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What changed in Airsculpt Technologies, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Airsculpt Technologies, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+275 added−287 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-10)

Top changes in Airsculpt Technologies, Inc.'s 2023 10-K

275 paragraphs added · 287 removed · 229 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+11 added−13 removed107 unchanged
Biggest changeThe Continuity Agreements (i) prohibit the Surgeon Owners from freely transferring or selling their interests in the Professional Associations, (ii) provide for the ability to add a second Surgeon Owner to help ensure continuity of the Professional Association, and (iii) provide that the ownership interests of the Surgeon Owners will automatically be transferred to another licensed professional designated by us in accordance with the terms of the Continuity Agreement upon the occurrence of certain events, which include, but is not limited to, the Surgeon Owner’s death, the termination of the Surgeon Owner’s employment, the Surgeon Owner’s license to practice medicine being revoked or terminated, the Surgeon Owner filing a petition for bankruptcy, the Surgeon Owner becoming indicted for or convicted of any felony or any misdemeanor offense involving moral turpitude, the Surgeon Owner breaching any provision of the Continuity Agreement, the Surgeon Owner’s gross negligence, willful misconduct or fraud with respect to the Professional Association, and the Surgeon Owner’s disability or incapacity. 9 Table of Contents Each Continuity Agreement will remain in effect until it is terminated (i) by written agreement signed by or on behalf of each party, (ii) upon the 21-year anniversary of the death of the Surgeon Owner, or (iii) only by the manager (being our wholly-owned subsidiaries), upon at least 30 days prior written notice of such termination to the Professional Association.
Biggest changeThe Continuity Agreements (i) prohibit the Surgeon Owners from freely transferring or selling their interests in the Professional Associations, (ii) provide for the ability to add a second Surgeon Owner to help ensure continuity of the Professional Association, and (iii) provide that the ownership interests of the Surgeon Owners will automatically be transferred to another licensed professional designated by us in accordance with the terms of the Continuity Agreement upon the occurrence of certain events, which include, but are not limited to, the Surgeon Owner’s death, the termination of the Surgeon Owner’s employment, the Surgeon Owner’s license to practice medicine being revoked or terminated, the Surgeon Owner filing a petition for bankruptcy, the Surgeon Owner becoming indicted for or convicted of any felony or any misdemeanor offense involving moral turpitude, the Surgeon Owner breaching any provision of the Continuity Agreement, the Surgeon Owner’s gross negligence, willful misconduct or fraud with respect to the Professional Association, and the Surgeon Owner’s disability or incapacity.
By using web-based lead generation, we generate over 400,000 monthly website visits, primarily through optimized spend on Google’s marketing engine. • Celebrity endorsements: We collaborate with celebrity influencers and TV personalities to drive continuous media coverage that raises brand awareness and social acceptance of our procedures. • Patient testimonials: Our patients are some of the best advocates for our brand, with many recommending our procedures to family and friends.
By using web-based lead generation, we generate over 450,000 monthly website visits, primarily through optimized spend on Google’s marketing engine. • Celebrity endorsements: We collaborate with celebrity influencers and TV personalities to drive continuous media coverage that raises brand awareness and social acceptance of our procedures. • Patient testimonials: Our patients are some of the best advocates for our brand, with many recommending our procedures to family and friends.
We also had contracts with approximately 64 surgeons. While each center varies depending on its size, case volume and case types, we employ an average of approximately 10 full-time equivalent employees at our centers. While we provide “full-time equivalent” information, a number of our employees work on flexible schedules rather than full-time, which increases our staffing efficiency.
We also had contracts with approximately 90 surgeons. While each center varies depending on its size, case volume and case types, we employ an average of approximately 10 full-time equivalent employees at our centers. While we provide “full-time equivalent” information, a number of our employees work on flexible schedules rather than full-time, which increases our staffing efficiency.
The amount of fat removed via the AirSculpt® method depends on patient body size, desired outcomes and state regulations. After the procedure is complete, a piece of dry gauze is used to cover the entryway to protect against infection. 6 Table of Contents Across our centers, we use a network of independent surgeons to perform the AirSculpt ® procedure.
The amount of fat removed via the AirSculpt® method depends on patient body size, desired outcomes and state regulations. After the procedure is complete, a piece of dry gauze is used to cover the entryway to protect against infection. 7 Table of Contents Across our centers, we use a network of independent surgeons to perform the AirSculpt ® procedure.
They are selected to join our nationwide practice because they are at the top of their profession, specialize in body sculpting, and have artistic skill. Before working on Elite Body Sculpture patients, each surgeon completes extensive AirSculpt ® training to ensure the best results for every patient and treatment.
They are selected to join our nationwide practice because they are at the top of their profession, specialize in body sculpting, and have artistic skill. Before working on AirSculpt patients, each surgeon completes extensive AirSculpt ® training to ensure the best results for every patient and treatment.
We employ the following strategies to drive brand awareness: • Developing digital content, including a “ before and after ” photo gallery and AirSculpt ® TV: We have collected a catalog of over 200,000 “before and after” photos, showcasing our treatment outcomes.
We employ the following strategies to drive brand awareness: • Developing digital content, including a “ before and after ” photo gallery and AirSculpt ® TV: We have collected a catalog of over 215,000 “before and after” photos, showcasing our treatment outcomes.
Instead of protecting specific, individual liposuction components (such as a particular handpiece design), our issued patents and one of our pending applications relate to certain proprietary implementations of the process described in the section “Our Technique, Training and Equipment,” and the combination of multiple components to form proprietary systems that are specially configured for carrying out those proprietary processes.
Instead of protecting specific, individual liposuction components (such as a particular handpiece design), our issued patents and our pending application relate to certain proprietary implementations of the process described in the section “Our Technique, Training and Equipment,” and the combination of multiple components to form proprietary systems that are specially configured for carrying out those proprietary processes.
Instead of protecting specific, individual liposuction components (such as a particular handpiece design), our issued patents and one of our pending applications relate to certain proprietary implementations of the process described in the section “Our Technique, Training and Equipment,” and the combination of multiple components to form proprietary systems that are specially configured for carrying out those proprietary processes.
Instead of protecting specific, individual liposuction components (such as a particular handpiece design), our issued patents and our pending application relate to certain proprietary implementations of the process described in the section “Our Technique, Training and Equipment,” and the combination of multiple components to form proprietary systems that are specially configured for carrying out those proprietary processes.
These agreements also generally provide opportunities for supplemental bonuses. In addition, the Professional Associations have also agreed to reimburse us for certain expenses. See “Governmental Regulation—State Corporate Practice of Medicine and Fee-Splitting Laws.” Continuity Agreements We have entered into Continuity Agreements at all of our Professional Associations, with the exception of New York, with Dr.
These agreements also generally provide opportunities for supplemental bonuses. In addition, the Professional Associations have also agreed to reimburse us for certain expenses. See “Governmental Regulation—State Corporate Practice of Medicine and Fee-Splitting Laws.” 10 Table of Contents Continuity Agreements We have entered into Continuity Agreements at all of our Professional Associations, with the exception of New York, with Dr.
If a prospective surgeon successfully completes the Elite Fellowship Program, they are permitted to conduct the AirSculpt ® method without restrictions. Otherwise, they are observed in additional training procedures or are not chosen to join the Elite Body Sculpture team.
If a prospective surgeon successfully completes the Elite Fellowship Program, they are permitted to conduct the AirSculpt ® method without restrictions. Otherwise, they are observed in additional training procedures or are not chosen to join the AirSculpt team.
The areas in which we compete include: • Patients: We compete for patients to utilize our procedures through our marketing efforts and exceptional brand reputation. • Procedure Offering: We compete with providers of liposuction, abdominoplasty (tummy tuck) and gastric bypass surgery, and non-surgical procedures that use cooling, injected medication or heat to reduce fat cells.
The areas in which we compete include: • Patients: We compete for patients to utilize our procedures through our marketing efforts and exceptional brand reputation. • Procedure Offering: We compete with providers of liposuction, abdominoplasty (tummy tuck) and gastric bypass surgery, weight-loss drugs and non-surgical procedures that use cooling, injected medication or heat to reduce fat cells.
Thus, regulatory authorities or other persons, including the Professional Associations’ contracted surgeons, may assert that, notwithstanding the careful structuring of our management arrangements, that we are engaged in the corporate practice of medicine or that the fees earned by us under our contractual arrangements with the Professional Associations constitute 10 Table of Contents unlawful fee splitting.
Thus, regulatory authorities or other persons, including the Professional Associations’ contracted surgeons, may assert that, notwithstanding the careful structuring of our management arrangements, that we are engaged in the corporate practice of medicine or that the fees earned by us under our contractual arrangements with the Professional Associations constitute unlawful fee splitting.
State Corporate Practice of Medicine and Fee-Splitting Laws The laws in many of the states in which we operate or may in the future operate, prohibit entities owned by non-physicians from practicing medicine, exercising control over surgeons, employing surgeons or otherwise interfering with the independent professional judgment of surgeons.
State Corporate Practice of Medicine and Fee-Splitting Laws The laws in many of the states in which we operate or may in the future operate, prohibit entities owned by non-physicians from practicing medicine, exercising control over surgeons, employing surgeons or otherwise interfering with the 11 Table of Contents independent professional judgment of surgeons.
In 2020, we began to offer our patients the choice of virtual consults prior to their procedures. • Elite Surgeons: Our surgeons are chosen not only for their medical skills, generally as plastic or cosmetic surgeons, but also for their artistic vision.
In 2020, we began to offer our patients the choice of virtual consults prior to their procedures. 3 Table of Contents • Elite Surgeons: Our surgeons are chosen not only for their medical skills, generally as plastic or cosmetic surgeons, but also for their artistic vision.
We encourage a strong relationship between our patients and 7 Table of Contents surgeons, from initial consultation, through procedure, to after treatment. Nearly all of our patient-facing consultants are former patients and can speak to their personal Elite experiences. Based on these efforts, together with discussions with our surgeons, our patients elect to move forward and schedule a procedure date.
We encourage a strong relationship between our patients and surgeons, from initial consultation, through procedure, to after treatment. Nearly all of our patient-facing consultants are 8 Table of Contents former patients and can speak to their personal AirSculpt experiences. Based on these efforts, together with discussions with our surgeons, our patients elect to move forward and schedule a procedure date.
Many procedures can also involve significant pain and may require excess post-surgical recovery time. • Surgeons and other professionals: We compete for high quality surgeons and other professionals across the body contouring and cosmetic surgery industry to ensure we are able to continue to provide our patients with a smooth process, premium service, and high quality results.
Many procedures can also involve significant pain and may require excess post-surgical recovery time. 9 Table of Contents • Surgeons and other professionals: We compete for high quality surgeons and other professionals across the body contouring and cosmetic surgery industry to ensure we are able to continue to provide our patients with a smooth process, premium service, and high quality results.
In accordance with applicable state laws, our surgeons have exclusive control and responsibility for all clinical decision-making and the provision of medical care to patients. The Professional Associations are set up as legal entities, separate from Elite Body Sculpture, organized in accordance with applicable state laws regarding the types of entities that may operate a physician practice group.
