense, despite an expansion of the corporate team[117](index=117&type=chunk) - Interest expense increased to **$3.6 million** from **$3.1 million** due to rising interest rates[119](index=119&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations, including cash flows and available credit - The company primarily relies on cash flows from operations and a **$5.0 million revolving credit facility** for liquidity[121](index=121&type=chunk) - Cash and cash equivalents increased to **$20.8 million** as of June 30, 2023, from **$9.6 million** at December 31, 2022[122](index=122&type=chunk) | Cash Flows Provided By (Used For) | 6 Months Ended June 30, 2023 ($000s) | 6 Months Ended June 30, 2022 ($000s) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Operating activities | 18,455 | 17,478 | | Investing activities | (5,976) | (6,139) | | Financing activities | (1,316) | (1,433) | | Net increase in cash and cash equivalents | 11,163 | 9,906 | - Working capital improved significantly to **$2.9 million** at June 30, 2023, from a deficit of **$(5.6) million** at December 31, 2022[124](index=124&type=chunk) - The carrying value of total indebtedness was **$83.0 million** as of June 30, 2023[127](index=127&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, AirSculpt Technologies, Inc. is exempt from providing detailed quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023. There were no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023[136](index=136&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[137](index=137&type=chunk) - Management acknowledges that any control system provides only reasonable, not absolute, assurance due to inherent limitations[138](index=138&type=chunk) [PART II OTHER INFORMATION](index=34&type=section&id=PART%20II%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is routinely involved in legal actions, primarily medical malpractice claims, which are considered ordinary and incidental to operations. These are not expected to have a material adverse effect on the company's financial condition, and insurance coverage is maintained, though its adequacy for all future liabilities is not guaranteed - The company is involved in pending and threatened legal actions, mostly medical malpractice claims, in the ordinary course of business[141](index=141&type=chunk) - These legal actions are not expected to have a material adverse effect on the company's financial condition, results of operations, or cash flows[141](index=141&type=chunk) - Liability insurance coverage is maintained, but there is no assurance that it will be adequate to cover all future claims[141](index=141&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, beyond any updates or additional factual information provided elsewhere in this Quarterly Report on Form 10-Q - No material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2022, except as updated in this 10-Q[142](index=142&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities and use of proceeds to report[143](index=143&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities for the period - No defaults upon senior securities to report[144](index=144&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the registrant[145](index=145&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - No other information to report[146](index=146&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including certifications from principal officers, the Amended and Restated Certificate of Incorporation, and various Inline XBRL taxonomy documents - Includes certifications of Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[148](index=148&type=chunk) - Includes the Amended and Restated Certificate of Incorporation (Exhibit 3.1)[148](index=148&type=chunk) - Includes various Inline XBRL taxonomy extension documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[148](index=148&type=chunk) [Signatures](index=36&type=section&id=Signatures) The Quarterly Report on Form 10-Q was duly signed on behalf of AirSculpt Technologies, Inc. by Dennis Dean, Chief Financial Officer, on August 11, 2023 - The report was signed by Dennis Dean, Chief Financial Officer, on August 11, 2023[154](index=154&type=chunk)

AirSculpt Technologies, Inc. (NASDAQ:AIRS) Q1 2023 Earnings Conference Call May 12, 2023 8:30 AM ET Company Participants Dennis Dean - CFO Aaron Rollins - Founder & Executive Chairman Todd Magazine - CEO Conference Call Participants Simeon Gutman - Morgan Stanley Josh Raskin - Nephron Research Korinne Wolfmeyer - Piper Sandler Parker Snure - Raymond James Operator Good morning, and welcome to AirSculpt Technologies First Quarter 2023 Earnings Conference Call. Currently, all participants are in a listen-only ...

