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Airsculpt Technologies Inc.

08/09/2024 | Press release | Distributed by Public on 08/09/2024 12:38

Quarterly Report for Quarter Ending June 30, 2024 (Form 10-Q)

airs-20240630

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission file number: 001-40973

AirSculpt Technologies, Inc.

(Exact name of registrant as specified in its charter)


Delaware	87-1471855
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


1111 Lincoln Road, Suite 802
Miami Beach, FL	33139
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code:(786) 709-9690

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	AIRS	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesxNo o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	x
Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 57,592,078 shares of common stock outstanding as of August 8, 2024.

Table of Contents

TABLE OF CONTENTS


Page
PART I FINANCIAL INFORMATION

Item 1.	Financial Statements	2
Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	3
Condensed Consolidated Statements of Other Comprehensive (Loss)/Income for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	4
Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26

Signatures	27

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements in the sections titled "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk" and in other sections of this Quarterly Report on Form 10-Q that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue," the negative of these terms and other comparable terminology, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. You are cautioned that there are important risks and uncertainties, many of which are beyond our control, that could cause our actual results, level of activity, performance or achievements to differ materially from the projected results, level of activity, performance or achievements that are expressed or implied by such forward-looking statements, including those factors discussed in the section titled "Risk Factors" in our Annual Report on Form 10-K. We qualify all of our forward-looking statements by these cautionary statements.

Our future results could be affected by a variety of other factors, including, but not limited to, failure to open and operate new centers in a timely and cost-effective manner; inability to open new centers due to rising interest rates and increased operating expenses due to rising inflation; increased competition in the weight loss and obesity solutions market, including

as a result of the recent regulatory approval, increased market acceptance, availability and customer awareness of

weight-loss drugs; shortages or quality control issues with third-party manufacturers or suppliers; competition for surgeons; litigation or medical malpractice claims; inability to protect the confidentiality of our proprietary information; changes in the laws governing the corporate practice of medicine or fee-splitting; changes in the regulatory, macroeconomic conditions, including inflation and the threat of recession, economic and other conditions of the states and jurisdictions where our facilities are located; and business disruption or other losses from war, pandemic, terrorist acts or political unrest.

The risk factors discussed in the section titled "Item 1A. Risk Factors" in our Annual Report on Form 10-K could cause our results to differ materially from those expressed in the forward-looking statements made in this Quarterly Report on Form 10-Q and in other filings we make from time to time with the U.S. Securities and Exchange Commission. There also may be other risks and uncertainties that are currently unknown to us or that we are unable to predict at this time.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date they were made, which are inherently subject to change, and we are under no duty and we assume no obligation to update any of the forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations, except as required by law. Given these uncertainties, investors should not place undue reliance on these forward-looking statements.

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

AirSculpt Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


($000s, except for shares)	June 30, 2024	December 31, 2023
(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	9,866	$	10,262
Taxes receivable	3,448	1,941
Prepaid expenses and other current assets	8,380	3,758
Total current assets	21,694	15,961
Property and equipment, net	31,815	28,908
Other long-term assets	3,946	5,657
Right of use operating lease assets	26,952	25,413
Intangible assets, net	43,969	46,346
Goodwill	81,734	81,734
Total assets	$	210,110	$	204,019
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	4,562	$	3,922
Accrued payroll and benefits	2,327	4,127
Current portion of long-term debt	3,188	2,125
Deferred revenue and patient deposits	942	1,463
Accrued and other current liabilities	8,453	3,303
Current operating lease liabilities	5,647	5,375
Total current liabilities	25,119	20,315
Long-term debt, net	67,540	69,503
Deferred tax liability, net	6,828	6,828
Long-term operating lease liabilities	24,084	22,665
Other long-term liabilities	1,525	716
Total liabilities	125,096	120,027
Commitments and contingent liabilities (Note 9)
Stockholders' equity
Common stock, $0.001 par value; shares authorized - 450,000,000; shares issued and outstanding - 57,574,244 and 57,355,676, respectively	58	57
Additional paid-in capital	102,078	103,898
Accumulated other comprehensive loss	(394)	(412)
Accumulated deficit	(16,728)	(19,551)
Total stockholders' equity	85,014	83,992
Total liabilities and stockholders' equity	$	210,110	$	204,019

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AirSculpt Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)


Three Months Ended June 30,	Six Months Ended June 30,
(in $000s, except for shares and per share figures)	2024	2023	2024	2023
Revenue	$	51,004	$	55,703	$	98,624	$	101,516
Operating expenses:
Cost of service (exclusive of depreciation and amortization)	18,827	19,952	36,869	37,969
Selling, general and administrative(1)	34,274	27,893	50,030	51,775
Depreciation and amortization	2,885	2,514	5,690	4,850
(Gain)/loss on disposal of long-lived assets	(1)	(18)	4	(202)
Total operating expenses	55,985	50,341	92,593	94,392
(Loss)/income from operations	(4,981)	5,362	6,031	7,124
Interest expense, net	1,515	1,891	3,047	3,626
Pre-tax net (loss)/income	(6,496)	3,471	2,984	3,498
Income tax (benefit)/expense	(3,290)	1,695	161	1,736
Net (loss)/income	$	(3,206)	$	1,776	$	2,823	$	1,762

Income per share of common stock
Basic	$	(0.06)	$	0.03	$	0.05	$	0.03
Diluted	$	(0.06)	$	0.03	$	0.05	$	0.03
Weighted average shares outstanding
Basic	57,557,178	56,753,498	57,489,466	56,599,291
Diluted	57,557,178	58,511,766	58,066,133	58,095,736

(1) During the first quarter of fiscal year 2024, the Company recorded a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AirSculpt Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Other Comprehensive (Loss)/Income (Unaudited)


Three Months Ended June 30,	Six Months Ended June 30,
($000s)	2024	2023	2024	2023
Net (loss)/income	$	(3,206)	$	1,776	$	2,823	$	1,762
Other comprehensive (loss)/income:
Change in foreign currency translation adjustment	(142)	(57)	18	(35)
Total other comprehensive (loss)/income	(142)	(57)	18	(35)
Comprehensive (loss)/income	$	(3,348)	$	1,719	$	2,841	$	1,727

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AirSculpt Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)


Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income
($000s, except shares and per share figures)	Shares	Amount	Accumulated Deficit	Total
Balance at December 31, 2022	56,181,689	$	56	$	85,858	$	(76)	$	(15,072)	$	70,766
Issuance of common stock through unit vesting	529,571	-	-	-	-	-
Dividends	-	-	66	-	-	66
Equity-based compensation	-	-	4,388	-	-	4,388
Net loss	-	-	-	-	(14)	(14)
Other comprehensive income	-	-	-	22	-	22
Balance at March 31, 2023	56,711,260	56	90,312	(54)	(15,086)	75,228
Issuance of common stock through unit vesting	73,708	1	-	-	-	1
Distributions	-	-	(79)	-	-	(79)
Equity-based compensation	-	-	4,603	-	-	4,603
Net income	-	-	-	-	1,776	1,776
Other comprehensive loss	-	-	-	(57)	-	(57)
Balance at June 30, 2023	56,784,968	$	57	$	94,836	$	(111)	$	(13,310)	$	81,472

Balance at December 31, 2023	57,355,676	$	57	$	103,898	$	(412)	$	(19,551)	$	83,992
Issuance of common stock through unit vesting	181,717	1	-	-	-	1
Dividends	-	-	479	-	-	479
Equity-based compensation	-	-	(6,781)	-	-	(6,781)
Payment of taxes withheld through vested equity-based compensation	-	-	(377)	-	-	(377)
Net income	-	-	-	-	6,029	6,029
Other comprehensive income	-	-	-	160	-	160
Balance at March 31, 2024	57,537,393	58	97,219	(252)	(13,522)	83,503
Issuance of common stock through unit vesting	36,851	-	-	-	-	-
Dividends	-	-	(14)	-	-	(14)
Equity-based compensation	-	-	4,873	-	-	4,873
Net loss	-	-	-	-	(3,206)	(3,206)
Other comprehensive loss	-	-	-	(142)	-	(142)
Balance at June 30, 2024	57,574,244	$	58	$	102,078	$	(394)	$	(16,728)	$	85,014

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AirSculpt Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


Six Months Ended June 30,
($000s)	2024	2023
Cash flows from operating activities
Net income	$	2,823	$	1,762
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,690	4,850
Equity-based compensation	(1,908)	8,991
Non-cash interest expense; amortization of debt costs	163	518
Loss/(gain) on disposal of long-lived assets	4	(202)
Changes in assets and liabilities
Taxes receivable	(1,507)	88
Prepaid expense and other current assets	(4,617)	1,052
Other assets	173	(3,967)
Accounts payable	(3)	(392)
Deferred revenue and patient deposits	(520)	1,912
Accrued and other liabilities	6,509	3,843
Net cash provided by operating activities	6,807	18,455
Cash flows from investing activities
Purchases of property and equipment, net	(5,580)	(5,976)
Net cash used in investing activities	(5,580)	(5,976)
Cash flows from financing activities
Payment on term loan	(1,063)	(1,063)
Distribution to member	-	(79)
Dividends paid to shareholders	(14)	(206)
Payment of taxes withheld through vested equity-based compensation	(391)	-
Other financing activity	(155)	32
Net cash used in financing activities	(1,623)	(1,316)
Net (decrease)/increase in cash and cash equivalents	(396)	11,163
Cash and cash equivalents
Beginning of period	10,262	9,616
End of period	$	9,866	$	20,779

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,947	$	3,109
Cash paid for taxes	$	1,752	$	872

Supplemental disclosure of non-cash investing information:
Property and equipment included in accounts payable and accrued expenses	$	644	$	724

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AirSculpt Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF KEY ACCOUNTING POLICIES

AirSculpt Technologies, Inc. ("AirSculpt" or the "Company"), was formed as a Delaware corporation on June 30, 2021. On October 28, 2021, AirSculpt completed an initial public offering ("IPO") of 8,050,000 shares of common stock at an initial public offering price of $11.00 per share. Immediately following the IPO, AirSculpt's total outstanding shares were 55,640,154. Pursuant to a reorganization (the "Reorganization") among entities under common control immediately prior to the IPO, AirSculpt became a holding company with its principal asset being 100% of the ownership interests in EBS Intermediate Parent LLC. The Company's revenues are concentrated in the specialty, minimally invasive liposuction market. The operations of the Company prior to the IPO represent the predecessor to AirSculpt. The Company and its consolidated subsidiaries are referred to collectively in these consolidated financial statements as "we," "our," and "us." Solely for convenience, some of the copyrights, trade names and trademarks referred to in these consolidated financial statements are listed without their ©, ®and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks.

The Company, through its wholly-owned subsidiaries, is a provider of practice management services to professional associations ("PAs") located throughout the United States, Canada, and the United Kingdom. The Company owns and operates non-clinical assets and provides its management services to the PAs through management services agreements ("MSAs"). Management services provide for the administration of the non-clinical aspects of the medical operations and include, but are not limited to, financial, administrative, technical, marketing, and personnel services. Pursuant to the MSA, the PA is responsible for all clinical aspects of the medical operations of the practice.

Principles of Consolidation

These consolidated financial statements present the financial position and results of operations of the Company, its wholly-owned domestic and international subsidiaries, and its variable interest in the managed PAs in the United States ("Domestic PAs"), which are under the control of the Company and are considered variable interest entities in which the Company is the primary beneficiary.

All intercompany accounts and transactions have been eliminated in consolidation.

Variable Interest Entities

The Company has a variable interest in the Domestic PAs where it has a long-term and unilateral controlling financial interest over their assets and operations. The Company has the ability to direct the activities that most significantly affect the Domestic PAs' economic performance via the MSAs and related agreements. The Company is a practice management service organization and does not engage in the practice of medicine. These services are provided by licensed professionals at each of the Domestic PAs. Certain key features of the MSAs and related agreements enable the Company to assign the member interests of certain of the Domestic PAs to another member designated by the Company (i.e., "nominee shareholder") for a nominal value in certain circumstances at the Company's sole discretion. The MSA does not allow the Company to be involved in, or provide guidance on, the clinical operations of the Domestic PAs. The Company consolidates the Domestic PAs into the financial statements. All of the Company's revenue is earned from services provided by the Domestic PAs and its wholly-owned foreign subsidiaries in the United Kingdom and Canada. The only assets and liabilities held by the Domestic PAs included in the accompanying consolidated balance sheets are clinical related. The clinical assets and liabilities are not material to the Company as a whole.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Concentration of Credit Risk

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company's revenues are concentrated in the specialty, minimally invasive liposuction market.

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The Company maintains cash balances at financial institutions which may at times exceed the amount covered by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts.

Revenue Recognition

Revenue consists primarily of revenue earned for the provision of the Company's patented AirSculpt® procedures. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company's performance obligations are delivery of specialty, minimally invasive liposuction services.

The Company assists patients, as needed, by providing third-party financing options to pay for procedures. The Company has arrangements with various financing companies to facilitate this option. There is a financing transaction fee based on a set percentage of the amount financed and are not contingent upon any criteria. The Company recognizes revenue based on the expected transaction price which is reduced for financing fees.