In accordance with applicable state laws, our surgeons have exclusive control and responsibility for all clinical decision-making and the provision of medical care to patients. The Professional Associations are set up as legal entities, separate from AirSculpt, organized in accordance with applicable state laws regarding the types of entities that may operate a physician practice group.
We believe there is a significant domestic growth opportunity and will continue to opportunistically evaluate new center openings and target opening three to four centers each year. • Expand Internationally: We believe our brand has global appeal. We draw clients from international markets that travel to our existing centers for body contouring procedures.
We believe 5 Table of Contents there is a significant domestic growth opportunity and will continue to opportunistically evaluate new center openings and target opening three to four centers each year. • Expand Internationally: We believe our brand has global appeal. We draw clients from international markets that travel to our existing centers for body contouring procedures.
Subject to applicable state laws governing enforceability of restrictive covenants relating to physicians, our surgeons contracted by the Professional Associations have agreed not to compete during the contracted period and have agreed not to use or disclose Elite Body Sculpture’s proprietary information, including the AirSculpt ® procedure, even after the terms of their respective contracts.
Subject to applicable state laws governing enforceability of restrictive covenants relating to physicians, our surgeons contracted by the Professional Associations have agreed not to compete during the contracted period and have agreed not to use or disclose AirSculpt’s proprietary information, including the AirSculpt ® procedure, even after the terms of their respective contracts.
We believe that the desire to be an Elite Body Sculpture surgeon has provided us with ready access to talented providers, making recruitment a selective process. Additionally, through referral and outreach, we plan to continue recruiting surgeons to perform procedures on our growing number of patients.
We believe that the desire to be an AirSculpt surgeon has provided us with ready access to talented providers, making recruitment a selective process. Additionally, through referral and outreach, we plan to continue recruiting surgeons to perform procedures on our growing number of patients.
Item 1. Business Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “Elite Body Sculpture,” “we,” “us” and “our” refer to AirSculpt Technologies, Inc. and its consolidated subsidiaries and the Professional Associations (as defined hereinafter).
Item 1. Business Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “AirSculpt,” “we,” “us” and “our” refer to AirSculpt Technologies, Inc. and its consolidated subsidiaries and the Professional Associations (as defined hereinafter).
Many patients, satisfied with results and experience, return to Elite Body Sculpture to receive further AirSculpt ® treatments on additional body parts.
Many patients, satisfied with results and experience, return to AirSculpt to receive further AirSculpt ® treatments on additional body parts.
Given the consistently high level of demand for our services and the average price of our procedures, our centers typically achieve profitability within approximately three months, providing Elite Body Sculpture with a highly attractive and near-immediate return on invested capital.
Given the consistently high level of demand for our services and the average price of our procedures, our centers typically achieve profitability within approximately three months, providing AirSculpt with a highly attractive and near-immediate return on invested capital.
Our surgeons are contractually prohibited from performing Elite Body Sculpture’s proprietary procedures, including the AirSculpt ® procedure, if they leave Elite Body Sculpture. 1. Pain Management Prior to the procedure, patient is given a sedative cocktail and local anesthesia via air pressure from a needleless jet injector. *Patient remains fully awake during the procedure 2.
Our surgeons are contractually prohibited from performing AirSculpt’s proprietary procedures, including the AirSculpt ® procedure, if they leave AirSculpt. 1. Pain Management Prior to the procedure, patient is given a sedative cocktail and local anesthesia via air pressure from a needleless jet injector. *Patient remains fully awake during the procedure 2.
We employ the following strategies to expand our footprint: • Expand Footprint by Opening New Centers in the United States: We believe our track record of successfully opening new Elite Body Sculpture centers consistently generating strong unit-level economics validates our strategy across the United States and to domestically expand our footprint.
We employ the following strategies to expand our footprint: • Expand Footprint by Opening New Centers in the United States: We believe our track record of successfully opening new AirSculpt centers consistently generating strong unit-level economics validates our strategy across the United States and to domestically expand our footprint.
On average, our centers contain two procedure rooms with the capacity to perform up to 36 surgeries a week, in addition to additional consultation offices for prospective patients. Our accreditation as an office-based practice under the Joint Commission demonstrates our commitment to safety and quality. In 2022, we generated revenue per case of $12,922 on average.
On average, our centers contain two procedure rooms with the capacity to perform up to 36 surgeries a week, in addition to additional consultation offices for prospective patients. Our accreditation as an office-based practice under the Joint Commission demonstrates our commitment to safety and quality. In 2023, we generated revenue per case of $13,121 on average.
We believe we are in compliance with federal and state antitrust laws, but courts or regulatory authorities may reach a determination in the future that could have a material adverse effect on our business, prospects, results of operations and financial condition. Employees As of December 31, 2022, we employed approximately 291 full-time employees and approximately 11 part-time employees.
We believe we are in compliance with federal and state antitrust laws, but courts or regulatory authorities may reach a determination in the future that could have a material adverse effect on our business, prospects, results of operations and financial condition. Employees As of December 31, 2023, we employed approximately 346 full-time employees and approximately 35 part-time employees.
We have the opportunity to continue to both add procedure rooms and adapt our schedule from primarily open six days 4 Table of Contents to seven days a week in order to meet the strong demand from our patients for our services.
We have the opportunity to continue to both add procedure rooms and adapt our schedule from primarily open six days to seven days a week in order to meet the strong demand from our patients for our services.
We do not face any risk in default of payment under that financing arrangement, which is solely between the patient and third party financing vendor. In 2022, approximately 43% of our cases involved the patient securing third-party financing.
We do not face any risk in default of payment under that financing arrangement, which is solely between the patient and third party financing vendor. In 2023, approximately 47% of our cases involved the patient securing third-party financing.
Our AirSculpt ® TV program, featured on our Elite Body Sculpture Instagram page and website, provides a never-before seen transparency in our space, encouraging further growth.
Our AirSculpt ® TV program, featured on our AirSculpt Instagram page and website, provides a never-before seen transparency in our space, encouraging further growth.
In addition, our director, Adam Feinstein, who founded Vesey Street Capital Partners, L.L.C., our private equity sponsor (“Sponsor”), has 25 years of experience working with many of the leading healthcare services companies, including service as a director of public and private healthcare company boards.
In addition, our Lead Independent Director, Adam Feinstein, who founded Vesey Street Capital Partners, L.L.C., our private equity sponsor (“Sponsor”), has 25 years of experience working with many of the leading healthcare services companies, including service as a member of public and private healthcare company board of directors.
Our Intellectual Property As of December 31, 2022, our patent portfolio is comprised of two issued U.S. utility patents and one pending U.S. utility patent applications, each of which we own directly.
Our Intellectual Property As of December 31, 2023, our patent portfolio is comprised of two issued U.S. utility patents and one pending U.S. utility patent application, each of which we own directly.
Our consultants provide patients pricing information the day of their consult and, if requested by the patient, assist patients with securing third-party financing from entities such as CareCredit, Alphaeon Credit and United Medical Credit, enabling consumers to more quickly schedule their procedures.
Our consultants provide patients pricing information the day of their consult and, if requested by the patient, assist patients with securing third-party financing from entities such as CareCredit, Cherry and Alphaeon, among others, enabling consumers to more quickly schedule their procedures.
We opened our first international facility in Toronto, Canada in December 2022. 5 Table of Contents Our Technique, Training and Equipment AirSculpt ® is a proprietary, patented method of tumescent liposuction that removes unwanted fat from several targeted areas of the body in a minimally invasive procedure, producing dramatic results.
We opened our first international facility in Toronto, Canada in December 2022, and our second in London, United Kingdom in June 2023. 6 Table of Contents Our Technique, Training and Equipment AirSculpt ® is a proprietary, patented method of tumescent liposuction that removes unwanted fat from several targeted areas of the body in a minimally invasive procedure, producing dramatic results.
In addition to monitoring and managing our social media presence, our team is focused on search engine optimization on our digital platform. For the year ended December 31, 2022, our total advertising costs were $20.6 million, split 85% digital advertising and 15% other advertising platforms.
In addition to monitoring and managing our social media presence, our team is focused on search engine optimization on our digital platform. For the year ended December 31, 2023, our total advertising costs were $25.9 million, split approximately 85% digital advertising and 15% other advertising platforms.
Rollins is primarily focused on leading the Company’s overall vision and providing strategic guidance. In addition, the Company recently appointed Todd Magazine as Chief Executive Officer. Mr. Magazine assumed CEO responsibilities at the end of January 2023. Mr. Magazine brings to AirSculpt more than 30 years of experience in retail operations and brand-building.
Rollins is primarily focused on leading the Company’s overall vision and providing strategic guidance. In addition, Todd Magazine became Chief Executive Officer at the end of January 2023. Mr. Magazine brings to AirSculpt more than 30 years of experience in retail operations and brand-building.
We have a broad offering of fat removal procedures across treatment areas. We also offer innovative fat transfer procedures that use the patient’s own fat cells to enhance the breasts, buttocks, hips or other areas and do not require silicone or foreign materials to be implanted.
We also offer innovative fat transfer procedures that use the patient’s own fat cells to enhance the breasts, buttocks, hips or other areas and do not require silicone or foreign materials to be implanted.
Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Our total selling expenses for 2022 were approximately $22.4 million, or approximately 13.3% of revenue. Our customer acquisition costs were approximately $2,300 per customer in 2022. Our sales assistants respond to inquiries from prospective patients and schedule virtual or in-person consultations.
Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Our total selling expenses for 2023 were approximately $36.8 million, or approximately 18.8% of revenue. Our customer acquisition costs were approximately $2,465 per customer in 2023. Our sales assistants respond to inquiries from prospective patients and schedule virtual or in-person consultations.
Aaron Rollins, our director, Adam Feinstein, and the other management team members, we have built a results-driven culture. For the year ended December 31, 2022, we generated $168.8 million of revenue compared to $133.3 million for the year ended December 31, 2021, which represents approximately 26.6% growth.
Aaron Rollins, our Lead Independent Director, Adam Feinstein, and the other management team members, we have built a results-driven culture. For the year ended December 31, 2023, we generated $195.9 million of revenue compared to $168.8 million for the year ended December 31, 2022, which represents approximately 16.1% growth.
We deliver our body contouring procedures through a growing, nationwide footprint of 22 centers across 18 states and Canada as of March 10, 2023. Our centers, located in metropolitan and suburban areas, offer a premium patient experience and luxurious, spa-like atmosphere.
We deliver our body contouring procedures through a growing, nationwide footprint of 27 centers across 18 U.S. states, Canada, and the United Kingdom as of February 27, 2024. Our centers, located in metropolitan and suburban areas, offer a premium patient experience and luxurious, spa-like atmosphere.
For the year ended December 31, 2022, we generated approximately $169 million of revenue compared to approximately $133 million for the year ended December 31, 2021, which represents approximately 26.6% growth.
For the year ended December 31, 2023, we generated approximately $196 million of revenue compared to approximately $169 million for the year ended December 31, 2022, which represents approximately 16.1% growth.
The principal competitive factors that companies in our industry need to consider include, but are not limited to: enhanced products and services, procedure safety, competitive pricing policies, vision for the market and procedure innovation, strength of sales and marketing strategies, technological advances, brand awareness and reputation, and access to financing. 8 Table of Contents We believe we compete favorably across all of these factors and we have developed a business model that is difficult to replicate.
