Greetings, and welcome to the AirSculpt Technologies Fourth Quarter and Full Year 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dennis Dean, Chief Financial Officer. You may begin.

Good morning, everyone, and thanks for joining us to discuss AirSculpt Technologies results for the fourth quarter. Joining me on the call today is the company's Founder and Executive Chairman, Dr. Aaron Rollins; and Chief Executive Officer, Todd Magazine. 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. Risks 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 financial 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 as filed this morning and in our most recent 10-K when filed, which will also be available on our website. With that, I'll turn the call over to Aaron.

Thank you, Dennis. Good morning to everyone, and thank you for joining the call. I'm very pleased with our fourth quarter results and our achievement of consistent double-digit growth in both revenue and adjusted EBITDA. We remain focused on reestablishing our same-store growth trajectory, improving operating margins and making prudent investments that build upon our solid foundation as well as drive long-term success of the overall business. In addition to increasing our revenue and adjusted EBITDA, the year included several noteworthy accomplishments. We generated strong free cash flow, which allowed us to pay down debt. We opened five new centers, marking the highest number of openings in the history of the company. We invested in brand building activities that drove 30% growth in brand awareness, we expanded our product and service offerings by adding AirSculpt Lift, a facial fat transfer procedure. We expanded our talent, particularly at the executive level. And finally, we quantified our TAM of $9 billion as well as the potential opportunity for opening hundreds of AirSculpt centers globally. I am proud of the many contributions of our teams and want to personally thank each one of them for their dedication that delivered our strong results in 2023. I am also very proud of our strong track record in having safely completed more than 50,000 procedures. The safety and well-being of our patients is our top priority, and we have policies and procedures that have ensured positive outcomes throughout our history. Our ability to achieve these positive outcomes is directly related to the professionalism of our staff. Our surgeons are respected in their field and together with our other clinical team members, are deeply committed to the care of our patients and achieving results that are in their best interest. As we look ahead, our strategy continues to focus on strengthening the AirSculpt brand accelerating our store openings and further enhancing our profitability, as we scale our business both domestically and internationally to further increase shareholder value. With that, let me now turn things over to Todd.

Thank you, Aaron, and good morning to everyone on the call. Our business remained strong in Q4, highlighted by 17% revenue growth and 28% adjusted EBITDA growth compared to the prior year. Our robust top line performance continues to be driven by our de novo locations that opened over the last two years with our 2023 centers continuing to ramp very favorably compared to their budgeted objectives. In fact, the average revenue of these centers in their first three months was the highest level in company history, excluding our 2021 de novos, which, as shared in previous calls, had a pronounced benefit from COVID. Our overall same-store revenue performance was minus 1.7%, which was below our expectations for the quarter. Just to put this in perspective, the difference between our actual same-store performance and our expectations represents about one procedure per location per month. I'd like to briefly comment on our recent revenue performance. We did see some slight softness as we exited 2023 which carried into January. However, as the quarter has progressed, we are encouraged with what we are seeing and fully expect a robust season. Importantly, our performance in Q1 is built into the 2024 outlook that we issued in our press release earlier this morning and that Dennis will go through later. Our adjusted EBITDA margin for the quarter improved year-over-year by 180 basis points to 21.2%, which was driven by our increased focus on cost management. Importantly, our margin expansion would have been even more substantial, but we decided late in the quarter to make additional awareness building media investments as this initiative continues to achieve its objective of driving brand awareness and brand recognition. With respect to our 2023 revenue guidance, we met expectations of $196 million, which represents 16% growth versus the prior…