Revenue for services is recognized when the service is performed. Payment is typically rendered in advance of the service. Customer contracts generally do not include more than one performance obligation.

The Company's policy is to require payment for services in advance. Payments received for services that have yet to be performed as of June 30, 2024 and December 31, 2023 are included in deferred revenue and patient deposits. All of the deferred revenue and patient deposits as of December 31, 2023 were recognized in revenue during the six months ended June 30, 2024.

For the three months ended June 30, 2024 and 2023, revenue from international locations was $1.8 million and $1.4 million, respectively, and net loss from international operations was $0.2 million and $0.7 million, respectively. For the six months ended June 30, 2024 and 2023, revenue from international locations was $3.2 million and $2.5 million, respectively, and net loss from international operations was $0.8 million and $0.9 million, respectively.

Cost of Service

Cost of service is comprised of all service and product costs related to the delivery of procedures, including but not limited to compensation to doctors, nurses and clinical staff, supply costs, and facility rent expense.

Deferred Financing Costs, Net

Loan costs and discounts are capitalized in the period in which they are incurred and amortized on the straight-line basis over the term of the respective financing agreement which approximates the effective interest method. These costs are included as a reduction of long-term debt on the condensed consolidated balance sheets. Total amortization of deferred financing costs was approximately $0.1 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively. Total amortization of deferred financing costs was approximately $0.2 million and $0.5 million for the six months ended June 30, 2024 and 2023, respectively. Amortization of loan costs and discounts is included as a component of interest expense.

Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 350, Intangibles - Goodwill and Other and Topic 360, Impairment or Disposal of Long-Lived Assets. These standards require that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to future estimated cash flows expected to arise as a direct result of the use and eventual disposition of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.No impairment charges were recognized for the three and six months ended June 30, 2024 and 2023.

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Fair Value

ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosure requirements about fair value measurements.

ASC Topic 820 defines three categories for the classification and measurement of assets and liabilities carried at fair value:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or observable inputs that are corroborated by market data.

Level 3: Unobservable inputs reflecting the reporting entity's own assumptions.

The fair value of financial instruments is generally estimated through the use of public market prices, quotes from financial institutions and other available information. Judgment is required in interpreting data to develop estimates of market value and, accordingly, amounts are not necessarily indicative of the amounts that could be realized in a current market exchange.

Short-term financial instruments, including cash, prepaid expenses and other current assets, accounts payable, and other liabilities, consist primarily of instruments without extended maturities, for which the fair value, based on management's estimates, approximates their carrying values. Borrowings bear interest at what is estimated to be current market rates of interest, accordingly, carrying value approximates fair value.

Earnings Per Share

Basic earnings per share of common stock is computed by dividing net (loss)/income for the three and six months ended June 30, 2024 and 2023 by the weighted-average number of shares of common stock outstanding during the same period. Diluted earnings per share of common stock is computed by dividing net (loss)/income for the three and six months ended June 30, 2024 and 2023 by the weighted-average number of shares of common stock adjusted to give effect to potentially dilutive securities.

Advertising Costs

Advertising costs are expensed in the period when the costs are incurred and are included as a component of selling, general and administrative costs. Advertising expenses were approximately $11.0 million and $6.9 million for the three months ended June 30, 2024 and 2023, respectively, and approximately $19.4 million and $12.9 million for the six months ended June 30, 2024 and 2023, respectively.

Income Taxes

The Company applies the provisions of ASC 740-10, Accounting for Uncertain Tax Positions("ASC 740-10"). Under these provisions, companies must determine and assess all material positions existing as of the reporting date, including all significant uncertain positions, for all tax years that are open to assessment or challenge under tax statutes. Additionally, those positions that have only timing consequences are analyzed and separated based on ASC 740-10's recognition and measurement model.

ASC 740-10 provides guidance related to uncertain tax positions for pass-through entities and tax-exempt not-for profit entities. ASC 740-10 also modifies disclosure requirements related to uncertain tax positions for nonpublic entities and provides that all entities are subject to ASC 740-10 even if the only tax position in question is the entity's status as a pass-through.

As required by the uncertain tax position guidance, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied the uncertain tax position guidance to all tax positions for

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which the statute of limitations remained open and determined that there are no uncertain tax positions as of June 30, 2024 or December 31, 2023. The Company is not subject to U.S. federal tax examination prior to 2021, when it was formed.

The Company has an effective tax rate of approximately 50.6% and 48.8% for the three months ended June 30, 2024 and 2023, respectively, and approximately 5.4% and 49.6% for the six months ended June 30, 2024 and 2023, respectively, inclusive of all applicable U.S. federal and state income taxes.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which requires enhanced disclosures of significant segment expenses. The ASU is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. The amendments in this ASU must be applied retrospectively to all periods presented and early adoption is permitted. The Company is evaluating the impact of this ASU on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which establishes new requirements for the categorization and disaggregation of information in the rate reconciliation as well as for disaggregation of income taxes paid. The ASU is effective for annual periods beginning after December 15, 2024 and interim periods beginning after December 15, 2025. The amendments in this ASU may be applied prospectively or retrospectively to all periods presented and early adoption is permitted. The Company is evaluating the impact of this ASU on its consolidated financial statements.

NOTE 2 - GOODWILL AND INTANGIBLES, NET

The annual review of goodwill impairment will be performed in October 2024. There were no triggering events during the three and six months ended June 30, 2024 and 2023.

The Company had goodwill of $81.7 million at June 30, 2024 and December 31, 2023.

Intangible assets consisted of the following at June 30, 2024 and December 31, 2023 (in 000's):


June 30, 2024	December 31, 2023	Useful Life
Technology and know-how	$	53,600	$	53,600	15 years
Trademarks and tradenames	17,700	17,700	15 years
71,300	71,300
Accumulated amortization of technology and know-how	(20,546)	(18,759)
Accumulated amortization of tradenames and trademarks	(6,785)	(6,195)
Total intangible assets	$	43,969	$	46,346

Amortization of intangible assets will be $4.8 million per year for each of the next five fiscal years.

Aggregate amortization expense on intangible assets was approximately $1.2 million for both of the three months ended June 30, 2024 and 2023 and $2.4 million for both of the six months ended June 30, 2024 and 2023.

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NOTE 3 - PROPERTY AND EQUIPMENT, NET

As of June 30, 2024 and December 31, 2023 property and equipment consists of the following (in 000's):


June 30, 2024	December 31, 2023
Medical equipment	$	11,995	$	11,576
Office and computer equipment	901	860
Furniture and fixtures	4,606	4,280
Leasehold improvements	27,277	21,982
Construction in progress	2,019	1,910
Less: Accumulated depreciation	(14,983)	(11,700)
Property and equipment, net	$	31,815	$	28,908

Depreciation expense was approximately $1.7 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively, and $3.3 million and $2.5 million for the six months ended June 30, 2024 and 2023, respectively.