The principal competitive factors that companies in our industry need to consider include, but are not limited to: enhanced products and services, procedure safety, competitive pricing policies, vision for the market and procedure innovation, strength of sales and marketing strategies, technological advances, brand awareness and reputation, and access to financing.
AirSculpt ® , AirSculpt+ ™ , AirSculpt Plus ™ , AirSculpt Smooth ™ , AirSculpt Slim ™ , No Needle, No Scalpel, No Stitches ® , If You Can Pinch It, We Can Take It ® , Power BBL ® , Tiny Tuck ® , 48 Hour Six Pack ® , AirSculpt is for Everybody ® , Cure for the Hip Dip ® , Hip Flip ® , CankCure ® , Next Generation Of Body Contouring, and our logo are U.S. registered trademarks or trademarks for which registration is pending in the United States.
AirSculpt ® , AirSculpt+®, AirSculpting™, AirSculpt Plus ™ , Elite Body Sculpture®, RevisionSculpt®, AirSculpt Lift ™ , No Needle, No Scalpel, No Stitches ® , If You Can Pinch It, We Can Take It ® , Power BBL ® , Tiny Tuck ® , 48 Hour Six Pack ® , AirSculpt is for Everybody ® , Cure for the Hip Dip ® , Hip Flip ® , CankCure ® , Stubborn Fat, It’s All We Do®, The 48 Hour Difference™, What a Difference A Day Makes™, and our logo are U.S. registered trademarks or trademarks for which registration is pending in the United States.
We believe we are a leading provider of body contouring procedures and that there is a significant opportunity to drive awareness and adoption of our AirSculpt ® method and procedure offerings. • Continue to Drive Sales Growth of Our Centers: We employ the following strategies to increase our procedures performed and drive higher revenue per procedure with the aim of continuing to accelerate our growth in existing centers: ◦ Continue to add new procedure rooms: Our centers typically have two procedure rooms.
Our Growth Strategies We intend to deliver sustainable growth in revenue and profitability by executing on the following strategies: • Continue to Grow Our Brand Awareness and Attract New Patients: We believe that consumer trends towards greater acceptance of body contouring and cosmetic treatments will continue to expand the market for our services. 4 Table of Contents We believe we are a leading provider of body contouring procedures and that there is a significant opportunity to drive awareness and adoption of our AirSculpt ® method and procedure offerings. • Continue to Drive Sales Growth of Our Centers: We employ the following strategies to increase our procedures performed and drive higher revenue per procedure with the aim of continuing to accelerate our growth in existing centers: ◦ Continue to add new procedure rooms: Our centers typically have two procedure rooms.
They have partnered with our Chief Financial Officer, Dennis Dean, who has over 20 years of experience in the health care industry, including at Envision Healthcare and Surgery Partners. Further, AirSculpt founder and former Chief Executive Officer, Dr. Aaron Rollins, recently became Executive Chairman of the board of directors. Dr.
Our Chief Financial Officer, Dennis Dean, who has over 20 years of experience in the healthcare industry, including at Envision Healthcare and Surgery Partners, joined the team in 2021 prior to our IPO. Further, AirSculpt's founder and former Chief Executive Officer, Dr. Aaron Rollins, serves as Executive Chairman of the board of directors. Dr.
Surgeon Practice Structure Due to the prevalence of the corporate practice of medicine doctrine, including in many of the states where we conduct our business, our affiliated surgeons are organized in traditional physician practice group structures.
We believe we compete favorably across all of these factors and we have developed a business model that is difficult to replicate. Surgeon Practice Structure Due to the prevalence of the corporate practice of medicine doctrine, including in many of the states where we conduct our business, our affiliated surgeons are organized in traditional physician practice group structures.
Our surgeons are also featured on our social media platforms. 3 Table of Contents AirSculpt ® allows the surgeon to provide high quality outcomes to patients while being less physically demanding on the surgeon than traditional liposuction.
Our surgeons are also featured on our social media platforms. AirSculpt ® allows the surgeon to provide high quality outcomes to patients while being less physically demanding on the surgeon than traditional liposuction. As AirSculpt ® is only available for use at AirSculpt centers, we protect our brand and are able to retain high quality surgeons.
Our AirSculpt ® procedures are differentiated by our patented technology, broad and innovative procedures, elite patient experience, and highly skilled surgeons. • AirSculpt ® Technology: Our patented and precision-engineered method, AirSculpt ® , permanently removes fat and tightens skin while sculpting targeted areas of the body through minimally invasive body contouring procedures. 2 Table of Contents Unlike traditional liposuction which uses cannulae in a scraping motion, AirSculpt ® drives a cannula 1,000 times per minute in a corkscrew motion to remove fat cells while tightening skin simultaneously.
Our AirSculpt ® procedures are differentiated by our patented technology, broad and innovative procedures, elite patient experience, and highly skilled surgeons. • AirSculpt ® Technology: Our patented and precision-engineered method, AirSculpt ® , permanently removes fat and tightens skin while sculpting targeted areas of the body through minimally invasive body contouring procedures.
Rollins in 2012 and reorganized in 2018 as part of the acquisition by our Sponsor of a majority stake in the company prior to the IPO. AirSculpt Technologies, Inc. was incorporated in Delaware on June 30, 2021 and completed an IPO on October 28, 2021. Our website address is www.elitebodysculpture.com and our investor relations website is located at https://investors.elitebodysculpture.com .
AirSculpt Technologies, Inc. was incorporated in Delaware on June 30, 2021 and completed an IPO on October 28, 2021. 12 Table of Contents Our website address is www.airsculpt.com and our investor relations website is located at https://investors.elitebodysculpture.com . The information posted on our website is not incorporated into this Annual Report.
We offer our surgeons a compelling economic opportunity, with annual compensation for part-time work at Elite Body Sculpture often higher than the average full-time salary in a private practice.
We offer our surgeons a compelling economic opportunity, with annual compensation for part-time work at AirSculpt often higher than the average full-time salary in a private practice. By joining AirSculpt, surgeons are also able to grow their private practices by attracting Elite patients to their private practice for non-body contouring procedures, such as face lifts and injectables.
As of December 31, 2022, our patent portfolio is comprised of two issued U.S. utility patents and one pending U.S. utility patent applications, each of which we own directly. The tools we use to perform our fat removal and fat transfer procedures are purchased from third parties, and we do not own the proprietary rights to such tools.
The tools we use to perform our fat removal and fat transfer procedures are purchased from third parties and we do not own the proprietary rights to such tools.
Beneficial Treatment Results and Premium Patient Experience, Underpinned by Proprietary AirSculpt ® Technology We believe that our AirSculpt ® procedures offer beneficial results and a premium patient experience.
The proprietary AirSculpt ® method empowers our surgeons to use their high level of skill and artistry to deliver dramatic results personalized to our patients. 2 Table of Contents Beneficial Treatment Results and Premium Patient Experience, Underpinned by Proprietary AirSculpt ® Technology We believe that our AirSculpt ® procedures offer beneficial results and a premium patient experience.
Our proprietary and patented AirSculpt ® method is minimally invasive because it requires no needle, no scalpel, no stitches and no general anesthesia to achieve transformational change that appears both natural and smooth. Our patients are guided by surgeons, nurses and patient care consultants through every step of the experience.
We believe our treatment results and elite patient experience have positioned AirSculpt as a preferred body contouring brand. We performed 14,932 body contouring procedures in 2023. Our proprietary and patented AirSculpt ® method is minimally invasive because it requires no needle, no scalpel, no stitches and no general anesthesia to achieve transformational change that appears both natural and smooth.
Additionally, university and hospital systems, medical spas and centers and beauty and rejuvenation centers include the body contouring services in their offerings.
Additionally, university and hospital systems, medical spas and centers and beauty and rejuvenation centers include the body contouring services in their offerings. While we primarily operate in the body contouring market, we also compete with companies that offer non-surgical methods of fat reduction, including weight-loss drugs, and other non-invasive weight loss and obesity solutions.
We specialize in body contouring through the minimally invasive removal of unwanted fat. The proprietary AirSculpt ® method empowers our surgeons to use their high level of skill and artistry to deliver dramatic results personalized to our patients.
We specialize in body contouring through the minimally invasive removal of unwanted fat.
Further, we opened our newest center in Toronto, Canada in December 2022, which is the Company's first international facility. Our centers are located primarily in metropolitan cities near retail shops that our patients frequent and popular areas.
National and International Footprint Fueled by Attractive Unit Economics We have a growing national footprint consisting of 27 centers across 18 U.S. states, Canada, and the United Kingdom as of February 27, 2024. Our centers are located primarily in metropolitan cities near retail shops that our patients frequent and popular areas.
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Our Company Our Company is an experienced, fast-growing national provider of body contouring procedures delivering a premium consumer experience under our brand Elite Body Sculpture. At Elite Body Sculpture, we provide custom body contouring using our proprietary AirSculpt ® method that removes unwanted fat in a minimally invasive procedure, producing dramatic results.
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Our Company AirSculpt is a next-generation body contouring treatment designed to optimize both comfort and precision, available exclusively at AirSculpt offices. The minimally invasive procedure removes fat and tightens skin, while sculpting targeted areas of the body, allowing for quick healing with minimal bruising, tighter skin, and precise results.
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It is our mission to generate the best results for our patients. We believe our treatment results and elite patient experience have positioned Elite Body Sculpture as a preferred body contouring brand. We performed 13,063 body contouring procedures in 2022.
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Our patients are guided by surgeons, nurses and patient care consultants through every step of the experience. We have a broad offering of fat removal procedures across treatment areas.
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It requires no needle, no scalpel, no stitches and no general anesthesia to create dramatically natural, smooth results. AirSculpt ® is minimally invasive, providing transformative results, all delivered in one session while the patient is awake.
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The recent regulatory approval, increased market acceptance, availability and customer awareness of weight-loss drugs has negatively impacted demand in the market for body fat reduction procedures by causing some patients to reject surgical options in favor of non-invasive and less expensive solutions.
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By joining Elite Body Sculpture, surgeons are also able to grow their private practices by attracting Elite patients to their private practice for non-body contouring procedures, such as face lifts and injectables.
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It is difficult to predict the long-term outlook of the market for weight-loss drugs, including their long-term efficacy and potential drawbacks.
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As AirSculpt ® is only available for use at Elite Body Sculpture centers, we protect our brand and are able to retain high quality surgeons. National and International Footprint Fueled by Attractive Unit Economics We have a growing national footprint consisting of 22 centers across 18 states and Canada as of March 10, 2023.
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As a result, we cannot be certain that the market for body fat reduction procedures which we operate in will continue to grow and that it will not be reduced or eliminated due to the growth of the market for weight-loss drugs.
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Our Growth Strategies We intend to deliver sustainable growth in revenue and profitability by executing on the following strategies: • Continue to Grow Our Brand Awareness and Attract New Patients: We believe that consumer trends towards greater acceptance of body contouring and cosmetic treatments will continue to expand the market for our services.
