AirSculpt Technologies, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are to Q1 2022 unless noted. AirSculpt provides management services to professional associations delivering its branded minimally invasive body-contouring procedures. It reported 23 centers across 18 states and Canada as of May 12, 2023.
Financial and operating results
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $45.8 million | $39.5 million; up 15.9% |
| Cases performed | 3,640 | 3,156; up 15.3% |
| Revenue per case | $12,586 | $12,530; up 0.4% |
| Same-center cases | 3,155; up 0.9% | 3,127 |
| Same-center revenue per case | $12,676; up 1.3% | $12,510 |
| Operating income (loss) | $1.8 million | $(1.2) million |
| Net income (loss) | $(14,000) | $(693,000) |
| Adjusted EBITDA (non-GAAP) | $10.7 million; 23.4% margin | $9.8 million; 24.8% margin |
| Adjusted net income (non-GAAP) | $5.8 million; $0.10 per share | $7.7 million; $0.14 per share |
| Operating cash flow | $6.2 million | $7.1 million |
| Capital expenditures | $3.8 million | $4.3 million |
Cost of service was $18.0 million, or 39.3% of revenue, compared with $14.7 million, or 37.1%. Selling, general and administrative expense was $23.9 million, or 52.1% of revenue, versus $24.2 million, or 61.1%. Advertising expense was $6.1 million versus $4.8 million. Interest expense rose to $1.7 million from $1.5 million; the company cited higher interest rates. Income tax expense was $41,000, with a 151.9% effective tax rate, primarily affected by nondeductible executive compensation.
Balance sheet and liquidity
At March 31, 2023, cash and equivalents were $11.3 million, total assets $209.5 million, and stockholders’ equity $75.2 million. Debt carrying value was $83.3 million (principal $84.5 million); the $5.0 million revolver was undrawn. The term loan bears a reported 7.23% rate, matures in November 2027, and is secured by substantially all company assets. The company reported compliance with debt covenants.
Current assets were $17.9 million and current liabilities $21.5 million, producing reported working capital of negative $3.6 million. Operating cash flow less capital expenditures was approximately $2.4 million. Cash increased by $1.7 million during the quarter.
Material changes, outlook and risks
Revenue growth reflected four added centers and expansion of existing facilities: centers increased from 19 to 23 and procedure rooms from 36 to 49 year over year. Same-center revenue grew 2.2%, according to management. Management said lower cases per procedure room reflected the recent addition of capacity and expected this to be temporary as new rooms ramp up; new-center cost of service may remain elevated during ramp-up, which can take up to two years. The company expects marketing and corporate-support costs to rise as it expands.
No specific financial guidance was provided. Management stated that operating cash generation and revolver availability should fund working capital, planned center openings and room additions, and obligations for at least the next 12 months. Risks cited include execution and cost of new centers, supplier availability or quality, competition for surgeons, malpractice litigation and insurance adequacy, legal or regulatory changes affecting medical-practice structures, and macroeconomic conditions.
Ordinary-course legal claims include medical malpractice matters; the company believes current proceedings will not materially affect it, but outcomes are uncertain and insurance may be inadequate. No impairment charges or goodwill-triggering events were reported. Disclosure controls were deemed effective at a reasonable-assurance level; no material internal-control changes were reported.
Key facts for investors to verify
- Whether new centers and additional procedure rooms ramp to mature utilization and improve cost-of-service margins.
- Whether modest same-center case growth and higher customer acquisition costs support continued revenue growth.
- Debt-service capacity given the 7.23% borrowing rate, covenant requirements, negative working capital, and upcoming principal payments.
- Cash needs for planned expansion and whether operating cash flow remains sufficient as marketing, staffing, and lease commitments grow.
- Potential financial exposure from malpractice claims and the adequacy of insurance coverage.
- Non-GAAP adjustments: adjusted EBITDA and adjusted net income exclude items including equity compensation and expansion or restructuring costs; evaluate alongside GAAP results.