NOTE 4 - DEBT

On November 7, 2022, the Company entered into a credit agreement with a syndicate of lenders (the "Credit Agreement") maturing November 7, 2027. Pursuant to the Credit Agreement, there is (i) an $85.0 million aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $5.0 million. On September 29, 2023, the Company voluntarily pre-paid $10.0 million of the principal balance of the term loans under the Credit Agreement using cash on hand.

Under the Credit Agreement, all outstanding loans bear interest based on either a base rate or SOFR plus an applicable per annum margin. The applicable per annum margin is 2.0% or 3.0% for base rate or SOFR, respectively, if the Company's total leverage ratio is equal to or greater than 2.0x. If the Company's total leverage ratio is equal to or greater than 1.0x and less than 2.0x, the applicable per annum margin is 1.5% or 2.5% for base rate or SOFR, respectively. If the Company's total leverage ratio is below 1.0x, the applicable per annum margin is 1.0% or 2.0% for base rate or SOFR, respectively. As of June 30, 2024, the interest rate was 7.83%.

Total borrowings as of June 30, 2024 and December 31, 2023 were as follows (in 000's):


June 30, 2024	December 31, 2023
Term loan	$	71,813	$	72,875
Unamortized debt discounts and issuance costs	(1,085)	(1,247)
Total debt, net	70,728	71,628
Less: Current portion	(3,188)	(2,125)
Long-term debt, net	$	67,540	$	69,503

As of June 30, 2024 and December 31, 2023, the Company had $5.0 million available on the revolving credit facility.

The scheduled future maturities of long-term debt as of June 30, 2024 is as follows (in 000's):


Year ending December 31,
2024 (excluding the six months ended June 30, 2024)	$	1,063
2025	4,250
2026	6,375
2027	60,125
Total maturities	$	71,813

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All borrowings under the Credit Agreement are cross collateralized by substantially all assets of the Company and are subject to certain restrictive covenants including quarterly total leverage ratio and fixed charge ratio requirements. The Company is in compliance with all covenants and has no letter of credit outstanding as of June 30, 2024 and December 31, 2023.

NOTE 5 - LEASES

The Company's operating leases are primarily for real estate, including medical office suites and corporate offices. For the three months ended June 30, 2024 and 2023, the Company incurred rent expense of $1.6 million and $1.4 million, respectively, for its medical office suites. For the six months ended June 30, 2024 and 2023, the Company incurred rent expense of $3.1 million and $2.9 million, respectively, related to its medical office suites. The Company's rent expense related to its medical office suites is classified in cost of services within the Company's condensed consolidated statements of operations. The Company incurred rent expense of $91,000 and $91,000 for the three months ended June 30, 2024 and 2023, respectively, and $182,000 and $182,000 for the six months ended June 30, 2024 and 2023, respectively, related to the corporate offices which is classified in selling, general and administrative expenses. The Company currently does not have any finance leases.

Real estate lease agreements typically have initial terms of fiveto ten years and may include one or more options to renew. The useful life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual value guarantees, restrictions or covenants.

The following table presents supplemental cash flow information for the six months ended June 30, 2024 and 2023 (in 000's):


June 30, 2024	June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,126	$	2,544
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	4,360	$	8,991

Future minimum rental payments under all non-cancellable operating lease agreements for the succeeding five years are as follows, excluding common area maintenance charges that may be required by the agreements (in 000's):


Year ending December 31,
2024 (excluding the six months ended June 30, 2024)	$	3,443
2025	7,179
2026	7,049
2027	6,469
2028	5,589
Thereafter	14,621
Total lease payments	44,350
Less: imputed interest	(14,619)
Total lease obligations	$	29,731

NOTE 6 - STOCKHOLDERS' EQUITY AND EQUITY-BASED COMPENSATION

During the three and six months ended June 30, 2024, the Company granted 104,348 and 515,804 restricted stock units ("RSUs"), respectively, to executive officers and employees under the 2021 Equity Incentive Plan. During the three and six months ended June 30, 2023, the Company granted 158,306 and 767,261 RSUs, respectively. These RSUs are not considered outstanding until vested. These RSUs have a time-based vesting condition. These units will vest 1/3 per year over three years. Vesting and payment of these RSUs are generally subject to continuing service of the employee or non-employee director over the ratable vesting periods beginning one year from the date of grant to three years after the date of

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grant. The fair values of these RSUs were determined based on the closing price of the Company's common stock on the trading date immediately prior to the grant date.

During the three and six months ended June 30, 2024, the Company granted - and 407,688 performance based stock units ("PSUs"), respectively, which have market-based vesting conditions. In the three and six months ended June 30, 2023, the Company granted 89,258 and 674,876 PSUs, respectively, which have market-based vesting conditions. The vesting is based on achievement of a total shareholder return relative to a specified peer group ("rTSR"). Based on the rTSR, the awards can settle in shares in a range from 0% to 200%. In addition to the achievement of the performance conditions, these PSUs are generally subject to the continuing service of the employee over the ratable vesting period from the earned date continuing through the settlement of the shares. For these PSUs, the shares settle in the first quarter of the year following the year in which the vesting criteria is met. The fair values of PSUs with a market-based vesting condition were estimated using a Monte Carlo simulation model.

In connection with the IPO, on November 4, 2021 the Company previously granted PSUs with performance-based vesting conditions to certain employees. The performance-based conditions include PSUs that can vest upon achieving specified stock price performance targets (the "Price Targets"), and the remaining PSUs can vest upon achieving a revenue performance target in any trailing twelve month period up to December 31, 2024 (the "Revenue Target"). During the three months ended March 31, 2024, the Company reassessed the probability of achieving the Revenue Target and determined such achievement is improbable based on current facts and circumstances. As a result, the Company recorded a $10.4 million cumulative reversal of stock compensation expense related to the unvested PSUs attributable to the Revenue Target in the three months ended March 31, 2024.

The Company recognized equity-based compensation expense of $4.9 million and $4.6 million for the three months ended June 30, 2024 and 2023, respectively, and $(1.9) million and $9.0 million for the six months ended June 30, 2024 and 2023, respectively, in selling, general and administrative expenses on the condensed consolidated statements of operations. Forfeitures are recognized as incurred.

The Company paid dividends of approximately $14.0 thousand and $206.0 thousand for the six months ended June 30, 2024 and 2023, respectively.

