Good morning, and welcome to AirSculpt Technologies' Fourth Quarter and Full Year 2021 Earnings Conference Call. Currently, all participants are in a listen-only mode. As a reminder, today's call is being recorded, and we have allotted one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Dennis Dean, Chief Financial Officer at AirSculpt Technologies. Thank you. Please go ahead.

Good morning, everyone, and thanks for joining us to discuss AirSculpt Technologies' results for the fourth quarter and year end. Joining me on the call today is our Founder and Chief Executive Officer, Dr. Aaron Rollins, and our Chief Operating Officer, Ron Zelhof. Before we begin, I would like to remind you that this conference call may include forward-looking statements. These statements may include our future expectations regarding financial results and guidance, market opportunities and our growth. Risk and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release, and the reports we will file with the SEC, all of which can be found on our website at investors.elitebodysculpture.com. We undertake no obligation to revise or update any forward looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP measures. We use non-GAAP measures in some of our financial discussions, as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release, that's filed this morning, and in our annual report when filed which will also be available on our website. With that, I'll turn the call over to Dr. Aaron Rollins. Aaron?

Thank you, Dennis. Good morning and thank you for joining us today. We had an exceptional first quarter as a new public company. As you know, we completed our IPO during the fourth quarter and with that milestone behind us we look forward to continuing the momentum and success through 2022 and beyond. We generated $37.6 million of revenue reflecting growth of 64% over the prior year quarter and our adjusted EBITDA was $10.2 million which was 26% over the prior year quarter. We achieved these strong results while navigating challenges arising from the Omicron variant, which impacted how we scheduled patients as well as our surgeons and our nursing staff. Achieving our results for the quarter despite these challenges speaks to the resiliency of our business. We were also able to make additional clinical investments at our facilities to enhance quality and safety for our patients and we expect to continue these investments to further support our growth. Before we share more about our results, I want to recognize and say thank you to all of our employees and physicians. COVID brought a number of challenges over the past couple of years and our team has performed remarkably well in our outstanding financial results only tell part of the story. Now I'm going to provide a brief overview of the company for those who may be relatively new to AirSculpt. We are an experienced fast growing national provider of custom body contouring procedures. We operate under the brand Elite Body Sculpture and we deliver a premium consumer experience in a luxury spa-like atmosphere, providing exceptional custom body contouring using our proprietary AirSculpt technology. Our network of specialty centers focuses on the removal of unwanted fat, while simultaneously achieving exceptional skin tightening for our patients. We also offer fat transfer…

Thank you, Dr. Rollins, and good morning, everyone. I'm going to direct my comments towards some highlights for the fourth quarter, and then share some information regarding our business model and the attractive unit economics our centers produce. But before I do, I want to echo Dr. Rollins comments regarding our team. There were a lot of obstacles during the quarter, but our teams stepped up in the face of a challenging environment and performed wonderfully and again, we thank you all for your contributions. It was a great quarter and we continue to be encouraged by our strong top line revenue of $37.6 million, reflecting 64% growth over the prior year quarter. For the full year 2021, revenues grew to $133.3 million, which was more than double the prior year, and over three times the revenue from 2019. Our growth continues to be driven by strong volumes and revenue per case expansion. Our total case volume increased 43.8% in the fourth quarter over the prior year quarter of which 19.6% was from the same centers. And our revenue per case for the fourth quarter was $13,018, a 14% increase over the prior year quarter. For the year our total case volume increased 87.8% over the prior year, of which 55.5% was from the same centers. We continue to be encouraged by our rate increases, which are a result of the patient's desire to have multiple areas treated at the same time. We point to AirSculpt TV as a driving force behind this growth as patients who watch AirSculpt TV are more educated about the different types of procedures we offer. Our fourth quarter adjusted EBITDA increased to $10.2 million reflecting a 26% growth over the prior year quarter and our adjusted EBITDA margin was 27.2% compared to 35.5% in…