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Unlike traditional liposuction which uses cannulae in a scraping motion, AirSculpt ® drives a cannula 1,000 times per minute in a corkscrew motion to remove fat cells while tightening skin simultaneously. It requires no needle, no scalpel, no stitches and no general anesthesia to create dramatically natural, smooth results.
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The information posted on our website is not incorporated into this Annual Report.
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AirSculpt ® is minimally invasive, providing transformative results, all delivered in one session while the patient is awake. As of December 31, 2023, our patent portfolio is comprised of two issued U.S. utility patents and one pending U.S. utility patent application, each of which we own directly.
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Securities and Exchange Commission (“SEC”). Risk Factor Summary We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility of our risk factor disclosures.
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Because of the high growth potential of the market for weight loss and obesity solutions, existing and potential competitors have historically dedicated, and will continue to dedicate, significant resources to aggressively develop and commercialize their products.
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We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-K in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky.
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Each Continuity Agreement will remain in effect until it is terminated (i) by written agreement signed by or on behalf of each party, (ii) upon the 21-year anniversary of the death of the Surgeon Owner, or (iii) only by the manager (being our wholly-owned subsidiaries), upon at least 30 days prior written notice of such termination to the Professional Association.
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These risks and uncertainties include, but are not limited to, the following: 11 Table of Contents Risks Related to Our Business • Macroeconomic trends including inflation and rising interest rates may adversely affect our financial condition and results of operations. • We have a limited operating history and our past results may not be indicative of our future performance. • Our success depends on our ability to maintain the value and reputation of the AirSculpt® brand. • We have grown rapidly recently and have limited operating experience at our current scale of operations. • Our financial results will be harmed if there is not sufficient patient demand for AirSculpt® procedures. • Our success depends largely upon patient satisfaction with the effectiveness of the AirSculpt® procedure. • We may fail to open and operate new centers in a timely and cost-effective manner. • We may not be able to successfully continue to expand in markets outside of North America. • We may not be able to compete or achieve significant market penetration. • Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy resulting from the ongoing military conflict between Russia and Ukraine. • Changes in laws and regulations related to the internet, perceptions toward the use of social media and changes in internet infrastructure itself may diminish our ability to drive new customer acquisition. • Regulations related to healthcare may hamper our availability to provide virtual consultations. • We face competition for surgeons and other workers that provide our medspa and cosmetic services. • We outsource the manufacturing of key elements of the tools we use for AirSculpt® procedures to a single third-party manufacturer, Euromi, who is dependent upon third-party suppliers. • In some jurisdictions, we are precluded or limited in our ability to enter into non-compete agreements with our surgeons. • Our centers and our affiliated Professional Associations may become subject to medical liability claims. • Our revenue could decline due to changes in credit markets and decisions made by credit providers. • We may be adversely affected if we lose any member of our senior management. • The interests of our Sponsor may conflict with the interests of the Company and its other stockholders. • Our leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and expose us to interest rate risk. • Restrictive covenants in our debt instruments may adversely affect us. • Any failure to meet our debt service obligations could have a material adverse effect on our business, prospects, results of operations and financial condition. • We are a holding company with no operations of our own. • Our management team has limited experience managing a public company. • The COVID-19 global pandemic could negatively affect our operations, business and financial condition, and liquidity. • Use and storage of paper medical records increases risk of loss, destruction and could increase human error with respect to documentation and patient care. • Our internal computer systems, or those of any of our manufacturers, other contractors, consultants, or collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data.
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Rollins in 2012 and reorganized in 2018 as part of the acquisition by our Sponsor of a majority stake in the company prior to the IPO.
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Risks Related to Intellectual Property • Our competitors could develop and commercialize procedures and products similar or identical to ours. • We may become a party to intellectual property litigation or administrative proceedings that could be costly and could interfere with our ability to market and perform our services. • If we are unable to protect the confidentiality of our other proprietary information, our business and competitive position may be harmed. • We may not be able to protect our intellectual property rights throughout the world to the same extent as in the United States.
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Securities and Exchange Commission (“SEC”). 13 Table of Contents
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Risks Related to Government Regulations • If we fail to comply with numerous laws and regulations relating to the operation of our centers, we could incur significant penalties or other costs or be required to make significant changes to our operations. 12 Table of Contents • AirSculpt® procedures may cause or contribute to adverse medical events that we are required to report to the FDA and if we fail to do so, we could be subject to sanctions that would materially harm our business. • If laws governing the corporate practice of medicine or fee-splitting change, we may be required to restructure some of our relationships. • We may be subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback, self-referral, false claims and fraud laws, and any violations by us of such laws could result in fines or other penalties. • Certain risks are inherent in providing prescription and over the counter (“OTC”) treatments, and our insurance may not be adequate to cover any claims against us.
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Risks Related to Ownership of Our Common Stock • We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. • Our stock price could be extremely volatile, and, as a result, you may not be able to resell your shares at or above the price you paid for them. • There may be sales of a substantial amount of our common stock by our current stockholders, and these sales could cause the price of our common stock to fall. • Provisions in our charter documents and Delaware law may deter takeover efforts that could be beneficial to stockholder value. • We have no plans to pay cash dividends on our common stock for the foreseeable future. • Our internal controls may not be effective. • The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business. • Our stock price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business. • Operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict. 13 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlthough we have disaster plans in place and operate pursuant to infectious disease protocols, the extent to which new COVID-19 variants or other public health crisis will impact our business is difficult to predict and will depend on many factors beyond our control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel and other activity, and public reactions to these factors.
Biggest changeIn addition, our results and financial condition may be adversely affected by future federal or state laws, regulations, orders, or other governmental or regulatory actions addressing new COVID-19 variants or the United States’ healthcare system, which, if adopted, could result in direct or indirect restrictions to our business, financial condition, results of operations and cash flow.Although we have disaster plans in place and operate pursuant to infectious disease protocols, the extent to which new COVID-19 variants or other public health crises could impact our business is difficult to predict and depends on many factors beyond our control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel and other activity, and public reactions to these factors.
These provisions in our charter documents include the following: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; 40 Table of Contents • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the required approval of at least 66 2∕3 % of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause; • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; • the required approval of at least 66 2∕3 % of the shares entitled to vote to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings; • the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us; and • certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than affiliates of our Sponsor.
These provisions in our charter documents include the following: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the required approval of at least 66 2∕3 % of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause; • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; 42 Table of Contents • the required approval of at least 66 2∕3 % of the shares entitled to vote to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings; • the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us; and • certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than affiliates of our Sponsor.
Our financial condition and operating results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including: • the continued market acceptance of, and the growth of the body contouring market; • our ability to maintain and attract new customers; • our development and improvement of the quality of the AirSculpt ® experience, including, improving our proprietary AirSculpt ® technology and innovating new procedures; • any change in the competitive landscape of our market; 43 Table of Contents • pricing pressure as a result of competition or otherwise; • delays or disruptions in our supply of handpieces; • errors in our forecasting of the demand for our services, which could lead to lower revenue or increased costs, or both; • increases in marketing, sales, and other operating expenses that we may incur to grow and expand our footprint and to remain competitive; • the ability to maintain and open new centers; • successful expansion into international markets; • constraints on the availability of consumer financing or increased down payment requirements to finance our procedures; • system failures or breaches of security or privacy; • adverse litigation judgments, settlements, or other litigation-related costs; • changes in the legislative or regulatory environment, including with respect to healthcare regulation, privacy, consumer product safety, and advertising, or enforcement by government regulators, including fines, orders, or consent decrees; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • changes in our effective tax rate; • changes in accounting standards, policies, guidance, interpretations, or principles; and • changes in business or macroeconomic conditions, including lower consumer confidence, recessionary conditions, increased unemployment rates, or stagnant or declining wages.
Our financial condition and operating results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including: • the continued market acceptance of, and the growth of the body contouring market; • our ability to maintain and attract new customers; • our development and improvement of the quality of the AirSculpt ® experience, including, improving our proprietary AirSculpt ® technology and innovating new procedures; • any change in the competitive landscape of our market; • pricing pressure as a result of competition or otherwise; • delays or disruptions in our supply of handpieces; • errors in our forecasting of the demand for our services, which could lead to lower revenue or increased costs, or both; • increases in marketing, sales, and other operating expenses that we may incur to grow and expand our footprint and to remain competitive; 45 Table of Contents • the ability to maintain and open new centers; • successful expansion into international markets; • constraints on the availability of consumer financing or increased down payment requirements to finance our procedures; • system failures or breaches of security or privacy; • adverse litigation judgments, settlements, or other litigation-related costs; • changes in the legislative or regulatory environment, including with respect to healthcare regulation, privacy, consumer product safety, and advertising, or enforcement by government regulators, including fines, orders, or consent decrees; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • changes in our effective tax rate; • changes in accounting standards, policies, guidance, interpretations, or principles; and • changes in business or macroeconomic conditions, including lower consumer confidence, recessionary conditions, increased unemployment rates, or stagnant or declining wages.
The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere in this Annual Report on Form 10-K and others such as: • variations in our operating performance and the performance of our competitors; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us or our competitors or our industry; • announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments; 39 Table of Contents • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; • the passage of legislation or other regulatory developments affecting us or our industry; • speculation in the press or investment community; • changes in accounting principles; • geopolitical conditions such as acts of terrorism, military or armed conflicts, such as the Russian invasion of Ukraine, or global pandemics; • natural disasters and other calamities; and • changes in general market and economic conditions.
The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere in this Annual Report on Form 10-K and others such as: • variations in our operating performance and the performance of our competitors; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us or our competitors or our industry; • announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; • the passage of legislation or other regulatory developments affecting us or our industry; • speculation in the press or investment community; • changes in accounting principles; • geopolitical conditions such as acts of terrorism, military or armed conflicts, such as the Russian invasion of Ukraine, or global pandemics; • natural disasters and other calamities; and 41 Table of Contents • changes in general market and economic conditions.
The decision to undergo an AirSculpt ® procedure is thus driven by patient demand, which may be influenced by a number of factors, such as: • the success of our sales and marketing programs; • our success in attracting consumers who have not previously undergone an aesthetic procedure; • the extent to which the AirSculpt ® procedure satisfies patient expectations; • our ability to properly train our surgeons in performing AirSculpt ® procedures such that our patients do not experience excessive discomfort during treatment or adverse side effects; 15 Table of Contents • the cost, safety, and effectiveness of AirSculpt ® procedures versus other aesthetic treatments; • consumer sentiment about the benefits and risks of aesthetic procedures generally and the AirSculpt ® procedure in particular; • general consumer confidence, which may be impacted by economic and political conditions; • our use of social media to drive new customer acquisition; and • our ability to offer virtual consultations to our patients.
The decision to undergo an AirSculpt ® procedure is thus driven by patient demand, which may be influenced by a number of factors, such as: 17 Table of Contents • the success of our sales and marketing programs; • our success in attracting consumers who have not previously undergone an aesthetic procedure; • the extent to which the AirSculpt ® procedure satisfies patient expectations; • our ability to properly train our surgeons in performing AirSculpt ® procedures such that our patients do not experience excessive discomfort during treatment or adverse side effects; • the cost, safety, and effectiveness of AirSculpt ® procedures versus other aesthetic treatments; • consumer sentiment about the benefits and risks of aesthetic procedures generally and the AirSculpt ® procedure in particular; • general consumer confidence, which may be impacted by economic and political conditions; • our use of social media to drive new customer acquisition; and • our ability to offer virtual consultations to our patients.