NOTE 7 - EARNINGS PER SHARE

Basic earnings per share of common stock is computed by dividing net (loss)/income by the weighted-average number of shares of common stock outstanding during the same period. Diluted earnings per share of common stock is computed by dividing net (loss)/income by the weighted-average number of shares of common stock adjusted to give effect to potentially dilutive securities. Where the inclusion of potentially dilutive shares would be antidilutive, diluted loss per share equals basic loss per share.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net (loss)/income per share of common stock is as follows (in 000's except for shares and per share figures):


Three Months Ended June 30,	Six Months Ended June 30,
2024	2023	2024	2023
Numerator:
Net (loss)/income	$	(3,206)	$	1,776	$	2,823	$	1,762
Denominator:
Weighted average shares of common stock outstanding - basic	57,557,178	56,753,498	57,489,466	56,599,291
Add: Effect of dilutive securities	-	1,758,268	576,667	1,496,445
Weighted average shares of common stock outstanding - diluted	57,557,178	58,511,766	58,066,133	58,095,736
Income per share of common stock outstanding - basic and diluted	$	(0.06)	$	0.03	$	0.05	$	0.03

The following number of potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been antidilutive.

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Three Months Ended June 30,	Six Months Ended June 30,
2024	2023	2024	2023
Restricted stock units	1,544,923	738,437	1,341,790	791,716
Performance and market-based stock units	2,680,748	1,971,274	2,201,151	2,033,737

NOTE 8 - INCOME TAXES

The Company's income tax (benefit)/expense for the three months ended June 30, 2024 and 2023 was $(3.3) million and $1.7 million, respectively, and the income tax (benefit)/expense for the six months ended June 30, 2024 and 2023 was $0.2 million and $1.7 million, respectively. The effective tax rate for the three months ended June 30, 2024 and 2023 was 50.6% and 48.8%, respectively. The effective tax rate for the six months ended June 30, 2024 and 2023 was 5.4% and 49.6%, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code. There are no uncertain tax positions as of June 30, 2024 or December 31, 2023.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Professional Liability

In the ordinary course of business, the Company becomes involved in pending and threatened legal actions and proceedings, most of which involve claims of medical malpractice related to medical services provided by the PAs employed and affiliated physicians. The Company may also become subject to other lawsuits which could involve large claims and significant costs. The Company believes, based upon a review of pending actions and proceedings, that the outcome of such legal actions and proceedings will not have a material adverse effect on its business, financial condition, results of operations, and cash flows. The outcome of such actions and proceedings, however, cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows.

Although the Company currently maintains liability insurance coverage intended to cover professional liability and certain other claims, the Company cannot assure that its insurance coverage will be adequate to cover liabilities arising out of claims asserted against it in the future where the outcomes of such claims are unfavorable. Liabilities in excess of the Company's insurance coverage, including coverage for professional liability and certain other claims, could have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows.

NOTE 10 - SEGMENT INFORMATION

The Company has one reportable segment: direct medical procedure services. This segment is made up of facilities and medical staff that provide the Company's patented AirSculpt® procedures to patients. Segment information is presented in the same manner that the Company's chief operating decision maker ("CODM") reviews the operating results in assessing performance and allocating resources. The Company's CODM is the Company's chief executive officer. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources. The Company's CODM reviews revenue, gross profit and Adjusted EBITDA. Gross profit is defined as revenues less cost of service incurred and Adjusted EBITDA as net (loss)/income excluding depreciation and amortization, net interest (benefit)/expense, income tax expense, restructuring and related severance costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation.

NOTE 11 - SUBSEQUENT EVENTS

On July 16, 2024, the Company entered into a settlement agreement to resolve litigation with the estate of a former patient (the "Plaintiff") in which the patient passed away a few days after undergoing a procedure at one of the Company's facilities. Under the terms of the settlement, the Company agreed to pay $2.0 million. The settlement amount has been fully accrued and is reflected in the financial statements under accrued and other current liabilities as of June 30, 2024. This settlement is fully within the limits of the Company's insurance coverage and thus would have no effect on net income in the three or six months ended June 30, 2024. The Company has accrued a separate receivable for insurance proceeds of $2.0 million, included in the prepaid expenses and other current assets on the balance sheet as of June 30, 2024. The

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Company does not expect any further financial obligations related to this matter. The settlement resolved all claims against the Company, and the litigation has been dismissed.

On August 8, 2024, Todd Magazine stepped down from his role as Chief Executive Officer of AirSculpt Technologies, Inc., effective as of August 8, 2024.

On August 8, 2024, Mr. Magazine entered into a Transition Services Agreement (the "Transition Services Agreement") with the Company, which provides for the severance benefits specified in Section 7.2 of his employment agreement with the Company (previously attached as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the "SEC") on January 6, 2023). In addition, in consideration for the provision by Mr. Magazine of consulting services to the Company through December 31, 2024, and for his acknowledgement that the Employee Covenants Agreement between him and the Company, dated as of January 30, 2023, remains binding on him through the Consulting Term (as defined in the Transition Services Agreement), a total of 75,000 restricted stock units of the Company previously granted to Mr. Magazine, which are unvested and would otherwise be forfeited, will remain outstanding and will vest on January 1, 2025.

In connection with stepping down from his role as Chief Executive Officer of the Company, Mr. Magazine resigned from his position as a member of the board of directors of the Company (the "Board"), effective as of August 8, 2024.

On August 8, 2024, the Board appointed Dennis Dean, the Company's Chief Financial Officer, as the Interim Chief Executive Officer of the Company, effective as of August 8, 2024.

In his capacity as Interim Chief Executive Officer of the Company, Mr. Dean will succeed to Mr. Magazine as the principal executive officer of the Company, while maintaining his position as the principal financial officer.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes and other financial information appearing in our Annual Report on Form 10-K dated March 10, 2023 filed with the Securities and Exchange Commission ("SEC") pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"). This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. See the section entitled "Cautionary Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. Our actual results could differ materially from those anticipated in the forward-looking statements.

Unless otherwise indicated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to the "Company," "AirSculpt," "we," "us" and "our" refer to AirSculpt Technologies, Inc. and its consolidated subsidiaries and the Professional Associations.

Overview

AirSculpt is an experienced, fast-growing national provider of body contouring procedures delivering a premium consumer experience. We provide custom body contouring using our proprietary AirSculpt® method that removes unwanted fat and tightens skin in a minimally invasive procedure, producing dramatic results. We opened a new center in Kansas City, KS in July 2024. We deliver our AirSculpt® procedures through a growing nationwide footprint of 28 centers across 19 states, Canada and the United Kingdom as of August 9, 2024.

For the three and six months ended June 30, 2024, we performed 3,949 and 7,695 cases, respectively, compared to 4,186 and 7,826 for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2024, we generated approximately $51.0 million and $98.6 million of revenue, respectively, compared to $55.7 million and $101.5 million for the three and six months ended June 30, 2023, respectively. This represents approximately 8% decline in revenue for the three months ended June 30, 2024 over the same period in prior year and approximately 3% decline in revenue for the six months ended June 30, 2024 over the same period in prior year.