Thanks, Ron. Our first quarter as a new public company has certainly been exciting for us and we are glad to be reporting continued strong results financially, plus demonstrating our abilities to execute on our de novo growth plans. This truly is a unique company from both the services we offer to the attractive unit economics we deliver. We are results focused in everything we do and I'm excited about what the future holds for us. Now diving into Q4 results, revenues increased $14.7 million to $37.6 million, a 64% increase from the prior year quarter. And our case has increased about 43.8% to 2885. The increase is a result of adding four new de novo centers, which expanded our footprint from 14 centers to 18 centers, and our number of procedure rooms from 23 to 32 as of December 31, 2021. Our revenue per case was $13,018, a 14% increase from the prior year quarter. Revenues per case are determined by which areas of the body are treated. We also had favorable revenue metrics on the same center basis. Same center revenue increased 35% over the prior year quarter, primarily driven by case growth of approximately 20%. Much of our same store growth can be attributed to expanding our social media and marketing capabilities, especially AirSculpt TV, to increase brand awareness and to attract more patients into our existing centers. We continue to see increases in our revenue per case, which we attribute to patients becoming more informed and having more areas treated at one time. There are several variables that determine our pricing. Primarily it's based on the amount of time a patient is in the procedure room, which can vary due to the number of areas being treated, the volume of fat being removed, and whether a…

Thank you. The first question is coming from Simeon Gutman of Morgan Stanley. Please go ahead.

Good morning, everyone. My first question is around advertising and Dennis, I think you, the way you discussed it, it sounds like it was a bit of a change relative to whatever plans you were looking at previously. So the question around it is, what sparked the change? Are you doing it because of there's some pipeline issue regarding Omicron? Are you doing it because of any competitive threat or are you doing it just to press the advantage that you have, and drive the volumes in the centers?

Hey, thanks for the question, Simeon. I'll start and if Dr. Rollins or Ron wants to add to the response, they can. But really, it's not anything new. It was really quite frankly, not unexpected. We did open to new centers, if you recall, during the quarter and so we incur marketing costs on those new openings and so the revenue hasn't come in on that. So that's a portion of it. We do continue to focus heavily on the marketing and advertising and expect to significantly expand our brand awareness in the coming year as well. So, a lot of it had to do with the two new openings, the marketing on those that we didn't have the revenue in. Operator Sir, did you have any other questions?

Sorry, one followup question, I was muted, I apologize. My followup question is around AirSculpt versus other technologies right now. Do you have a sense on an ongoing basis market share of AirSculpt versus either CoolSculpting or other freezing or fat removing technologies, and so how do you measure on an ongoing basis, how you're performing?

Thank you for the question. This is Aaron Rollins. All I can say is that, as our awareness increases, we expect to take more and more market share, because we strongly feel we have by far the best technology and results, not to mention patient experience. But as I'm sure many people on this call know, fat freezing technology took a big hit in the last couple of months with the Linda Evangelista articles and information, and it seems to be something that we hear is less and less from patients. Also AirSculpt provides an excellent solution to people who are not happy with previous fat freezing experiences. So yes, as we've always stated, we expect to continue to increase our market share.

Thanks, everyone.

Thank you.

Thank you. The next question is coming from Josh Raskin of Nephron. Please go ahead.

Hi, thanks. Good morning, everyone. I was wondering if you could provide color on the new markets on Vegas, Boston, Philly, and Toronto, and maybe any of the characteristics that specifically attracted you to those markets? And then as an aside, anything special to think about Toronto, the Canadian laws and anything that would be different than the U.S. that we should expect?

Go ahead, go ahead.

Hi, thanks for the question. This is Ron Zelhof. In regards to Boston, Philadelphia, Vegas, that are out there right now, they've always been high on our list and as we said in some previous calls as well, our pipeline for our domestic growth continues to be really strong right now. So we're just executing on our de novo strategy there. They are obviously extremely big cities. Right now, the demographics just really line up to what we want to go ahead and to do. So those are the reasons for there, as for Toronto, that's a market that as everyone knows is, very, very financially viable for us. There are some differences in the regulations there that we're definitely accustomed with now through our attorneys that are helping us navigate those. And we feel extremely comfortable with operating in Toronto by the end of this year.

I'd just like to add, oh go ahead...