For example, the Court of Chancery of the State of Delaware recently determined that the exclusive forum provisions of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable.
For example, the Court of Chancery of the State of Delaware determined that the exclusive forum provisions of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable.
We recently filed a registration statement on Form S-3 with the SEC, and the number of shares of common stock being registered for sale is significant in relation to the number of our outstanding shares of common stock.
We filed a registration statement on Form S-3 with the SEC, and the number of shares of common stock being registered for sale is significant in relation to the number of our outstanding shares of common stock.
We recently filed a registration statement on Form S-3 with the SEC to register the shares offered thereunder for sale into the public market by the selling stockholders.
We filed a registration statement on Form S-3 with the SEC to register the shares offered thereunder for sale into the public market by the selling stockholders.
Our reliance on a single supplier of handpieces subjects us to a number of risks that could harm our business, including: • interruption of supply resulting from modifications to or discontinuation of Euromi’s operations; • delays in product shipments resulting from uncorrected defects, reliability issues, or Euromi’s variation in a component; • a lack of long-term supply agreements; • inability to obtain adequate supply in a timely manner or to obtain adequate supply on commercially reasonable terms; • difficulty and cost associated with locating and qualifying alternative suppliers for our handpieces in a timely manner; • production delays related to the evaluation and testing of handpieces from alternative suppliers and corresponding regulatory qualifications; and • damage to our brand reputation caused by defective handpieces.
Our reliance on a single supplier of handpieces subjects us to a number of risks that could harm our business, including: • interruption of supply resulting from modifications to or discontinuation of Euromi’s operations; • delays in product shipments resulting from uncorrected defects, reliability issues, or Euromi’s variation in a component; 22 Table of Contents • a lack of long-term supply agreements; • inability to obtain adequate supply in a timely manner or to obtain adequate supply on commercially reasonable terms; • difficulty and cost associated with locating and qualifying alternative suppliers for our handpieces in a timely manner; • production delays related to the evaluation and testing of handpieces from alternative suppliers and corresponding regulatory qualifications; and • damage to our brand reputation caused by defective handpieces.
Many of these companies have greater resources than we do, including financial, marketing, staff and capital resources. If we are unable to compete effectively with any of these entities for surgeons, we may be unable to implement our business strategies successfully and our financial position and results of operations could be adversely effected.
Many of these companies have greater resources than we do, including financial, marketing, staff and capital resources. If we are unable to compete effectively with any of these entities for surgeons, we may be unable to implement our business strategies successfully and our financial position and results of operations could be adversely affected.
Our contractual relationships with our affiliated Professional Associations and surgeons may implicate certain state laws that generally prohibit non-professional entities from providing licensed medical services and exercising control over 35 Table of Contents licensed physicians or other healthcare professionals (such activities generally referred to as the “corporate practice of medicine,” or CPOM) or engaging in certain practices such as fee-splitting with such licensed professionals (i.e., sharing in a percentage of professional fees).
Our contractual relationships with our affiliated Professional Associations and surgeons may implicate certain state laws that generally prohibit non-professional entities from providing licensed medical services and exercising control over licensed physicians or other healthcare professionals (such activities generally referred to as the “corporate practice of medicine,” or CPOM) or engaging in certain practices such as fee-splitting with such licensed professionals (i.e., sharing in a percentage of professional fees).
In addition, as of December 31, 2022 we had approximately $5.0 million available for additional borrowings under our Revolver, all of which is permitted to be incurred under the Term Loan and Revolving Facility subject to the conditions to borrowing thereunder.
In addition, as of December 31, 2023 we had approximately $5.0 million available for additional borrowings under our Revolver, all of which is permitted to be incurred under the Term Loan and Revolving Facility subject to the conditions to borrowing thereunder.
In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of 41 Table of Contents America is the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint.
In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America is the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint.
The demand for medical professionals has increased significantly as a result of the COVID-19 pandemic. Further, even before 19 Table of Contents the COVID-19 pandemic, the demand for medical professionals had been increasing as more consumers began gravitating to health and wellness treatments, such as medspa and cosmetic services.
The demand for medical professionals has increased significantly as a result of the COVID-19 pandemic. Further, even before the COVID-19 pandemic, the demand for medical professionals had been increasing as more consumers began gravitating to health and wellness treatments, such as medspa and cosmetic services.
Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there is a risk we may develop one or more procedures or other technologies without knowledge of a pending patent application, which if such patent application issued into a patent would result in our procedures or technologies infringing such patent.
Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there is a risk we may develop one or more procedures or other technologies without knowledge of a pending patent application, which if such patent application 32 Table of Contents issued into a patent would result in our procedures or technologies infringing such patent.
In any such lawsuit or other proceedings, a court or other administrative body may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.
In any such lawsuit or other proceedings, a court or other administrative body may decide that a patent of 33 Table of Contents ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.
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 of 1.5% or 2.5% for base rate or SOFR, respectively.
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 of 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.
Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our consumers’ ability to send communications through their services, disruptions or downtime experienced by these social networking 18 Table of Contents services or decline in the use of or engagement with social networking services by consumers could materially and adversely affect our business, financial condition and results of operations.
Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our consumers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by consumers could materially and adversely affect our business, financial condition and results of operations.
Regulations related to health care, including telehealth, are evolving. To the extent regulations change, our ability to provide virtual consultations could be hampered. In a regulatory climate that is uncertain, our operations and our arrangements with our affiliated Professional Associations may be subject to direct and indirect adoption, expansion or reinterpretation of various laws and regulations.
Regulations related to healthcare, including telehealth, are evolving. To the extent regulations change, our ability to provide virtual consultations could be hampered. In a regulatory climate that is uncertain, our operations and our arrangements with our affiliated Professional Associations may be subject to direct and indirect adoption, expansion or reinterpretation of various laws and regulations.
Any enforcement action against us, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. In pursuing our growth strategy, we may seek to expand our presence into states in which we do not currently operate.
Any enforcement action against us, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. 36 Table of Contents In pursuing our growth strategy, we may seek to expand our presence into states in which we do not currently operate.
However, these choice of forum provisions may limit a stockholder’s ability to bring a Proceeding in a judicial forum that it finds favorable for disputes with us or our directors, officers, other employees or stockholders. Further, these choice of forum provisions may increase the costs for a stockholder to bring such a Proceeding and may discourage them from doing so.
However, these choice of forum provisions may limit a stockholder’s ability to bring a Proceeding in a judicial forum that it finds favorable for disputes with us or our directors, officers, other employees or stockholders. 43 Table of Contents Further, these choice of forum provisions may increase the costs for a stockholder to bring such a Proceeding and may discourage them from doing so.
Our ability to restructure or refinance our debt, if at all, will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
Our ability to restructure or refinance our debt, if at all, will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could 26 Table of Contents further restrict our business operations.
Outcomes from these examinations and audits could have an adverse effect on our financial condition and results of operations. If there is a change in accounting standards by the Financial Accounting Standards Board or the interpretation thereof affecting consolidation of entities, it could have a material adverse effect on our consolidation of total revenue derived from the Professional Associations.
Outcomes from these examinations and audits could have an adverse effect on our financial condition and results of operations. 27 Table of Contents If there is a change in accounting standards by the Financial Accounting Standards Board or the interpretation thereof affecting consolidation of entities, it could have a material adverse effect on our consolidation of total revenue derived from the Professional Associations.
We provide comprehensive, administrative and non-clinical Management Services to our affiliated Professional Associations in exchange for a management fee. Regulatory authorities, state boards of medicine, state attorneys general and other parties may assess or determine that our relationships with our affiliated Professional Associations and surgeons violate state CPOM and/or fee-splitting prohibitions.
We provide comprehensive, administrative and non-clinical Management Services to our affiliated Professional Associations in exchange for a management fee. Regulatory authorities, state boards of medicine, state attorneys general and other parties 37 Table of Contents may assess or determine that our relationships with our affiliated Professional Associations and surgeons violate state CPOM and/or fee-splitting prohibitions.
While we have disaster recovery systems and business continuity plans in place, any disruptions in our disaster recovery systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely 26 Table of Contents affect our operating results by limiting our capacity to effectively monitor and control our operations.
While we have disaster recovery systems and business continuity plans in place, any disruptions in our disaster recovery systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our operations.
If our trademarks and trade names are not adequately protected, that could adversely impact our ability to build name recognition in certain markets. We rely on trademarks, service marks and trade names to distinguish our procedures and services from those of our competitors and have registered or applied to register these trademarks.
If our trademarks and trade names are not adequately protected, that could adversely impact our ability to build name recognition in certain markets. 35 Table of Contents We rely on trademarks, service marks and trade names to distinguish our procedures and services from those of our competitors and have registered or applied to register these trademarks.
Successful implementation of our growth strategy will require significant expenditures 14 Table of Contents before any substantial associated revenue is generated and we cannot guarantee that these increased investments will result in corresponding and offsetting revenue growth. Our planned expansion will place increased demands on our existing operational, managerial, and administrative resources.
Successful implementation of our growth strategy will require significant expenditures before any substantial associated revenue is generated and we cannot guarantee that these increased investments will result in corresponding and offsetting revenue growth. Our planned expansion will place increased demands on our existing operational, managerial, and administrative resources.
We anticipate that these threats will continue to grow 27 Table of Contents in scope and complexity over time and such incidents have occurred in the past, and may occur in the future, resulting in unauthorized, unlawful, or inappropriate access to, inability to access, disclosure of, or loss of the sensitive, proprietary and confidential information that we handle.
We anticipate that these threats will continue to grow in scope and complexity over time and such incidents have occurred in the past, and may occur in the future, resulting in unauthorized, unlawful, or inappropriate access to, inability to access, disclosure of, or loss of the sensitive, proprietary and confidential information that we handle.
Such agreements could also potentially be breached in a manner for which we may not have an adequate remedy. As a result, we may lose valuable intellectual property rights, such as exclusive 32 Table of Contents ownership of, and/or right to use, intellectual property that is important to our business.
Such agreements could also potentially be breached in a manner for which we may not have an adequate remedy. As a result, we may lose valuable intellectual property rights, such as exclusive ownership of, and/or right to use, intellectual property that is important to our business.
The training that we provide to our workforce and measures taken 28 Table of Contents to protect our systems, the systems of our contractors or third-party service providers, or more generally the IIHI/PII or other sensitive data or information that we or our contractors or third-party service providers Process may not adequately protect us from the risks associated with Processing sensitive data and information.
The training that we provide to our workforce and measures taken to protect our systems, the systems of our contractors or third-party service providers, or more generally the IIHI/PII or other sensitive data or information that we or our contractors or third-party service providers Process may not adequately protect us from the risks associated with Processing sensitive data and information.
The theft or unauthorized use or publication of our trade secrets and other confidential proprietary information could reduce the differentiation of our procedures and harm our business, the value of our investment in development could be reduced and third parties may make claims against us related to losses of their confidential or proprietary information.