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights that the report includes forward-looking statements subject to risks and uncertainties, with no obligation to update them - The report contains forward-looking statements identifiable by words such as 'may,' 'expects,' 'plans,' 'anticipates,' and 'believes,' which are subject to risks and uncertainties[8](index=8&type=chunk) - Actual results could differ materially due to factors discussed in the 'Risk Factors' section of the Annual Report on Form 10-K, including operational, competitive, regulatory, and macroeconomic conditions[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) - The company is under no duty to update any forward-looking statements after the report date[11](index=11&type=chunk) [Part I Financial Information](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents AirSculpt Technologies' unaudited condensed consolidated financial statements, including balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | March 31, 2023 ($000s) | December 31, 2022 ($000s) | Change ($000s) | | :-------------------------------- | :---------------------- | :------------------------ | :------------- | | Total assets | 209,521 | 200,759 | 8,762 | | Total liabilities | 134,293 | 129,993 | 4,300 | | Total stockholders' equity | 75,228 | 70,766 | 4,462 | | Cash and cash equivalents | 11,283 | 9,616 | 1,667 | | Right of use operating lease assets | 29,432 | 23,764 | 5,668 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance over a period, including revenue, expenses, and net income or loss | Metric | Three Months Ended March 31, 2023 ($000s) | Three Months Ended March 31, 2022 ($000s) | Change ($000s) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------- | | Revenue | 45,813 | 39,544 | 6,269 | | Total operating expenses | 44,051 | 40,715 | 3,336 | | Income/(loss) from operations | 1,762 | (1,171) | 2,933 | | Pre-tax net income/(loss) | 27 | (2,663) | 2,690 | | Net loss | (14) | (693) | 679 | | Basic loss per share | (0.00) | (0.01) | 0.01 | | Diluted loss per share | (0.00) | (0.01) | 0.01 | [Condensed Consolidated Statements of Other Comprehensive Income/(Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Other%20Comprehensive%20Income%2F(Loss)) This section presents items of comprehensive income or loss not recognized in net income, such as foreign currency adjustments | Metric | Three Months Ended March 31, 2023 ($000s) | Three Months Ended March 31, 2022 ($000s) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net loss | (14) | (693) | | Change in foreign currency translation adjustment | 22 | — | | Total other comprehensive income | 22 | — | | Comprehensive income/(loss) | 8 | (693) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines changes in the company's equity, including common stock, retained earnings, and other comprehensive income | Item | Balance at Dec 31, 2022 ($000s) | Issuance of common stock through unit vesting ($000s) | Dividends ($000s) | Equity-based compensation ($000s) | Net loss ($000s) | Other comprehensive income ($000s) | Balance at Mar 31, 2023 ($000s) | | :-------------------------- | :------------------------------ | :------------------------------------------------ | :---------------- | :-------------------------------- | :--------------- | :--------------------------------- | :------------------------------ | | Common Stock (Amount) | 56 | — | — | — | — | — | 56 | | Additional Paid-in Capital | 85,858 | — | 66 | 4,388 | — | — | 90,312 | | Accumulated Other Comp. Loss | (76) | — | — | — | — | 22 | (54) | | Accumulated Deficit | (15,072) | — | — | — | (14) | — | (15,086) | | **Total Stockholders' Equity** | **70,766** | **—** | **66** | **4,388** | **(14)** | **22** | **75,228** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period | Cash Flow Activity | Three Months Ended March 31, 2023 ($000s) | Three Months Ended March 31, 2022 ($000s) | Change ($000s) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------- | | Net cash provided by operating activities | 6,219 | 7,080 | (861) | | Net cash used in investing activities | (3,815) | (4,274) | 459 | | Net cash used in financing activities | (737) | (924) | 187 | | Net increase in cash and cash equivalents | 1,667 | 1,882 | (215) | | Cash and cash equivalents, end of period | 11,283 | 27,229 | (15,946) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [NOTE 1 – Organization and Summary of Key Accounting Policies](index=10&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20SUMMARY%20OF%20KEY%20ACCOUNTING%20POLICIES) This note describes the company's formation, business model, and significant accounting policies applied in financial reporting - AirSculpt Technologies, Inc. was formed on June 30, 2021, and completed an initial public offering (IPO) on October 