Please, please Dr. Rollins go ahead.

I'd just like to add that we're very excited about going internationally with Toronto and it really comes from a lot of demand from Canada and Toronto, specifically.

Right, and then my second question was just the metrics that you measure, Miami and Salt Lake were opened last quarter. I'm just curious, what metrics do you look at in terms of bookings, and scheduling and some things like that? How are you measuring the progress? And is there any way to judge sort of versus plan how you guys are feeling? And then just a quick aside, were those two or three procedure room openings for each of those?

Josh, it is Dennis. These were -- they were two procedure room centers and while we don't remark specifically about the details of individual centers, I will say that they are going really well. We are actually very excited about how well they're going and again, very good, very good start out the gates.

All right, that's helpful, thanks.

Thank you. Our next question is coming from John Ransom of Raymond James. Please go ahead.

Hey, how's it going? This is Parker on for John Ransom. So I know you alluded to some impact from the Omicron variant. Could you maybe just give us a sense may be the number of nurses quarantined or cases differed kind of during the peak? And then how are you seeing things recover in February and kind of early March?

Hi thanks for the question, Parker. Yes, we did experience obviously, as you would expect some challenges in the latter part of the quarter related to the Omicron variant. The thing about our team, and the work that they did to be able to get cases scheduled, was actually remarkable. They did an excellent job of if a patient were to call in with a, needing to reschedule, we were quickly looking for other patients that were scheduled maybe the following week, to kind of reschedule them in those slots. So a lot of work was done around that. So we didn't have a significant amount of case volume that was lost in the quarter due to that. And, again, it was a remarkable effort by the team. We didn't have nurses at time they were in quarantine. We had physicians at time in quarantine as well and we were able to get those areas covered. Certain physicians, we have licensed in multiple states, so in certain situations, we were able to move doctors to other states where we needed to cover cases. So again, a remarkable effort by the team. But we did continue to see that obviously, in the first couple of months of this year. And we are experiencing what we seem to be an easing from the variant as it relates to impacting our team. And so we hope that obviously continues, not only as a company, but also as the country and the world. So…

Okay, great. And then you had really strong revenue per cases up like 400 bucks sequentially. How much of that is just a shift in mix? I know you said, roughly 20% of cases are fat transfers, how much is that increase from mixed shift and how much of that is just price increase?

You know, as we had said previously on other remarks, we don't do or we have not to date done price increases. It's really a mix and really even more than mix, it is just patients having more procedures or more areas done. And so when they're coming in, historically, we've seen patients would just have maybe have their chin done, which is a very quick procedure and very profitable procedure for us, but revenue per case because it's quite a bit lower because they're only in the procedure room for a short amount of time. What we're seeing is as patients are doing more and more areas at once, and because they're in the procedure room longer, it drives up the revenue per case. I will say that from a revenue per case perspective, we were a little pleasantly surprised by the 13,000. That number is somewhat variable. And, and so again, seeing the 13,000 per case was a surprise for us, a pleasant surprise. But again, because of the mix, and the shifts that can happen from month to month and quarter to quarter. That's again a surprise number for us, but it's something that as we look into this next year, we don't necessarily think it's going to decline significantly. But we just want to say that that number can be variable from quarter to quarter.

Okay, great. And then last question, are you seeing any second derivative kind of effects from maybe a slowing economy inflation, increasing gas prices, is there anything there kind of affecting maybe customers willingness to spend up for more expensive procedures or just because of your kind of customer archetype, is that not an issue?

I can take that, this is Aaron Rollins. So no, is the answer to your question and having been in this business during the 2008 recession, I remember, absolutely no decrease in demand and as I'm sure you guys know, we're actually doing more procedures than ever before in our 10-year history. So we're very happy that our industry and our market segments that we go after, is really not being affected by this at least our patient demand is up.

All right, great, thank you.

Thanks.

Thank you. The next question is coming from Korinne Wolfmeyer of Piper Sandler. Please go ahead.

Hi, good morning, and congrats on the quarter. So to start off, to kind of piggyback off of the last question, I'd like to ask about the broader supply chain challenges going on in the macro environment, is that impacting your ability to build out new facilities or the cost to build out new facilities in any way?