Thanks, Todd. Our revenue for the quarter was $47.6 million, a 17% increase over the prior year quarter. Our growth was primarily due to the addition of five de novo centers versus the prior year base. As of December 31, 2023, we operated 27 centers versus 22 at the end of the fourth quarter of 2022. Our same-store revenue was slightly negative in the quarter. Average revenue per case for the quarter was $12,937, a 6.1% increase over the prior year's quarter. As we have said previously, rates can vary from quarter-to-quarter, mostly from procedure mix fluctuations, and we expect our rates to range from $12,000 to $13,000. We are pleased that our rates continue to pace on the high end of our expected range, which reflects the fact that our core consumer is in a higher socioeconomic group, which provide us more insulation from some of the economic volatility in the market. Our percentage of patients using financing to pay for procedures was 48% during the quarter, which was consistent to the prior quarter. As a reminder, we received full payment of all procedures upfront, and we did either have any recourse related to patients who finance their procedures with third-party vendors. Our cost of services as a percentage of revenue was 37.5% versus 38.7% in the same period last year. This improvement was a result of certain cost management initiatives that were implemented during the quarter. Our customer acquisition cost for the quarter was approximately $2,600 per case as compared to $2,300 in the prior year. This increase, as Todd mentioned in his remarks, is due to further investments in our brand awareness activities above what we originally forecasted. For clarity, our calculation of customer acquisition costs includes both our advertising and media spend plus the full salaries…

[Operator Instructions] Our first question is from Josh Raskin with Nephron Research.

I guess, I'll just have to start with any response to the short report that we saw last week.

Josh, this is Todd. How are you doing? In our view, the short-seller report contains multiple inaccuracies and misleading information, and we advise shareholders to consult the company's public filings rather than third parties for accurate information about the company. With that said, let me share three things. First, we take the safety and well-being of our patients seriously, and we're proud of our safety track record. Second, our ability to achieve positive outcomes for our patients is directly related to the professionalism of our staff and in particular, our surgeons. And third, our teams strive to be transparent and honest in how we market our business, and they consistently work hard to earn the trust of our patients. We do not intend to address the allegations in this report any further. If you have another question, Josh, we'd be open to taking that question. Otherwise, we'll go ahead and move on to another call.

I appreciate that. I'll ask a business question then. I guess on the case -- in the actual quarter, the cases came in a little bit better than we expected. The rate was a little bit lower. I know up 6% on a year-over-year basis. So just curious, is there any sort of seasonality just after particularly strong quarters in 2Q and 3Q? Was there any change in discounting or sort of anything like that, that impacted the quarter?

Josh, this is Dennis. No, nothing really from that standpoint. I mean, we are very comfortable with kind of where our rates landed. We were pretty close to 13,000 for the quarter and for the full year. So rates held up very consistent from quarter-to-quarter. There wasn't really any kind of seasonal impact as it relates to that. Again, we kind of called out in the remarks that we still target a consumer that's in a higher socioeconomic class. And so I think that helped us kind of keep our rates where they were.

And Josh, just to add on that. Also, we've talked about this kind of bundling kind of strategy to help us kind of push up the ASP. And that continues to be a lever that we use, and it is definitely working, giving people more discount as they do more procedures. And that's clearly been, I think, one of the strategies that's gotten us to that higher end of the range in that 13,000 ASP range.

And maybe just sneak in one more, just a clarification. Just you talked about these costs that came in late in the quarter for brand awareness. I'm just curious if you could, one, could you give us some specifics on that? And two, maybe talk a little bit about the decision process there sort of as you were tracking towards your full year guidance and then accelerating costs in the quarter. I didn't know if there was an ability to defer that or if there was something that done sooner.

When we yes, thanks for the question. So when we reiterated guidance early in November, we actually were seeing revenue come in even higher than ultimately where we netted out. And so really, the strength of what we were seeing in terms of demand is what gave us the desire to go ahead and make that additional investment. As we noted, some of that demand and some of that performance softened a little bit as we exited the quarter, but we decided to keep that investment. It was really awareness building investment, which for us is obviously very important and more of a long-term benefit for us. So we decided to keep that investment rather than pulling back elsewhere. The other thing in my remarks, I would tell you that there was some cost savings that we thought we were going to be able to pull in from Q1 into Q4 and that would actually have put us over the $2.5 million that we had committed to for full year 2023, but that didn't accelerate. So those were really the two components of that, and it was really a strategic decision at the end of the year, whether we make some cuts just to get to our number or do we leave the investment in Atlantis building, which we believe is the right long-term decision for the business.

Our next question is from John Ransom with Raymond James.

Just as for Dennis. So the company is a bit behind its IPO forecast, particularly same-store revenue growth. But just can you point out any other variances in the model over -- and I'm taking kind of a longer-term view here, but just variance in the model versus your original forecast.