28, 2021[30](index=30&type=chunk) - The company provides practice management services to professional associations (PAs) and consolidates them as variable interest entities, with all revenue earned from services provided by PAs[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - Revenue is primarily from patented AirSculpt® procedures, recognized when the service is performed, with payment typically rendered in advance[39](index=39&type=chunk)[41](index=41&type=chunk) - Advertising expenses were approximately **$6.1 million** for the three months ended March 31, 2023, compared to **$4.8 million** for the same period in 2022[50](index=50&type=chunk) [NOTE 2 – Goodwill and Intangibles, Net](index=13&type=section&id=NOTE%202%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLES,%20NET) This note details the company's goodwill and other intangible assets, including their amortization and carrying values | Asset Category | March 31, 2023 ($000s) | December 31, 2022 ($000s) | | :-------------------------------- | :---------------------- | :------------------------ | | Goodwill | 81,734 | 81,734 | | Technology and know-how (gross) | 53,600 | 53,600 | | Trademarks and tradenames (gross) | 17,700 | 17,700 | | Accumulated amortization of technology and know-how | (16,079) | (15,186) | | Accumulated amortization of tradenames and trademarks | (5,310) | (5,015) | | **Total intangible assets, net** | **49,911** | **51,099** | - Aggregate amortization expense on intangible assets was approximately **$1.2 million** for both the three months ended March 31, 2023, and 2022[57](index=57&type=chunk) [NOTE 3 – Property and Equipment, Net](index=13&type=section&id=NOTE%203%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT,%20NET) This note provides information on the company's property and equipment, including additions, disposals, and accumulated depreciation | Asset Category | March 31, 2023 ($000s) | December 31, 2022 ($000s) | | :-------------------- | :---------------------- | :------------------------ | | Medical equipment | 9,474 | 8,906 | | Office and computer equipment | 740 | 551 | | Furniture and fixtures | 3,604 | 3,457 | | Leasehold improvements | 18,658 | 14,614 | | Construction in progress | 2,150 | 2,854 | | Less: Accumulated depreciation | (7,342) | (6,176) | | **Property and equipment, net** | **27,284** | **24,206** | - Depreciation expense increased to approximately **$1.2 million** for the three months ended March 31, 2023, from **$0.7 million** for the same period in 2022[58](index=58&type=chunk) [NOTE 4 – Debt](index=13&type=section&id=NOTE%204%20%E2%80%93%20DEBT) This note outlines the company's debt obligations, including term loans, revolving credit facilities, and associated interest rates - On November 7, 2022, the company entered into a new credit agreement for an **$85.0 million** term loan and a **$5.0 million** revolving loan facility[59](index=59&type=chunk) | Metric | March 31, 2023 ($000s) | December 31, 2022 ($000s) | | :-------------------------------- | :---------------------- | :------------------------ | | Term loan | 84,469 | 85,000 | | Unamortized debt discounts and issuance costs | (1,196) | (1,455) | | **Total debt, net** | **83,273** | **83,545** | | Less: Current portion | (2,125) | (2,125) | | **Long-term debt, net** | **81,148** | **81,420** | - As of March 31, 2023, the interest rate on outstanding loans was **7.23%**, and the company had **$5.0 million** available on the revolving credit facility and was in compliance with all covenants[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) [NOTE 5 – Leases](index=15&type=section&id=NOTE%205%20%E2%80%93%20LEASES) This note details the company's lease arrangements, including right-of-use assets, lease liabilities, and future minimum rental payments - Rent expense for medical office suites increased to **$1.5 million** for the three months ended March 31, 2023, from **$1.0 million** for the same period in 2022[65](index=65&type=chunk) | Year | Future Minimum Rental Payments ($000s) | | :--- | :------------------------------------- | | 2023 (excluding Q1) | 4,310 | | 2024 | 6,393 | | 2025 | 6,542 | | 2026 | 6,173 | | 2027 | 5,069 | | Thereafter | 11,081 | | **Total lease payments** | **39,568** | | Less: imputed interest | (9,366) | | **Total lease obligations** | **30,202** | - Operating cash outflows from operating leases were **$1.25 million** for Q1 2023, up from **$0.98 million** for Q1 2022[67](index=67&type=chunk) [NOTE 6 – Stockholders' Equity and Equity-Based Compensation](index=17&type=section&id=NOTE%206%20%E2%80%93%20STOCKHOLDERS'%20EQUITY%20AND%20EQUITY-BASED%20COMPENSATION) This note describes changes in stockholders' equity and the nature and impact of equity-based compensation plans - During Q1 2023, the company granted **608,955** restricted stock units (RSUs) with time-based vesting and **585,588** performance-based stock units (PSUs) with market-based vesting conditions[69](index=69&type=chunk)[70](index=70&type=chunk) - Equity-based compensation expense decreased to **$4.4 million** for Q1 2023 from **$7.3 million** for Q1 2022[71](index=71&type=chunk) - The company paid **$0.2 million** in dividends to shareholders in Q1 2023, compared to **$0.3 million** in distributions to the Parent in Q1 2022[72](index=72&type=chunk) [NOTE 7 – Earnings Per Share](index=17&type=section&id=NOTE%207%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note presents the calculation of basic and diluted earnings per share, considering potential dilutive securities | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(14) | $(693) | | Weighted average shares outstanding - basic | 56,443,370 | 55,640,154 | | Weighted average shares outstanding - diluted | 56,443,370 | 55,640,154 | | Loss per share (basic and diluted) | $(0.00) | $(0.01) | - Potentially dilutive shares (RSUs and PSUs) were excluded from the diluted loss per share calculation because their inclusion would have been anti-dilutive[76](index=76&type=chunk) [NOTE 8 – Income Taxes](index=18&type=section&id=NOTE%208%20%E2%80%93%20INCOME%20TAXES) This note provides details on the company's income tax expense or benefit, effective tax rate, and deferred tax assets and liabilities | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense/(benefit) | $41 thousand | $(2.0) million | | Effective tax rate | 151.9% | 74.0% | - The primary driver of the difference between the effective and statutory tax rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code[77](index=77&type=chunk) [NOTE 9 – Commitments and Contingencies](index=18&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's legal proceedings, claims, and other commitments that could impact its financial position - The company is involved in pending and threatened legal actions, primarily medical malpractice claims, which management believes will not have a material adverse effect on its financial condition[78](index=78&type=chunk) - There is no assurance that the company's liability insurance coverage will be adequate to cover all potential liabilities arising from future claims[79](index=79&type=chunk) [NOTE 10 – Segment Information](index=18&type=section&id=NOTE%2010%20%E2%80%93%20SEGMENT%20INFORMATION) This note describes the company's operating segments and how financial information is reported to the chief operating decision maker - The company operates as a single reportable segment: direct medical procedure services, focusing on its patented AirSculpt® procedures[80](index=80&type=chunk) - The Chief Operating Decision Maker (CODM), the CEO, reviews financial information on a consolidated basis, including revenue, gross profit, and Adjusted EBITDA, to assess performance[80](index=80&type=chunk) - Adjusted EBITDA is a non-GAAP measure that excludes depreciation, amortization, interest, taxes, pre-opening costs, restructuring costs, IPO costs, asset disposal gains/losses, and equity-based compensation[80](index=80&type=chunk)[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operational results, highlighting revenue growth, key metrics, non-GAAP measures, and liquidity [Overview](index=21&type=section&id=Overview) This section provides a high-level summary of the company's business, operational highlights, and strategic direction - AirSculpt, operating as Elite Body Sculpture, is a fast-growing national provider of minimally invasive body contouring procedures using its proprietary AirSculpt® method[86](index=86&type=chunk) - The company expanded its footprint to **23 centers** across **18 states** and Canada as of May 12, 2023, including a new center opened in Orange County, CA, in March 2023[86](index=86&type=chunk) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Growth | | :---------------- | :-------------------------------- | :-------------------------------- | :----- | | Cases performed | 3,640 | 3,156 | 15.3% | | Revenue | $45.8 million | $39.5 million | 15.9% | [Key Operational and Business Metrics](index=21&type=section&id=Key%20Operational%20and%20Business%20Metrics) This section presents crucial non-financial and financial metrics used to evaluate the company's operational performance and growth | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Growth | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Cases | 3,640 | 3,156 | 15.3% | | Revenue per case | $12,586 | $12,530 | 0.4% | | Number of facilities | 23 | 19 | +4 | | Number of total procedure rooms | 49 | 36 | +13 | | Metric (Same-Center) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Growth | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Cases | 3,155 | 