The theft or unauthorized use or publication of our trade secrets and other confidential proprietary information could reduce the differentiation of our 34 Table of Contents procedures and harm our business, the value of our investment in development could be reduced and third parties may make claims against us related to losses of their confidential or proprietary information.
For example, the California Confidentiality of Medical Information Act (CMIA) regulates the disclosure of medical information, and applies to the IIHI we Process in the ordinary course of our Business. Violations of the CMIA can result in personal liability to the patient, the imposition of administrative fines and civil penalties, and even criminal liability.
For example, the California Confidentiality of Medical Information Act (CMIA) regulates the disclosure of medical information, and applies to the IIHI we Process in the ordinary course of our Business. Violations of the CMIA can result in personal liability to the patient, the imposition of 39 Table of Contents administrative fines and civil penalties, and even criminal liability.
Despite our implementation of security measures, cyber-attacks are becoming more sophisticated and frequent, and we or our third-party service providers may be unable to anticipate these techniques or to implement adequate protective measures against them or to prevent additional attacks.
Despite our 30 Table of Contents implementation of security measures, cyber-attacks are becoming more sophisticated and frequent, and we or our third-party service providers may be unable to anticipate these techniques or to implement adequate protective measures against them or to prevent additional attacks.
The law governing non-compete agreements and other forms of restrictive covenants 20 Table of Contents varies from state to state. Some jurisdictions prohibit us from entering into non-compete agreements with our professional staff. Other states are reluctant to strictly enforce non-compete agreements and restrictive covenants against surgeons.
The law governing non-compete agreements and other forms of restrictive covenants varies from state to state. Some jurisdictions prohibit us from entering into non-compete agreements with our professional staff. Other states are reluctant to strictly enforce non-compete agreements and restrictive covenants against surgeons.
We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, many countries, including India, China and certain countries in Europe, have compulsory licensing laws under which a patent owner may 33 Table of Contents be compelled to grant licenses to third parties.
We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, many countries, including India, China and certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties.
The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and 42 Table of Contents procedures, we need to commit significant resources, hire additional staff and provide additional management oversight.
The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we need to commit significant resources, hire additional staff and provide additional management oversight.
It is possible that United States and foreign patents and pending patent applications or trademarks of third parties may be alleged to cover our 30 Table of Contents technology or our procedures, or that we may be accused of misappropriating third parties’ trade secrets.
It is possible that United States and foreign patents and pending patent applications or trademarks of third parties may be alleged to cover our technology or our procedures, or that we may be accused of misappropriating third parties’ trade secrets.
Any failure to preserve our culture could negatively affect our 16 Table of Contents future success, including our ability to retain and recruit surgeons and other personnel on behalf of our affiliated Professional Associations and to effectively focus on and pursue our corporate objectives.
Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit surgeons and other personnel on behalf of our affiliated Professional Associations and to effectively focus on and pursue our corporate objectives.
If we do not adapt to meet these evolving challenges or if our management team does not effectively scale with our growth, we may experience erosion to our brand and our company culture may be harmed. Our growth strategy contemplates expanding our footprint by opening new centers around the world.
If we do not adapt to meet these evolving challenges or if our management team does not effectively scale with our growth, we may experience erosion to our brand and our company culture may be harmed. 16 Table of Contents Our growth strategy contemplates expanding our footprint by opening new centers around the world.
The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patents or patent applications at a reasonable cost, in a timely 29 Table of Contents manner, in all jurisdictions where protection may be commercially advantageous, or at all.
The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patents or patent applications at a reasonable cost, in a timely manner, in all jurisdictions where protection may be commercially advantageous, or at all.
Our ability to pay or to refinance our indebtedness will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control. Restrictive covenants in our debt instruments may adversely affect us.
Our ability to pay or to refinance our indebtedness will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control. 25 Table of Contents Restrictive covenants in our debt instruments may adversely affect us.
Competitors may infringe our issued patents or other intellectual property, which we may not always be able to detect. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property or alleging that 31 Table of Contents our intellectual property is invalid or unenforceable.
Competitors may infringe our issued patents or other intellectual property, which we may not always be able to detect. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property or alleging that our intellectual property is invalid or unenforceable.
Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications or that we were the first to file for patent protection of such inventions.
Therefore, we cannot be certain that we were the first to 31 Table of Contents make the inventions claimed in our patents or pending patent applications or that we were the first to file for patent protection of such inventions.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some 40 Table of Contents investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We are 25 Table of Contents subject to significant regulatory oversight and reporting obligations under the federal securities laws, Nasdaq Stock Market, and the continuous scrutiny of securities analysts and investors.
We are subject to significant regulatory oversight and reporting obligations under the federal securities laws, Nasdaq Stock Market, and the continuous scrutiny of securities analysts and investors.
The unpredictability of this regulatory landscape means that sudden changes in policy regarding standards of care and what is permissible are possible.
The unpredictability of this regulatory landscape means that sudden 21 Table of Contents changes in policy regarding standards of care and what is permissible are possible.
We rely on a skilled, licensed labor force to provide our medspa and cosmetic services, and the supply of this labor force is finite. If we cannot hire adequate staff for our clinics, we will not be able to operate. As of December 31, 2022, we employed approximately 291 full-time employees and approximately 11 part-time employees.
We rely on a skilled, licensed labor force to provide our medspa and cosmetic services, and the supply of this labor force is finite. If we cannot hire adequate staff for our clinics, we will not be able to operate. As of December 31, 2023, we employed approximately 346 full-time employees and approximately 35 part-time employees.
As of December 31, 2022, total outstanding indebtedness under our senior credit facility was approximately $85.0 million, consisting of $85.0 million in senior secured term loans (the “Term Loan”) and $5.0 million revolving credit facility (the “Revolver”), of which approximately $5.0 million was undrawn (the “Term Loan and Revolving Facility”).
As of December 31, 2023, total outstanding indebtedness under our senior credit facility was approximately $72.9 million, consisting of $72.9 million in term loans (the “Term Loan”) and $5.0 million revolving credit facility (the “Revolver”), of which approximately $5.0 million was undrawn (the “Term Loan and Revolving Facility”).
Factors that could affect customers’ willingness to make such discretionary purchases include general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit, consumer confidence in future economic conditions and risks, or the public perception of risks, related to epidemics or pandemics, such as the COVID-19 pandemic.
Factors that could affect customers’ willingness to make such discretionary purchases include general business conditions, levels of employment, interest rates, overall inflation, tax rates, the availability of consumer credit, consumer confidence in future economic conditions and risks, or the public perception of risks related to public health crises, including epidemics or pandemics such as the COVID-19 pandemic or other catastrophic events.
In addition, surgeons who provide professional services in our centers are required to maintain separate malpractice coverage with similar minimum coverage limits.
In addition, surgeons who provide 23 Table of Contents professional services in our centers are required to maintain separate malpractice coverage with similar minimum coverage limits.
Such shares are freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). As of March 10, 2023, approximately 78.8% of our outstanding common stock is held by investment funds affiliated with our Sponsor and members of our management and employees.
Such shares are freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). As of February 26, 2024, approximately 79% of our outstanding common stock is held by investment funds affiliated with our Sponsor and members of our management and employees.
As of the date of this Annual Report on Form 10-K, we operate through our arrangements with our affiliated Professional Associations twenty-two centers in Arizona, California, Colorado, Florida, Georgia, Illinois, Massachusetts, Minnesota, Nevada, New York, North Carolina, Pennsylvania, Tennessee, Texas, Utah, Washington, and Virginia as well as Toronto, Canada.
As of the date of this Annual Report on Form 10-K, we operate through our arrangements with our affiliated Professional Associations twenty-two centers in Arizona, California, Colorado, Florida, Georgia, Illinois, Massachusetts, Minnesota, Nevada, New York, North Carolina, Pennsylvania, Tennessee, Texas, Utah, Washington, and Virginia as well as Toronto, Canada. 24 Table of Contents In addition, our centers located in California represented 20% of our revenue in 2023 and 2022.
Our information technology networks and systems used in our business, as well as those of our service providers, may experience an increase in attempted cyber-attacks, seeking to take advantage of shifts to employees working remotely using their household or personal internet networks and to leverage fears promulgated by the COVID-19 pandemic.
Our information technology networks and systems used in our business, as well as those of our service providers, may experience an increase in attempted cyber-attacks, seeking to take advantage of shifts to employees working remotely using their household or personal internet networks.
As we continue to grow, including geographically, we will need to maintain our high-performance, results-driven culture among a larger number of surgeons and other employees, dispersed across various geographic regions.
We have invested substantial time and resources in building our high-performance, results-driven culture. As we continue to grow, including geographically, we will need to maintain our high-performance, results-driven culture among a larger number of surgeons and other employees, dispersed across various geographic regions.
Risks Related to Ownership of Our Common Stock We are an “emerging growth company,” as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. 38 Table of Contents We are an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding stockholder advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We are an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding stockholder advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue are $1.07 billion or more, if we issue more than $1 billion in non-convertible debt during the previous three-year period, or if the Company qualifies as a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act.
We could remain an emerging growth company until December 31, 2026, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue is $1.235 billion or more, if we issue more than $1 billion in non-convertible debt during the previous three-year period, or if the Company qualifies as a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act.
If we are unable to successfully deliver emails or other messages to potential customers, or if potential customers decline to open or read our messages, our business, financial condition and results of operations may be materially adversely affected.
Our business depends on email and other messaging services for promoting our brand and services. If we are unable to successfully deliver emails or other messages to potential customers, or if potential customers decline to open or read our messages, our business, financial condition and results of operations may be materially adversely affected.
If we cannot maintain our high-performance and results-driven culture as we grow, we could lose the innovation and passion that we believe contribute to our success and our business may be harmed. We believe that a critical component of our success has been our corporate culture. We have invested substantial time and resources in building our high-performance, results-driven culture.
If we cannot maintain our high-performance and results-driven culture as we grow, we could lose the innovation and passion that we believe contribute to our success and our business may be harmed. 18 Table of Contents We believe that a critical component of our success has been our corporate culture.
Competing in the body contouring market could result in price-cutting, reduced profit margins, and limited market share, any of which would harm our business, financial condition, and results of operations.
Competing in the body contouring market and the spread of non-surgical weight loss and obesity solutions could result in price-cutting, reduced profit margins, and reduced market share, any of which would harm our business, financial condition, and results of operations.
Some of these competitors offer similar services (including competitors who may charge less for such services than we do) and others also offer alternative services that are less expensive than the procedures we offer.
Some of these competitors offer similar procedures (including competitors who may charge less for such procedures than we do) and others offer alternative procedures and products, including non-surgical weight loss and obesity solutions, that are less expensive than the procedures we offer.
We are subject to numerous environmental, health and safety laws and regulations, and must maintain licenses or permits, and non-compliance with these laws, regulations, licenses, or permits may expose us to significant costs or liabilities. 36 Table of Contents We are subject to numerous foreign, federal, state, and local environmental, health and safety laws and regulations relating to, among other matters, safe working conditions and environmental protection, including those governing the generation, storage, handling, use, transportation, and disposal of hazardous or potentially hazardous materials, including medical waste and other highly regulated substances.
