Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AirSculpt Technologies Inc (AIRS, Financial) has successfully completed over 60,000 procedures since its founding in 2012, demonstrating a strong track record.
- The 2023 de novo class of centers performed ahead of expectations, indicating effective identification and opening of new centers.
- Lead generation activities saw a 30% sequential increase in lead volumes, showing strong interest in AirSculpt's procedures.
- The company has a solid balance sheet with approximately $10 million in cash and a modest leverage ratio of 1.81 times.
- AirSculpt Technologies Inc (AIRS) is taking decisive actions to align its cost base with the current environment, including reducing marketing costs by over $4 million in the second half of the year.
Negative Points
- Second quarter revenue decreased by 8.4% to $51 million, reflecting a 17% decline in same-store revenue compared to the prior year quarter.
- Adjusted EBITDA was down $7.7 million year-over-year, resulting from lower revenue combined with growth in brand awareness marketing activities and advertising cost inflation.
- Selling, general, and administrative expenses increased by $6.4 million or 22.9% in the second quarter compared to the same period in fiscal 2023.
- Customer acquisition cost for the quarter increased to $3,325 per case compared to $2,250 in the prior year, driven by further investments in brand awareness activities.
- The company experienced lower-than-expected conversion rates despite an increase in lead volumes, attributed to the difficult macro environment.
Q & A Highlights
Q: Can you discuss the general consumer trends you observed throughout the quarter? Did the volume fluctuate month-to-month, and what would you attribute the bulk of the decline to? Are there any competitive pressures or other factors at play?
A: We saw a slight fall-off in June, which was unusual. Lead volume increased throughout the quarter, indicating significant interest in AirSculpt, but conversion rates declined due to the challenging macro environment. We are not seeing GLP-1s as a significant factor in decision-making. The primary issue is the economic environment affecting consumer behavior. — Dennis Dean, Interim CEO & CFO
Q: Can you elaborate on the new marketing strategies and tactics you are implementing? How do you expect these changes to improve conversion rates, and what is the expected timeline for these improvements?
A: We are shifting away from brand awareness activities and focusing on paid search, which has historically provided quicker conversions. We are also realigning our sales team to improve conversion rates. We expect some improvement in the fourth quarter due to lower comparatives, but significant changes are not anticipated until next year. — Dennis Dean, Interim CEO & CFO
Q: Excluding stock compensation, SG&A expenses were over $29 million in the quarter. Can you provide details on how much of this was marketing or sales and marketing, and what portion is variable versus fixed?
A: We had a $4 million charge related to severance and over $2 million in brand awareness marketing, both of which are variable and will be removed going forward. The remaining increase was primarily due to professional fees. — Dennis Dean, Interim CEO & CFO
Q: Despite a decline in case count, the rate has held up well. What consumer behavior explains this, and is there no price sensitivity among your customers?
A: Our rates have held up due to the perceived value of AirSculpt procedures. While some consumers are delaying their procedures due to economic factors, we believe our pricing reflects the value we offer. We may consider promotional activities in the future but have chosen not to do so at this time. — Dennis Dean, Interim CEO & CFO
Q: Same-store cases were down 14%, not far off from the 10% decline last quarter. What changed in the last three months, and what did you expect to improve?
A: We saw an increase in lead volumes, which gave us optimism. However, conversion rates dropped due to macroeconomic factors. We are focusing on improving marketing and sales strategies to bring case volumes back up. — Dennis Dean, Interim CEO & CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