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Key Operational and Business Metrics

In addition to the measures presented in our condensed consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions:

Cases Performed and Revenue per Case

Our case volumes in the table below, which are used for calculating revenue per case, represent one patient visit; notwithstanding that, a patient may have multiple areas treated during one visit. We believe this provides the best approach for assessing our revenue performance and trends.

Total Case and Revenue Metrics


Three Months Ended June 30,	Six Months Ended June 30,
2024	2023	2024	2023
Cases	3,949	4,186	7,695	7,826
Case growth	(5.7)	%	N/A	(1.7)	%	N/A
Revenue per case	$	12,916	$	13,307	$	12,817	$	12,972
Revenue per case growth	(2.9)	%	N/A	(1.2)	%	N/A
Number of facilities	27	25	27	25
Number of total procedure rooms	57	53	57	53

Same-Center Case and Revenue Metrics

Same-Center Information

For the three months ended June 30, 2024 and 2023, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that were owned and operated during the three months ended June 30, 2024 and 2023, respectively. At facilities that were not owned or operated for the entirety of the prior year period, the current year period has been pro-rated to reflect only growth experienced during the portion of the three months ended June 30, 2024 in which such facilities were owned and operated during the three months ended June 30, 2023. We define same-center facilities and procedure rooms based on if a facility was owned or operated as of June 30, 2023.

For the six months ended June 30, 2024 and 2023, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that were owned and operated during the six months ended June 30, 2024 and 2023, respectively. At facilities that were not owned or operated for the entirety of the prior year period, the current year period has been pro-rated to reflect only growth experienced during the portion of the six months ended June 30, 2024 in which such facilities were owned and operated during the six months ended June 30, 2023.We define same-center facilities and procedure rooms based on if a facility was owned or operated as of June 30, 2023.


Three Months Ended June 30,	Six Months Ended June 30,
2024	2023	2024	2023
Cases	3,598	4,186	6,866	7,826
Case growth	(14.0)	%	N/A	(12.3)	%	N/A
Revenue per case	$	12,836	$	13,307	$	12,741	$	12,972
Revenue per case growth	(3.5)	%	N/A	(1.8)	%	N/A
Number of facilities	25	25	25	25
Number of total procedure rooms	53	53	53	53

Our same-store revenue decline is primarily attributed to weaker than expected performance across the broader aesthetic and consumer retail industries, particularly related to customers that are more price sensitive.

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Non-GAAP Financial Measures-Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Net Income per Share

We report our financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"), however, management believes the evaluation of our ongoing operating results may be enhanced by a presentation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income per Share, which are non-GAAP financial measures.

We define Adjusted EBITDA as net (loss)/income excluding depreciation and amortization, net interest expense, income tax (benefit)/expense, restructuring and related severance costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation.

We define Adjusted Net Income as net (loss)/income excluding restructuring and related severance costs, (gain)/loss on disposal of long-lived assets, equity-based compensation and the tax effect of these adjustments.

We include Adjusted EBITDA and Adjusted Net Income because they are important measures on which our management assesses and believes investors should assess our operating performance. We consider Adjusted EBITDA and Adjusted Net Income each to be an important measure because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis. Adjusted EBITDA has limitations as an analytical tool including: (i) Adjusted EBITDA does not include results from equity-based compensation and (ii) Adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments. Adjusted Net Income has limitations as an analytical tool because it does not include results from equity-based compensation.

We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of revenue. We define Adjusted Net Income per Share as Adjusted Net Income divided by weighted average basic and diluted shares. We included Adjusted EBITDA Margin and Adjusted Net Income per Share because they are important measures on which our management assesses and believes investors should assess our operating performance. We consider Adjusted EBITDA Margin and Adjusted Net Income per Share to be important measures because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis.

The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net (loss)/income, the most directly comparable GAAP financial measure:


Three Months Ended June 30,	Six Months Ended June 30,
($ in thousands)	2024	2023	2024	2023
Net (loss)/income	$	(3,206)	$	1,776	$	2,823	$	1,762
Plus
Equity-based compensation(1)	4,873	4,603	(1,908)	8,991
Restructuring and related severance costs	4,092	2,151	4,388	3,305
Depreciation and amortization	2,885	2,514	5,690	4,850
(Gain)/loss on disposal of long-lived assets	(1)	(18)	4	(202)
Interest expense, net	1,515	1,891	3,047	3,626
Income tax (benefit)/expense	(3,290)	1,695	161	1,736
Adjusted EBITDA	$	6,868	$	14,612	$	14,205	$	24,068
Adjusted EBITDA Margin	13.5	%	26.2	%	14.4	%	23.7	%

For the three months ended June 30, 2024 and 2023, pre-opening de novo and relocation costs were $0.1 million and $0.8 million, respectively. For the six months ended June 30, 2024 and 2023, pre-opening de novo and relocation costs were $0.2 million and $0.9 million, respectively.

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The following table reconciles Adjusted Net Income and Adjusted Net Income per Share to net (loss)/income, the most directly comparable GAAP financial measure:


Three Months Ended June 30,	Six Months Ended June 30,
($ in thousands)	2024	2023	2024	2023
Net (loss)/income	$	(3,206)	$	1,776	$	2,823	$	1,762
Plus
Equity-based compensation(1)	4,873	4,603	(1,908)	4,850
Restructuring and related severance costs	4,092	2,151	4,388	3,305
(Gain)/loss on disposal of long-lived assets	(1)	(18)	4	(202)
Tax effect of adjustments	(618)	(869)	1,713	(1,328)
Adjusted net income	$	5,140	$	7,643	$	7,020	$	8,387

Adjusted net income per share of common stock (2)
Basic	$	0.09	$	0.13	$	0.12	$	0.15
Diluted	$	0.09	$	0.13	$	0.12	$	0.14
Weighted average shares outstanding
Basic	57,557,178	56,753,498	57,489,466	56,599,291
Diluted	57,990,621	58,511,766	58,066,133	58,095,736

(2) Diluted Adjusted Net Income Per Share is computed by dividing adjusted net income by the weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock.

Components of Results of Operations

Revenue

Our revenue is generated from our patented AirSculpt®procedures performed on our patients. We are 100% self-pay and do not accept payments from the U.S. federal government or payer organizations. We assist patients, as needed, by providing third-party financing options to pay for procedures. We have arrangements with various financing companies to facilitate this option. There is a financing transaction fee based on a set percentage of the amount financed. We recognize revenue based on the expected transaction price which is reduced for financing fees.