We are subject to numerous foreign, federal, state, and local environmental, health and safety laws and regulations relating to, among other matters, safe working conditions and environmental protection, including those governing the generation, storage, handling, use, transportation, and disposal of hazardous or potentially hazardous materials, including medical waste and other highly regulated substances.
Cybercrime and hacking techniques are constantly evolving, and we and/or our third-party service providers may be unable to anticipate or avoid attempted or actual security breaches, react in a timely manner, or implement adequate preventative measures, particularly given the increasing use of hacking techniques designed to circumvent controls, avoid detection, and remove or obfuscate forensic artifacts.
Despite the implementation of security measures, our internal computer systems and those of our current and any other contractors, consultants, collaborators and third-party service providers, such measures may not be effective in every instance. 29 Table of Contents Cybercrime and hacking techniques are constantly evolving, and we and/or our third-party service providers may be unable to anticipate or avoid attempted or actual security breaches, react in a timely manner, or implement adequate preventative measures, particularly given the increasing use of hacking techniques designed to circumvent controls, avoid detection, and remove or obfuscate forensic artifacts.
There may be sales of a substantial amount of our common stock by our current stockholders, and these sales could cause the price of our common stock to fall. As of March 10, 2023, there are 56,385,671 shares of common stock outstanding.
There may be sales of a substantial amount of our common stock by our current stockholders, and these sales could cause the price of our common stock to fall. As of February 26, 2024, there are 57,422,246 shares of common stock outstanding.
Increases in interest rates on any of our debt will result in higher debt service costs, which will adversely affect our cash flows. We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings.
We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings.
Our earnings and cash flows could be materially and adversely affected by any of the following: • the collapse or insolvency of our insurance carriers; • further increases in premiums and deductibles; • increases in the number of liability claims against us or the cost of settling or trying cases related to those claims; or • an inability to obtain one or more types of insurance on acceptable terms, if at all. 21 Table of Contents The health of the economy may affect consumer purchases of discretionary services, such as cosmetic services, which could have a material adverse effect on our business, financial condition and results of operations.
Our earnings and cash flows could be materially and adversely affected by any of the following: • the collapse or insolvency of our insurance carriers; • further increases in premiums and deductibles; • increases in the number of liability claims against us or the cost of settling or trying cases related to those claims; or • an inability to obtain one or more types of insurance on acceptable terms, if at all.
These activities are or may become regulated by a variety of domestic and foreign laws and regulations relating to privacy, data protection, and data security, which are complex and increasingly stringent and the scope of which is constantly changing, and in some cases, inconsistent and conflicting and subject to differing interpretations as new laws of this nature are proposed and adopted, and we currently, and from time to time, may not be in technical compliance with all such laws. 37 Table of Contents The Federal Trade Commission (“FTC”) has brought legal actions against organizations that have violated consumers’ privacy rights or misled them by failing to maintain security for sensitive consumer information, or caused substantial consumer injury.
These activities are or may become regulated by a variety of domestic and foreign laws and regulations relating to privacy, data protection, and data security, which are complex and increasingly stringent and the scope of which is constantly changing, and in some cases, inconsistent and conflicting and subject to differing interpretations as new laws of this nature are proposed and adopted, and we currently, and from time to time, may not be in technical compliance with all such laws.
We cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits.
We cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits. 38 Table of Contents Certain risks are inherent in providing prescription and over the counter (“OTC”) treatments, and our insurance may not be adequate to cover any claims against us.
In connection with the completion of our IPO, the Management Agreement terminated. Daniel Sollof and Adam Feinstein remain on our board of directors and hold contractual rights to seats on our board of directors for as long as our Sponsor maintains certain levels of ownership of our common stock.
Daniel Sollof and Adam Feinstein remain on our board of directors and hold contractual rights to seats on our board of directors for as long as our Sponsor maintains certain levels of ownership of our common stock. Currently, affiliates of our Sponsor beneficially own 51.1% of our common stock.
Because our senior management has contributed greatly to our growth since inception, the loss of key management personnel, without adequate replacements, or our inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our financial condition and results of operations. 22 Table of Contents We rely on Vesey Street Capital Partners, L.L.C., our private equity sponsor (“Sponsor”) and the interests of our Sponsor may conflict with the interests of the Company and its other stockholders.
Because our senior management has contributed greatly to our growth since inception, the loss of key management personnel, without adequate replacements, or our inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our financial condition and results of operations.
The global economy has been negatively impacted by increasing tension, uncertainty and tragedy resulting from ongoing military conflict between Russia and Ukraine. The adverse and uncertain economic conditions resulting therefrom have and may further negatively impact global demand, cause supply chain disruptions and increase costs for transportation, energy and other raw materials.
The adverse and uncertain economic conditions resulting therefrom have and may further negatively impact global demand, cause supply chain disruptions and increase costs for transportation, energy and other raw materials.
The affiliated Professional Associations continue to rely on the use paper medical records, which are initially stored on-site at our centers. Paper records are more susceptible to human error both in terms of accurately capturing patient information, as well as with respect to misplacing or losing the same.
Paper records are more susceptible to human error both in terms of accurately capturing patient information, as well as with respect to misplacing or losing the same.
Our results of operations may be materially affected by conditions in the capital and credit markets and the economy generally. We appeal to a wide demographic customer profile for cosmetic services. Uncertainty in the economy could adversely impact customer purchases of discretionary services, including cosmetic services.
We appeal to a wide demographic customer profile for cosmetic services. Uncertainty in the economy could adversely impact customer purchases of discretionary services, including cosmetic services.
If any of the following risks, or other risks and uncertainties, actually occurred, our business, financial condition and operating results could suffer. Risks Related to Our Business Macroeconomic trends including inflation and rising interest rates may adversely affect our financial condition and results of operations.
If any of the following risks, or other risks and uncertainties, actually occurred, our business, financial condition and operating results could suffer.
We have in recent years depended on our relationship with our Sponsor to help guide our business plan. Our Sponsor has significant expertise in financial matters. This expertise was available to us through the representatives our Sponsor has on our board of directors and as a result of our management agreement with an affiliate of our Sponsor (the "Management Agreement").
This expertise was available to us through the representatives our Sponsor has on our board of directors and as a result of our management agreement with an affiliate of our Sponsor (the "Management Agreement"). In connection with the completion of our IPO, the Management Agreement terminated.
Further, our patent protection is limited to the United States, and therefore we may face increased competition from competitors using procedures similar to the AirSculpt® procedure in other countries. Many of our competitors are large, experienced companies that have substantially greater resources and brand recognition than we do.
As a result, we face even greater competition in these markets than in the United States. Further, our patent protection is limited to the United States, and therefore we may face increased competition from competitors using procedures similar to the AirSculpt® procedure in other countries.
Moreover, the COVID-19 pandemic and new COVID-19 variants have resulted in widespread global supply chain disruptions to vendors including critical supply shortages, significant material cost inflation and extended lead times for items that are required for our operations. Any such interruptions to our supply chain could increase our costs and could limit the availability of products critical to our operations.
Moreover, during the past several years, macroeconomic and geopolitical conditions, as well as outbreaks of COVID-19, have resulted in widespread global supply chain delays and disruptions to vendors, including critical supply shortages, significant material cost inflation and extended lead times for items that are required for our operations.
Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Cuts and Jobs Act may affect us, and certain aspects of the Tax Cuts and Jobs Act could be repealed or modified in future legislation.
Future guidance from the Internal Revenue Service and other tax authorities may affect us, and certain aspects of the Tax Cuts and Jobs Act or other U.S. tax laws could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to any newly enacted federal tax legislation.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
In addition, in the event that a significant number of our management personnel were unavailable in the event of a disaster, our ability to effectively conduct business could be adversely affected. Use and storage of paper medical records increases risk of loss, destruction and could increase human error with respect to documentation and patient care.
In addition, in the event that a significant number of our management personnel were unavailable in the event of a disaster, our ability to effectively conduct business could be adversely affected.
In addition, our Term Loan and Revolving Facility contain other and more restrictive covenants, including covenants requiring us to maintain specified financial ratios triggered in certain situations and to satisfy other financial condition tests. 23 Table of Contents Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will continue to meet those tests.
In addition, our Term Loan and Revolving Facility contain other and more restrictive covenants, including covenants requiring us to maintain specified financial ratios triggered in certain situations and to satisfy other financial condition tests.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeState/Country City Number of Procedure Rooms Arizona Scottsdale 2 California Beverly Hills 2 California Sacramento 3 California San Diego 2 Colorado Denver 2 Florida Orlando 2 Florida Miami 2 Georgia Atlanta 2 Illinois Chicago 2 Massachusetts Boston 3 Minnesota Minneapolis 2 Nevada Las Vegas 2 New York New York 2 North Carolina Charlotte 2 Pennsylvania Philadelphia 2 Tennessee Nashville 2 Texas Dallas 3 Texas Houston 2 Utah Salt Lake City 2 Washington Seattle 2 Virginia Vienna 2 Canada Toronto 2 __________ * Leases have been signed with facilities in Austin, Irvine, San Jose, Raleigh and London, UK, but it is not yet known when these facilities will open for business.
Biggest changeState/Country City Number of Procedure Rooms Arizona Scottsdale 2 California Beverly Hills 2 California Orange County 2 California Sacramento 3 California San Diego 2 California San Jose 2 Colorado Denver 2 Florida Orlando 2 Florida Miami 2 Georgia Atlanta 2 Illinois Chicago 2 Massachusetts Boston 3 Minnesota Minneapolis 2 Nevada Las Vegas 2 New York New York 2 North Carolina Charlotte 2 North Carolina Raleigh 2 Pennsylvania Philadelphia 2 Tennessee Nashville 2 Texas Austin 2 Texas Dallas 3 Texas Houston 2 Utah Salt Lake City 2 Washington Seattle 2 Virginia Vienna 2 Canada Toronto 2 United Kingdom London 2 __________ * Leases have been signed with facilities in Birmingham, MI, Deerfield, IL, White Plains, NY and Kansas City, MO but it is not yet known when these facilities will open for business.
We intend to procure additional space as we hire additional employees and expand geographically. We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed.
We intend to procure additional space as we hire additional employees and expand geographically. We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed. 47 Table of Contents
We use these locations primarily for sales and marketing, information technology, social media content management, research and development, supply chain and logistics, finance, human resources, and editing related to AirSculpt ® TV. 44 Table of Contents In addition to our corporate headquarters, as of the date of this Annual Report on Form 10-K, we operate twenty-two centers* from which we offer AirSculpt ® procedures.
We use these locations primarily for sales and marketing, information technology, social media content management, research and development, supply chain and logistics, finance, human resources, and editing related to AirSculpt ® TV. In addition to our corporate headquarters, as of the date of this Annual Report on Form 10-K, we operate twenty-seven centers* from which we offer AirSculpt ® procedures.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThese 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 4. Mine Safety Disclosures Not applicable. 45 Table of Contents PART II
Biggest changeThese 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 4. Mine Safety Disclosures Not applicable. 48 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 45 Part II 46 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. R eserved 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 60 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 48 Part II 49 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 49 Item 6. Reserved 49 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 50 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 63 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Record As of March 10, 2023, there were 56,385,671 issued and outstanding shares of common stock held by 40 stockholders of record.
