AirSculpt Technologies(AIRS) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents AirSculpt Technologies' unaudited condensed consolidated financial statements as of June 30, 2025, reflecting decreased revenue and net losses compared to prior periods Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2025, shows total assets of $198.4 million, a decrease from $210.0 million at December 31, 2024, with total liabilities decreasing to $107.2 million and total stockholders' equity increasing to $91.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $16,405 | $17,117 | | Total Assets | $198,367 | $209,996 | | Total Current Liabilities | $25,829 | $28,609 | | Total Liabilities | $107,210 | $130,706 | | Total Stockholders' Equity | $91,157 | $79,290 | Condensed Consolidated Statements of Operations For Q2 2025, the company reported a net loss of $0.6 million on revenue of $44.0 million, while for H1 2025, the net loss was $3.4 million on revenue of $83.4 million, a significant shift from prior-year net income Q2 Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $44,012 | $51,004 | | Income/(loss) from operations | $786 | $(4,981) | | Net (loss)/income | $(591) | $(3,206) | | Diluted (Loss)/income per share | $(0.01) | $(0.06) | Six-Month Operating Results (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenue | $83,383 | $98,624 | | (Loss)/income from operations | $(803) | $6,031 | | Net (loss)/income | $(3,438) | $2,823 | | Diluted (Loss)/income per share | $(0.06) | $0.05 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities for H1 2025 was $5.9 million, with net cash used in investing activities decreasing to $2.2 million and financing activities reflecting debt payments offset by public offering proceeds Six-Month Cash Flow Summary (in thousands) | Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,852 | $6,807 | | Net cash used in investing activities | $(2,166) | $(5,580) | | Net cash used in financing activities | $(3,732) | $(1,623) | | Net decrease in cash | $(46) | $(396) | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, a March 2025 credit agreement amendment, a June 2025 equity offering raising $13.8 million in net proceeds, and a $10.4 million stock compensation reversal in Q1 2024 - In March 2025, the Company amended its Credit Agreement to modify financial covenants, including the Consolidated Fixed Charge Coverage Ratio and Consolidated Leverage Ratio, and added new liquidity requirements[62][64] - On June 11, 2025, the Company closed an underwritten public offering, receiving net proceeds of approximately $13.8 million from the sale of 3,634,000 shares. A portion of the proceeds was used to make a $10.0 million principal payment on its term loan[79][80][66] - In Q1 2024, the Company recorded a $10.4 million cumulative reversal of stock compensation expense related to performance-based stock units (PSUs) after determining the revenue target was improbable to achieve[76][19][95] - Advertising expenses decreased to $7.3 million in Q2 2025 from $11.0 million in Q2 2024, and to $14.5 million for H1 2025 from $19.4 million in H1 2024[48] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a revenue decline of 13.7% for Q2 and 15.5% for the first six months of 2025, attributed to broader aesthetics industry weakness, and outlines strategies including marketing optimization, sales process improvements, and a $3.0 million annual cost reduction program Overview & Strategic Initiatives The company experienced a revenue decline of approximately 14% in Q2 2025 and 15% in H1 2025 year-over-year, prompting strategic initiatives focused on marketing, sales, customer experience, financing, and new product innovation, alongside a $3.0 million cost reduction program and a pause on new center openings - The company has launched several strategic priorities to stabilize revenue growth, including: - Optimizing marketing investment with a returns-based approach - Improving go-to-market and sales strategies under a new Chief Sales Officer - Enhancing the customer experience - Expanding consumer financing offerings - Focusing on new product innovation, such as a standalone skin tightening procedure[102][104] - A cost reduction program has been implemented to eliminate approximately $3.0 million in annual overhead and contracted expenses, and the company has paused de novo center and new procedure room openings[102] Key Operational and Business Metrics Total cases decreased by 14.1% in Q2 2025 and 15.9% in H1 2025, with same-center cases declining more significantly by 22.0% and 23.1%, while revenue per case saw a slight increase and the company expanded to 32 facilities Total Case and Revenue Metrics | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Cases | 3,392 | 3,949 | 6,468 | 7,695 | | Case growth | (14.1)% | N/A | (15.9)% | N/A | | Revenue per case | $12,975 | $12,916 | $12,892 | $12,817 | | Number of facilities | 32 | 27 | 32 | 27 | Same-Center Case Metrics | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Cases | 3,079 | 3,949 | 5,916 | 7,695 | | Case growth | (22.0)% | N/A | (23.1)% | N/A | Non-GAAP Financial Measures Adjusted EBITDA for Q2 2025 was $5.8 million (13.3% margin), down from $6.9 million (13.5% margin) in Q2 2024, and for H1 2025, it was $9.6 million (11.5% margin), down from $14.2 million (14.4% margin) in H1 2024 Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (loss)/income | $(591) | $(3,206) | $(3,438) | $2,823 | | Adjusted EBITDA | $5,835 | $6,868 | $9,590 | $14,205 | | Adjusted EBITDA Margin | 13.3% | 13.5% | 11.5% | 14.4% | Adjusted Net Income Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (loss)/income | $(591) | $(3,206) | $(3,438) | $2,823 | | Adjusted net income | $1,187 | $5,140 | $79 | $7,020 | | Adjusted net income per share (Diluted) | $0.02 | $0.09 | $0.00 | $0.12 | Results of Operations Q2 2025 revenue decreased by $7.0 million (13.7%) due to lower case volume, while SG&A expenses decreased by $11.6 million (33.9%) primarily from reduced advertising, stock compensation, and severance costs, and cost of service as a percentage of revenue increased - Q2 2025 revenue decreased by $7.0 million (13.7%) YoY, attributed to weaker performance across the broader aesthetics industry[126] - Q2 2025 Selling, General and Administrative (SG&A) expenses decreased by $11.6 million (33.9%) YoY, driven by lower advertising costs ($3.4M), stock compensation ($3.5M), and severance costs ($3.7M)[128][129] - H1 2025 revenue decreased by $15.2 million (15.5%) YoY, also attributed to weaker industry performance[135] Liquidity and Capital Resources As of June 30, 2025, the company had $8.2 million in cash and cash equivalents and $5.0 million available on its revolving credit facility, bolstered by a June 2025 equity offering that raised $13.8 million in net proceeds, used partly for debt repayment, and a March 2025 credit agreement amendment - As of June 30, 2025, the company had $8.2 million in cash and cash equivalents and $5.0 million available under its revolving credit facility[146] - In June 2025, the company completed a follow-on equity offering, raising net proceeds of approximately $13.8 million, and used the proceeds to make a $10.0 million principal payment on its term loan[157][166] - The company amended its credit agreement in March 2025, modifying financial covenants, increasing interest rate margins, and shortening the maturity date to May 11, 2027[164][165] Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide the information for this item - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[170] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, 2025[172] - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2025[173] PART II OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal actions, primarily related to medical malpractice claims, which are not expected to have a material adverse effect on its financial condition and are generally covered by insurance - The company faces routine legal actions, mainly medical malpractice claims, which are not expected to have a material adverse impact on its financial condition, results of operations, or cash flows[178] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2024[179] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None reported for the period[180] Other Information No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the quarter[183] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications pursuant to Sarbanes-Oxley Act sections 302 and 906, and Inline XBRL data files - The report includes required certifications from the Principal Executive Officer and Principal Financial Officer, as well as Inline XBRL documents, as filed exhibits[185]