Our policy is to require full payment for services in advance of performing a procedure. Payments received for which services have yet to been performed for all reported periods are included in deferred revenue and patient deposits on our balance sheets.

Cost of Service (excluding depreciation and amortization)

Cost of service is comprised of all service and product costs related to the delivery of procedures, including but not limited to compensation to our physicians and clinical staff, medical supply costs, and facility-related rent expense.

Operating Expense

Selling, General and Administrative

Selling, general and administrative consists of marketing and advertising expenses we incur to market our patented AirSculpt®procedures to potential patients and general and administrative costs, including rent for our corporate offices.

Selling Expenses

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Our advertising costs include both national and site-based advertising used to generate greater awareness and engagement

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among our current and potential patients. Our advertising costs include social media, digital marketing and traditional advertising. Selling expenses include salaries and commissions for employees engaged in marketing and sales. We define our customer acquisition costs as the total selling expenses per case.

We generally expect our selling expenses to increase as we continue to grow our brand and expand our national footprint. We evaluate our selling expense as compared to growth in our sales volume and will invest accordingly to the extent we believe we can increase our growth without materially negatively impacting our Adjusted EBITDA Margins.

General and Administrative

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service and the salaries and commissions of sales and marketing employees), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. We expect our general and administrative expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that we will continue to incur as a public company. We also expect increases from other costs associated with continuing to grow our business. As we continue to expand the number of centers and procedures rooms, we anticipate general and administrative expenses to decrease as a percentage of revenue over time.

Interest Expense

Interest expense, net consists primarily of interest costs on our outstanding borrowings under our debt.

Results of Operations

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

The following table and notes summarize certain results from the statements of operations for each of the periods indicated and the changes between periods. The table also shows the percentage relationship to revenue for the periods indicated:


Three Months Ended June 30,
2024	2023
($ in thousands)	Amount	% of Revenue	Amount	% of Revenue
Revenue	$	51,004	100.0	%	$	55,703	100.0	%
Operating expenses:
Cost of service	18,827	36.9	%	19,952	35.8	%
Selling, general and administrative(1)	34,274	67.2	%	27,893	50.1	%
Depreciation and amortization	2,885	5.7	%	2,514	4.5	%
Gain on disposal of long-lived assets	(1)	-	%	(18)	-	%
Total operating expenses	55,985	109.8	%	50,341	90.4	%
(Loss)/income from operations	(4,981)	(9.8)	%	5,362	9.6	%
Interest expense, net	1,515	3.0	%	1,891	3.4	%
Pre-tax net (loss)/income	(6,496)	(12.7)	%	3,471	6.2	%
Income tax (benefit)/expense	(3,290)	(6.5)	%	1,695	3.0	%
Net (loss)/income	$	(3,206)	(6.3)	%	$	1,776	3.2	%

(1)During the first quarter of fiscal year, 2024, the Company recorded a cumulative reversal of stock compensation expense of $10.4 million related to reassessing the probability of achieving the performance target on certain of the Company's performance-based stock units. See Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.

Overview-Our financial results for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 reflect the addition of two de novo centers which increased our procedure rooms by four.

Revenue-Our revenue decreased $4.7 million, or 8.4%, compared to the same period in 2023. The decrease is primarily attributed to weaker than expected performance across the broader aesthetics and high-end retail industries.

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Cost of Service-Our cost of services decreased $1.1 million, or 5.6%, compared to the same period in 2023. The percentage decrease in cost of service is consistent with the decrease in cases over the same period. Cost of service was 36.9% and 35.8% as a percentage of revenue for the three months ended June 30, 2024 and 2023, respectively.

Selling, General and Administrative Expenses-Selling, general and administrative expenses increased $6.4 million, or 22.9%, for the three months ended June 30, 2024 compared to the same period in 2023. This increase is related to the additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers. We expect our marketing and corporate support costs to continue to increase on an absolute dollar basis as we open de novo centers. Additionally, we incurred $3.7 million in severance costs in the three months ended June 30, 2024. Selling, general and administrative expenses as a percent of revenue was at 67.2% and 50.1% for the three months ended June 30, 2024 and 2023, respectively.

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $13.1 million and $9.4 million for the three months ended June 30, 2024 and 2023, respectively. Our customer acquisition costs were approximately $3,325 and $2,250 per customer in the three months ended June 30, 2024 and 2023, respectively. We intend to continue investing in our sales and marketing capabilities as we add new centers. Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expenses were approximately $21.1 million and $18.5 million for the three months ended June 30, 2024 and 2023, respectively. This increase is related to the $3.7 million in severance costs incurred in the three months ended June 30, 2024.

Depreciation and Amortization-Depreciation and amortization increased to approximately $2.9 million for the three months ended June 30, 2024 compared to $2.5 million for the same period in 2023. This increase is the result of having two additional de novo centers during the three months ended June 30, 2024 as compared to the 2023 period.

Interest Expense, net-Interest expense was $1.5 million and $1.9 million for the three months ended June 30, 2024 and 2023, respectively. The decrease is due to the voluntary prepayment of $10.0 million of the principal balance of the term loans under the Credit Agreement on September 29, 2023.

Income Tax Expense-Our effective tax rate is 50.6% and 48.8% for the three months ended June 30, 2024 and 2023, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.

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Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023


Six Months Ended June 30,
2024	2023
($ in thousands)	Amount	% of Revenue	Amount	% of Revenue
Revenue	$	98,624	100.0	%	$	101,516	100.0	%
Operating expenses:
Cost of service	36,869	37.4	%	37,969	37.4	%
Selling, general and administrative	50,030	50.7	%	51,775	51.0	%
Loss on debt modification	-	-	%	-	-	%
Depreciation and amortization	5,690	5.8	%	4,850	4.8	%
Loss/(gain) on disposal of long-lived assets	4	-	%	(202)	(0.2)	%
Total operating expenses	92,593	93.9	%	94,392	93.0	%
Income from operations	6,031	6.1	%	7,124	7.0	%
Interest expense, net	3,047	3.1	%	3,626	3.6	%
Pre-tax net income	2,984	3.0	%	3,498	3.4	%
Income tax (benefit)/expense	161	0.2	%	1,736	1.7	%
Net income	$	2,823	2.9	%	$	1,762	1.7	%

Overview-Our financial results for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 reflect the addition of two de novo centers which increased procedure rooms by four.

Revenue-Our revenue decreased $2.9 million, or 2.8%, compared to the same period in 2023. The decrease is primarily attributed to weaker than expected performance across the broader aesthetic and high-end retail industries.

Cost of Service-Our cost of service decreased $1.1 million, or 2.9%, compared to the six months ended June 30, 2023. This decrease is consistent with the (2.8%) decrease in revenue over the same period.