3,127 | 0.9% | | Revenue per case | $12,676 | $12,510 | 1.3% | | Number of facilities | 18 | 18 | 0 | | Number of total procedure rooms | 38 | 35 | +3 | - Cases per procedure room were lower due to the recent addition of **four de novo centers** and expansions, which increased procedure rooms by **13** over the prior year, a decline expected to be temporary as new rooms ramp up[88](index=88&type=chunk) [Non-GAAP Financial Measures—Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Net Income per Share](index=23&type=section&id=Non-GAAP%20Financial%20Measures%E2%80%94Adjusted%20EBITDA,%20Adjusted%20EBITDA%20Margin,%20Adjusted%20Net%20Income,%20and%20Adjusted%20Net%20Income%20per%20Share) This section defines and reconciles non-GAAP financial measures, providing additional insights into the company's performance - Adjusted EBITDA is defined as net loss excluding depreciation and amortization, net interest expense, income tax expense/(benefit), pre-opening de novo and relocation costs, restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation[94](index=94&type=chunk) - Adjusted Net Income is defined as net loss excluding pre-opening de novo and relocation costs, restructuring and related severance costs, IPO related costs, (gain)/loss on long-lived assets disposal, and equity-based compensation, with these items tax-effected[95](index=95&type=chunk) | Metric | Three Months Ended March 31, 2023 ($ thousands) | Three Months Ended March 31, 2022 ($ thousands) | | :-------------------- | :---------------------------------------- | :---------------------------------------- | | Net loss | (14) | (693) | | Adjusted EBITDA | 10,721 | 9,788 | | Adjusted EBITDA Margin | 23.4% | 24.8% | | Adjusted net income | 5,821 | 7,652 | | Adjusted net income per share (Basic) | 0.10 | 0.14 | | Adjusted net income per share (Diluted) | 0.10 | 0.14 | [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, discussing revenue, expenses, and profitability trends | Metric | 3 Months Ended Mar 31, 2023 ($000s) | % of Revenue (2023) | 3 Months Ended Mar 31, 2022 ($000s) | % of Revenue (2022) | Change ($000s) | Change (%) | | :-------------------------------- | :---------------------------------- | :------------------ | :---------------------------------- | :------------------ | :------------- | :--------- | | Revenue | 45,813 | 100.0% | 39,544 | 100.0% | 6,269 | 15.9% | | Cost of service | 18,017 | 39.3% | 14,662 | 37.1% | 3,355 | 22.9% | | Selling, general and administrative | 23,882 | 52.1% | 24,167 | 61.1% | (285) | (1.2)% | | Income/(loss) from operations | 1,762 | 3.8% | (1,171) | (3.0)% | 2,933 | N/A | | Net loss | (14) | 0.0% | (693) | (1.8)% | 679 | (98.0)% | - Revenue increased by **$6.3 million (15.9%)** due to the addition of **four de novo centers**, expanding the footprint from **19 to 23 centers** and **36 to 49 procedure rooms**. Same-store revenue increased by **2.2%**[101](index=101&type=chunk) - Cost of service increased by **22.9%** due to new center openings and higher rent, with de novo centers typically having a higher cost of service as a percentage of revenue in their initial year[102](index=102&type=chunk) - Selling expenses increased to **$8.6 million** in Q1 2023 from **$6.0 million** in Q1 2022, with customer acquisition costs rising to **$2,360** from **$2,200** per customer[104](index=104&type=chunk) - Interest expense increased to **$1.7 million** from **$1.5 million** due to rising interest rates[108](index=108&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations and fund its operations - The company relies on cash flows from operations and a **$5.0 million** revolving credit facility for liquidity, which management believes will be sufficient for working capital, capital expenditures, and debt payments for at least the next 12 months[110](index=110&type=chunk) - Cash and cash equivalents were **$11.3 million** as of March 31, 2023, with **$5.0 million** available under the revolving credit facility[111](index=111&type=chunk) - Net cash provided by operating activities decreased by **$0.9 million** in Q1 2023 compared to Q1 2022, primarily due to increased spending on brand awareness[113](index=113&type=chunk) - Net cash used in investing activities decreased to **$3.8 million** in Q1 2023 from **$4.3 million** in Q1 2022, attributable to less expansion of existing facilities[114](index=114&type=chunk) - Net cash used in financing activities was **$0.7 million** in Q1 2023, including **$0.2 million** in dividends paid to shareholders and **$0.5 million** in principal payments on debt[115](index=115&type=chunk) [JOBS Act Accounting Election](index=27&type=section&id=JOBS%20Act%20Accounting%20Election) This section explains the company's election regarding accounting standards under the Jumpstart Our Business Startups (JOBS) Act - As an 'emerging growth company' under the JOBS Act, AirSculpt has irrevocably elected not to delay adopting new or revised accounting standards, adhering to the same standards as other public companies[4](index=4&type=chunk)[120](index=120&type=chunk) - The company is eligible for other exemptions for up to five years or until it ceases to be an emerging growth company, such as not providing an auditor's attestation report on internal controls[121](index=121&type=chunk)[122](index=122&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights accounting policies requiring significant judgment and estimates that materially impact financial reporting - There have been no material changes in the nature of the company's critical accounting policies and estimates from those disclosed in its Annual Report on Form 10-K dated March 10, 2023[123](index=123&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, AirSculpt Technologies, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide market risk disclosures[124](index=124&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective with no material changes in internal control - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023[126](index=126&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2023[127](index=127&type=chunk) - Management recognizes that controls provide only reasonable, not absolute, assurance and are subject to inherent limitations such as faulty judgment, error, circumvention, or management override[128](index=128&type=chunk) [Part II Other Information](index=29&type=section&id=PART%20II%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company is routinely involved in legal actions, primarily medical malpractice claims, which are considered ordinary course of business - The company is subject to pending and threatened legal actions, mostly medical malpractice claims, which are ordinary and routine[129](index=129&type=chunk) - Management believes the resolution of current legal actions will not have a material adverse effect, but there is no assurance that insurance coverage will be adequate for all liabilities[129](index=129&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the risk factors previously discussed in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2022, except as updated or supplemented by factual information in this 10-Q[130](index=130&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities and no use of proceeds to report[131](index=131&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were no defaults upon senior securities[132](index=132&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[133](index=133&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - There is no other information to report under this item[134](index=134&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including employment agreements and certifications - Exhibits include employment agreements, certifications of principal executive and financial officers (pursuant to Sarbanes-Oxley Act Sections 302 and 906), and Inline XBRL documents[136](index=136&type=chunk) - Certifications under 18 U.S.C. Section 1350 (Exhibit 32.1 and 32.2) are not deemed filed with the Securities and Exchange Commission[138](index=138&type=chunk) [Signatures](index=31&type=section&id=Signatures) The report is duly signed on behalf of AirSculpt Technologies, Inc. by Dennis Dean, Chief Financial Officer, on May 12, 2023 - The report was signed by Dennis Dean, Chief Financial Officer (Principal Accounting and Financial Officer), on May 12, 2023[142](index=142&type=chunk)

AirSculpt Technologies, Inc. (NASDAQ:AIRS) Q4 2022 Earnings Conference Call March 10, 2023 8:30 AM ET Company Participants Dennis Dean - Chief Financial Officer Aaron Rollins - Founder and Executive Chairman Todd Magazine - Chief Executive Officer Conference Call Participants Simeon Gutman - Morgan Stanley Josh Raskin - Nephron Research Korinne Wolfmeyer - Piper Sandler Parker Snure - Raymond James Operator Good morning, and welcome to AirSculpt Technologies Fourth Quarter 2022 Earnings Conference Call. Cur ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________. Commission file number: 001-40973 AirSculpt Technologies, Inc. (Exact name of registrant as specified in its charter) | ...

Airsculpt Technologies, Inc. (NASDAQ:AIRS) Q3 2022 Earnings Conference Call November 11, 2022 8:30 AM ET Company Participants Dennis Dean - Chief Financial Officer Aaron Rollins - Founder and Chief Executive Officer Ron Zelhof - Chief Operating Officer Conference Call Participants Josh Raskin - Nephron Research Whit Mayo - SVB Leerink John Ransom - Raymond James Korinne Wolfmeyer - Piper Sandler Hannah Pittock - Morgan Stanley Operator Good morning, and welcome to AirSculpt Technologies Third Quarter 2022 E ...