Yes. Well, you called out -- you did call out the same-store. Same-store has been a little bit softer than what we had originally put in the IPO model a couple of years ago. And I would say probably the second area, John, we have made significant investments in our corporate executive teams, kind of building infrastructure around the business, and I think that's probably come in a little bit higher than the original model than -- and I think the last area is in the area of the brand awareness. We kind of kept sort of a consistent sort of percent of revenue kind of model, if you will, as it relates to how we looked at advertising spend. And as we've gotten more and more digging more into it, it's more of a -- we've got to look at brand awareness investments, if you will. And I think probably if I were to kind of layer them out there, it'd probably be the brand awareness higher from a marketing spend. Second would be there's a little bit of softness from the same store that was in the model. And then lastly would be the corporate aspect of it.

And just secondly, it strikes me that the new markets you're going into or, I guess, secondary markets. Do you have any concern like some of these markets you burn through the first group of patients and then there's just not enough growth or population to support long-term growth.

Yes. I mean, first of all, I'm not sure I would consider what definition of primary, secondary. I mean we're in many markets today. I mean we opened in Raleigh last year, Austin last year, San Jose. Those are performing as I said in my prepared remarks, well above our expectations. So the markets that we're opening, we feel very, very good about. And as I noted, I'm particularly excited about the markets where we're going with the second locations because we're a brand that today really only has one location in any given market. And the ability to have any kind of critical mass in that market from operationally and awareness building, et cetera, et cetera, is very limited. So it's going to give us an opportunity to really, we think, command a lot bigger share of voice and obviously, a lot bigger awareness in that market and that will help. But we have a lot of runway of markets. And I mentioned Columbus, Ohio and Birmingham, Michigan. I mean these are very, very good and robust markets that we feel very good about. And there's many, many more markets on the docket to come that look like that as well. So right now, we feel very good about it. And as we stated before, our de novo performance has been very, very strong. So we continue to fuel that pump hard. And we're just going to only get smarter now that we have more analytics to pair with all of the work that the team has done historically.

Okay. And then lastly, look, I'm not going to get into the short report, but I'd be curious -- I'm sure you guys have KPIs around Net Promoter Score complication rates. Maybe after the fact complaints about like a follow-up. Could you just get a high level, tell us how those have trended over the past couple of years? And is there any work to be done there.

Look, I don't want to get into kind of the short report and kind of the back and forth. We can take some of the more detailed questions offline, if you'd like. So as we stated before, we just think it's best to kind of leave it at that. And not giving any more airtime. We just don't think it has much credence given all the inaccuracies and the misleading nature of the information.

Our next question is from Korinne Wolfmeyer with Piper Sandler.

This is Sarah on for Korinne. Just one for us today on pricing, what is your willingness to take further pricing in the near to intermediate term to drive comps look like? And then have you done any work on what those levels if those would start to discourage potential patients?

Yes. Thanks for the question. Pricing is a somewhat complicated when you say take pricing, unlike a traditional retailer, where you have a proposition or a product that you're selling and you have the opportunity to take pricing because of the bespoke nature of our procedure and the fact that every person who walks in the door obviously has different needs in terms of what we're removing or transferring and the number of body parts that they're doing. So pricing -- straight pricing is not linear as it might be in other kind of retail businesses. All that being said, we do believe at some point that there might be opportunity for us there, just given the kind of uncertainty of the economic environment and everything that's going on in the marketplace. We think right now, it's best for us to continue down the path that we're going on. But it's certainly something that we discussed and talk about. And we think, particularly given the quality of our procedure and the nature of the consumer who we're going after, we believe there probably is some opportunity there, but it isn't kind of quite as linear as you would think in a retail business. And again, I think at some point, we may choose to do something. But right now, I think we're being measured in how we think about our ASP. So that's kind of how we're thinking about it right now.

Thank you. There are no further questions at this time. I'll hand the floor back over to Todd Magazine for any closing comments.

Well, thanks, everybody, for your time today, and we look forward to speaking with you in the near future. Have a great Tuesday afternoon.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.