Selling, General and Administrative Expenses-Selling, general and administrative expenses decreased $1.7 million, or 3.4%, for the six months ended June 30, 2024 compared to the same period in 2023. This decrease is related to a decrease in our equity-based compensation expense (see Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion) partially offset by additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers. We expect our marketing and corporate support costs to continue to increase on an absolute dollar basis as we open de novo centers. Selling, general and administrative expenses as a percent of revenue were 50.7% and 51.0% for the six months ended June 30, 2024 and 2023, respectively.

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $24.3 million and $18.0 million for the six months ended June 30, 2024 and 2023, respectively. Our customer acquisition costs were approximately $3,165 and $2,300 per customer in the six months ended June 30, 2024 and 2023, respectively. We intend to continue investing in our sales and marketing capabilities as we add new centers. Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expense were approximately $25.7 million and $33.8 million for the six months ended June 30, 2024 and 2023, respectively. This reduction is due to a decrease in equity-based compensation (see Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion).

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Depreciation and Amortization-Depreciation and amortization increased to approximately $5.7 million for the six months ended June 30, 2024 compared to $4.9 million for the same period in 2023. This increase is the result of having two additional de novo centers during the six months ended June 30, 2024 as compared to the 2023 period.

Interest Expense, net-Interest expense decreased to $3.0 million from $3.6 million for the six months ended June 30, 2024 and 2023, respectively. The decrease is due to the lower principal balance resulting from the Company's voluntary $10 million prepayment made in 2023.

Income Tax Expense- Our effective tax rate is 5.4% and 49.6% for the six months ended June 30, 2024 and 2023, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.

Liquidity and Capital Resources

We principally rely on cash flows from operations as our primary source of liquidity and, if needed, up to $5.0 million in revolving loans under our revolving credit facility. Our primary cash needs are for payroll, marketing and advertisements, rent, capital expenditures associated with de novo locations and new procedure room additions, as well as information technology and infrastructure, including our corporate office. We believe that the cash expected to be generated from operations and the availability of borrowings under the revolving credit facility will be sufficient for our working capital requirements, liquidity obligations, anticipated capital expenditures relating to the opening of de novo centers, and payments due under our existing credit facilities for at least the next 12 months.

Certain trends in our business, including declining revenues and increased advertising costs, could make it difficult for us to meet certain financial covenants-particularly relating to leverage ratios-contained in the Credit Agreement (as defined below). Although we are in compliance with these covenants as of June 30, 2024, and expect to remain in compliance going forward, if trends in revenue continue to deteriorate, we believe that at some point in next twelve months we may be at risk of violating certain financial covenants. If we were to violate these covenants and were unable to obtain waivers of such violations or otherwise arrange for modified financial covenants with our lender syndicate, our business and results of operations could be materially and adversely affected. We will continue to monitor our compliance with all of our financial covenants and, if we feel that we are likely to violate any such covenant, we will seek to obtain the necessary relief.

As of June 30, 2024, we had $9.9 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility. We do not have any letters of credit outstanding as of June 30, 2024.

As of June 30, 2023, we had $10.3 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility. We did not have any letters of credit outstanding as of June 30, 2023.

The following table summarizes the net cash provided by (used for) operating activities, investing activities and financing activities for the periods indicated:


Six Months Ended June 30,
($ in thousands)	2024	2023
Cash Flows Provided By (Used For):
Operating activities	$	6,807	$	18,455
Investing activities	(5,580)	(5,976)
Financing activities	(1,623)	(1,316)
Net (decrease)/increase in cash and cash equivalents	(396)	11,163

Operating Activities

The primary source of our operating cash flow is the collection of patient payments received prior to performing surgical procedures. For the six months ended June 30, 2024, our operating cash flow decreased by $11.6 million compared to the same period in 2023. The decrease is primarily attributed to weaker than expected revenue performance and an increase in our marketing investments during the six months ended June 30, 2024 as compared to the prior year period. At June 30, 2024, we had working capital of $(3.4) million compared to $(4.4) million at December 31, 2023.

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Investing Activities

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $5.6 million and $6.0 million, respectively. Investing activities during both periods were attributable to the relocation of multiple existing facilities and the preparation for the opening of de novo locations.

Financing Activities

Net cash used in financing activities during the six months ended June 30, 2024 was $1.6 million. During the six months ended June 30, 2024, we made principal payments on our debt of $1.1 million and made payments of taxes withheld through vested equity-based compensation of $0.4 million.

Net cash used in financing activities for the six months ended June 30, 2023 was $1.3 million. For the six months ended June 30, 2023, we paid cash dividends to shareholders of $0.2 million and made principal payments on our debt of $1.1 million.

Long-Term Debt

The carrying value of our total indebtedness was $70.7 million and $71.6 million, which includes unamortized deferred financing costs and issuance discount of $1.1 million and $1.2 million, as of June 30, 2024 and December 31, 2023, respectively.

JOBS Act Accounting Election

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an "emerging growth company," whichever is earlier.

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Critical Accounting Policies and Estimates

A summary of significant accounting policies is disclosed in our Annual Report on Form 10-K dated February 27, 2024 filed with the SEC pursuant to Section 13 or 15d of the Exchange Act, as amended (the "Exchange Act") under the caption "Critical Accounting Policies and Estimates" in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes in the nature of our critical accounting policies and estimates or the application of those policies from our Annual Report on Form 10-K dated February 27, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

Item 4. Controls and Procedures

Management's Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended June 30, 2024.

Limitations on the Effectiveness of Controls

Our management, including the Chief Executive Officer and the Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls. For these reasons, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

During the ordinary course of business, we have become and may in the future become subject to pending and threatened legal actions and proceedings, including with respect to the quality of our services. All of the current legal actions and proceedings that we are a party to are of an ordinary or routine nature incidental to our operations, the resolution of which should not have a material adverse effect on our financial condition, results of operations or cash flows. These claims, to the extent they exceed our insurance deductibles, are covered by insurance, but there can be no assurance that our insurance coverage will be adequate to cover any such liability.

Item 1A. Risk Factors

Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations"), there were no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 dated February 27, 2024 and filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the quarter ended June 30, 2024, none of our directors or officers have adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (each as defined in Item 408(a) of Regulation S-K).

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Item 6. Exhibits


Exhibit Number	Description of Exhibit
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*†	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*†	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (embedded within the Inline XBRL document)

__________________________________

* Filed herewith.

† The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates them by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


AIRSCULPT TECHNOLOGIES, INC.

By:	/s/ Dennis Dean
Dennis Dean
Chief Financial Officer
(Principal Accounting and Financial Officer)

Date: August 9, 2024

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