Hey, Korinne, it's Ron, how are you? Thanks for the question. No, not at all. We do you have some supply chain issues that that do pop up in our construction projects, but it's already really built into our timeline for it. So as we've done in the past, we've been able to execute on our de novo strategy there.

Awesome, thank you. And then just touching on AirSculpt TV, and how that's helping with your customer reach, do you have any way of tracking customer conversion from the AirSculpt TV? And if so, what percent of patients do you think are coming from that method of advertising? Just curious what kind of impacts you're seeing from this? Thank you.

Thanks for the question. It's Aaron Rollins. We don't have any way of directly tracking that because you can view something on Instagram and think about it and go on, pay per click Ad a month later, or tell a friend, watch a YouTube video and just call, just visit the website organically. There's really no way to know. But I can tell you anecdotally that when I go to different offices and talk to people in the waiting room, . AirSculpt TV is a big topic. And a lot of people say jeez, I would never be here if it wasn't for AirSculpt TV because watching a patient laugh and talk and get interviewed while fats leaving their body was just incredible to me and it made me not scared.

Thank you.

Sure.

Thank you. Our next question is coming from Whit Mayo of SVB Leerink. Please go ahead.

Hey, thanks. May be just a followup on that, that last question, may be a little bit more broad of a question just around the marketing strategy. I think the question really is like, what you guys are changing? How the marketing strategy is evolving? How are you thinking about YouTube, AirSculpt TV versus other social media outlets? Just maybe some of the investments that you're making, just anything as you look at your plan, and how that's evolved sort of over the last 12 months that might be might be helpful? Thanks.

We're continuing our strategy that we've always had and we're making opportunistic investments as opportunities arise.

Okay and I know you guys are providing guidance around the first quarter, but it might just be helpful to think about normal seasonality and maybe what might be a little bit different about this year versus prior years, anything that you could you could frame might be helpful?

Hey Whit, this is Dennis. Yes, as it relates to the guidance for the coming year, there is there is some seasonality within the business. But interesting also that center by center, there may be different periods of time they experience seasonality. Scottsdale, Arizona is extremely hot in the July-August time period, and so they're their seasons are a little bit different than maybe a Nashville or Beverly Hills. But we do see a little bit of a pickup from a seasonality perspective, in the second quarter, as people are preparing for beach, bathing suits, swimming pools, those types of things. So we do experience an uptick in the second quarter. We tend to be a little softer in the first as we come out, but that tends to ramp up in the March time period, as we again kind of get closer to that second quarter and that swimsuit season. So there is a bit of seasonality whereas the second quarter tends to be one of our better quarters.

All right. And then any way to maybe frame as a percentage of your full year EBITDA that you think you might be budgeting for in the first quarter, I just want to make sure that we're not all off the reservation with how you're…

Sure. First quarter and then from a full year from the guidance number, you're looking in the low 20% range.

Perfect, perfect, perfect. And last question really is, you guys are kind of a new company for a lot of us and as you reflect back on the last year, maybe the bigger surprises good or bad relative to your internal plan, what developed there that surprised you? Anything that you could share might be helpful, thanks.

I'll start and then I'll let Ron and Aaron complete. I think probably from a surprise standpoint, for me is probably the rate. We really have obviously, shown very successful results from our revenue per case. And so that that would be something that's probably a little ahead of where we had expected and forecasted. Again, it's a very variable number. And we do see it from month to month shift up and down based on mix. And so from our perspective, I think that would be one area that was a surprise a bit for me.

I echo Dennis's remarks on really no surprises being in this business for as long as we've have.

Okay, well great. Thanks a lot guys, I appreciate it.

Thank you. At this time, I'd like to turn the floor back over Dr. Rollins for closing comments.

Thank you. And thank you for joining us on this call and your interest in AirSculpt Technologies. I also want to thank our patients, our staff, and our surgeons, for such a wonderful quarter, their hard work and we just really appreciate our patients and all of your interest in AirSculpt Technologies.

Ladies and gentlemen, thank you for your participation. This does conclude today's event. You may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.