Biggest changeHolders of Record As of February 26, 2024, there were 57,422,246 issued and outstanding shares of common stock held by 35 stockholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Shares are traded on the Nasdaq Global Market under the symbol “AIRS.” Dividends During the twelve months ended December 31, 2022, we paid a $23.2 million dividend on our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Shares are traded on the Nasdaq Global Market under the symbol “AIRS.” Dividends During the twelve months ended December 31, 2023, we paid a $0.4 million dividend on our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+9 added−29 removed60 unchanged
Biggest changeThe following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net (loss)/income, the most directly comparable GAAP financial measure: Twelve Months Ended December 31, ($ in thousands) 2022 2021 2020 Net (loss)/income $ (14,679) $ 10,551 $ 7,577 Plus Sponsor management fee — 1,636 500 Equity-based compensation 29,457 7,185 325 Loss on debt modification 932 682 — IPO related costs 731 11,837 — Pre-opening de novo and relocation costs 4,293 1,556 879 Restructuring and related severance costs 4,111 850 115 Depreciation and amortization 8,061 6,597 5,641 (Gain)/loss on disposal of long-lived assets 147 — — Interest expense, net 6,751 4,888 2,456 Income tax expense 3,383 329 — Adjusted EBITDA $ 43,187 $ 46,111 $ 17,493 Adjusted EBITDA Margin 25.6 % 34.6 % 27.9 % The Company's adjusted EBITDA was impacted by a full year's worth of public company costs during 2022.
Biggest changeThe following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net (loss)/income, the most directly comparable GAAP financial measure: Twelve Months Ended December 31, ($ in thousands) 2023 2022 2021 Net (loss)/income $ (4,479) $ (14,679) $ 10,551 Plus Sponsor management fee — — 1,636 Equity-based compensation 18,224 29,457 7,185 Loss on debt modification — 932 682 IPO related costs — 731 11,837 Restructuring and related severance costs 5,488 4,111 850 Depreciation and amortization 10,253 8,061 6,597 (Gain)/loss on disposal of long-lived assets (212) 147 — Interest expense, net 6,485 6,751 4,888 Income tax expense 7,477 3,383 329 Adjusted EBITDA $ 43,236 $ 38,894 $ 44,555 Adjusted EBITDA Margin 22.1 % 23.0 % 33.4 % For the twelve months ended December 31, 2023, 2022, and 2021 pre-opening de novo and relocation costs were $3.3 million, $4.3 million, and $1.6 million, respectively. 53 Table of Contents The following table reconciles Adjusted Net Income and Adjusted Net Income per Share to net loss, the most directly comparable GAAP financial measure: Twelve Months Ended December 31, ($ in thousands) 2023 2022 2021 Net (loss)/income $ (4,479) $ (14,679) $ (393) Plus Equity-based compensation 18,224 29,457 4,725 Loss on debt modification — 932 — IPO related costs — 731 317 Restructuring and related severance costs 5,488 4,111 — (Gain)/loss on disposal of long-lived assets (212) 147 — Tax effect of adjustments (2,732) (2,195) (192) Adjusted net income $ 16,289 $ 18,504 $ 4,457 Adjusted net income per share of common stock (1)(2) Basic $ 0.29 $ 0.33 $ 0.08 Diluted $ 0.28 $ 0.32 $ 0.08 Weighted average shares outstanding Basic 56,778,793 55,684,701 55,640,154 Diluted 57,611,469 57,918,005 58,329,428 (1) 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.
Investing Activities Net cash used in investing activities for the twelve months ended December 31, 2022 and 2021 was $12.9 million and $7.1 million, respectively.
Net cash used in investing activities for the twelve months ended December 31, 2022 and 2021 was $12.9 million and $7.1 million, respectively.
Our ability to successfully open and operate new centers depends on many factors, including, among others, our ability to: • recruit qualified surgeons for our new centers; • address regulatory, competitive, marketing, and other challenges encountered in connection with expansion into new markets; • hire, train and retain surgeons and other personnel; • maintain adequate information system and other operational system capabilities; • successfully integrate new centers into our existing management structure and operations, including information system integration; • negotiate acceptable lease terms at suitable locations; • source sufficient levels of medical supplies at acceptable costs; • obtain and maintain necessary permits and licenses; • construct and open our centers on a timely basis; • generate sufficient levels of cash or obtain financing on acceptable terms to support our expansion; 47 Table of Contents • achieve and maintain brand awareness in new and existing markets; and • identify and satisfy the needs and preferences of our patients.
Our ability to successfully open and operate new centers depends on many factors, including, among others, our ability to: • recruit qualified surgeons for our new centers; • address regulatory, competitive, marketing, and other challenges encountered in connection with expansion into new markets; • hire, train and retain surgeons and other personnel; • maintain adequate information system and other operational system capabilities; • successfully integrate new centers into our existing management structure and operations, including information system integration; • negotiate acceptable lease terms at suitable locations; • source sufficient levels of medical supplies at acceptable costs; • obtain and maintain necessary permits and licenses; 50 Table of Contents • construct and open our centers on a timely basis; • generate sufficient levels of cash or obtain financing on acceptable terms to support our expansion; • achieve and maintain brand awareness in new and existing markets; and • identify and satisfy the needs and preferences of our patients.
Under the new 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.
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.
Each surgeon owner of a Professional Association (each a “Surgeon Owner,” and collectively, the “Surgeon Owners”) is also party to a continuity agreement (each, a “Continuity Agreement,” and collectively, the “Continuity Agreements”), which (i) prohibits the applicable surgeons from freely transferring or selling their interests in the Professional Associations, (ii) provides for the ability to add a second surgeon equity holder to help ensure continuity of the Professional Association, and (iii) provides for the automatic transfer of ownership upon the occurrence of certain events, save that, due to limitations under New York law, there is no Continuity Agreement in place with respect to the New York Professional Association.
Each surgeon owner of a Professional Association (each a “Surgeon Owner,” and collectively, the “Surgeon Owners”) is also party to a continuity agreement (each, a “Continuity Agreement,” and collectively, the “Continuity Agreements”), which (i) prohibits the applicable surgeons from freely transferring or selling their interests in the Professional Associations, (ii) provides for the ability to add a second surgeon equity holder to help ensure continuity of the Professional Association, and (iii) provides for the automatic transfer of ownership upon the occurrence of certain 61 Table of Contents events, save that, due to limitations under New York law, there is no Continuity Agreement in place with respect to the New York Professional Association.
Interest Expense Interest expense, net consists primarily of interest costs on our outstanding borrowings under our debt. 52 Table of Contents Results of Operations The following table and notes summarize certain results from the statements of operations for each of the periods indicated and the changes between periods.
Interest Expense Interest expense, net consists primarily of interest costs on our outstanding borrowings under our debt. 55 Table of Contents Results of Operations The following table and notes summarize certain results from the statements of operations for each of the periods indicated and the changes between periods.
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.
We recognize revenue based on the expected transaction price which is reduced for financing fees. 54 Table of Contents 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.
Normalizing the prior year for the increase in equity-based compensation and public company costs, selling, general and administrative expenses as a percent of revenue were 60.1% and 71.1% for the twelve months ended December 31, 2022 and 2021, respectively. Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel.
Normalizing the prior year for the increase in equity-based compensation and public company costs, selling, general and administrative expenses as a percent of revenue were 60.1% and 71.1% for the twelve months ended December 31, 2022 and 2021, respectively. 57 Table of Contents Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel.
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 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.
We expect these costs to continue to increase as we continue to open de novo centers and expand the support we provide to our centers. 53 Table of Contents Selling, general and administrative expenses as a percent of revenue were 60.1% and 49.3% for the twelve months ended December 31, 2022 and 2021, respectively.
We expect these costs to continue to increase as we continue to open de novo centers and expand the support we provide to our centers. Selling, general and administrative expenses as a percent of revenue were 60.1% and 49.3% for the twelve months ended December 31, 2022 and 2021, respectively.
Our performance obligations are delivery of specialty, minimally invasive liposuction services. 58 Table of Contents Revenue for services is recognized over time as the service is delivered, typically over a single day. Payment is typically rendered in advance of the service. Customer contracts generally do not include more than one performance obligation.
Our performance obligations are delivery of specialty, minimally invasive liposuction services. Revenue for services is recognized over time as the service is delivered, typically over a single day. Payment is typically rendered in advance of the service. Customer contracts generally do not include more than one performance obligation.
See “Business—Surgeon Practice Structure—Continuity Agreements.” In accordance with relevant accounting guidance, each of these Professional Associations is determined to be a variable interest entity. Elite Body Sculpture has the ability, through the Management Services and (with the exception of New York) Continuity Agreements to direct the activities (excluding clinical decisions) that most significantly affect the Professional Associations’ economic performance.
See “Business—Surgeon Practice Structure—Continuity Agreements.” In accordance with relevant accounting guidance, each of these Professional Associations is determined to be a variable interest entity. AirSculpt has the ability, through the Management Services and (with the exception of New York) Continuity Agreements to direct the activities (excluding clinical decisions) that most significantly affect the Professional Associations’ economic performance.
Treasury yield of treasury bonds with a maturity that approximates the expected term of the market-based PSU awards. • Expected dividend yield—The dividend yield is based on the current expectations of dividend payouts. The Company does not anticipate paying any cash dividends in the foreseeable future.
Treasury yield of treasury bonds with a maturity that approximates the expected term of the market-based PSU awards. 62 Table of Contents • Expected dividend yield—The dividend yield is based on the current expectations of dividend payouts. The Company does not anticipate paying any cash dividends in the foreseeable future.
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 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.
Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “Elite Body Sculpture,” “we,” “us” and “our” refer to AirSculpt Technologies, Inc. and its consolidated subsidiaries and the Professional Associations.
Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “AirSculpt,” “we,” “us” and “our” refer to AirSculpt Technologies, Inc. and its consolidated subsidiaries and the Professional Associations.
Our policy is to require payment for services in advance of performing any procedure. Payments received for which services have yet to been performed were $2.4 million as of December 31, 2022 and $2.8 million as of December 31, 2021, respectively and are included in deferred revenue and patient deposits on our balance sheets.
Our policy is to require payment for services in advance of performing any procedure. Payments received for which services have yet to been performed were $1.5 million as of December 31, 2023 and $2.4 million as of December 31, 2022, respectively and are included in deferred revenue and patient deposits on our balance sheets.
Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our investments. 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.
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. 56 Table of Contents 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.
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 55 Table of Contents technology and infrastructure, including our corporate office.
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.
As of December 31, 2021, we had $25.3 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 December 31, 2021.
As of December 31, 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 do not have any letters of credit outstanding as of December 31, 2023.
We performed our annual review of goodwill impairment in October 2022 and 2021 using a qualitative analysis and determined that a quantitative analysis was not required. There were no triggering events during the twelve months ended December 31, 2022 and 2021.
We review goodwill for impairment annually in the month of October. We performed our annual review of goodwill impairment in October 2023 and 2022 using a qualitative analysis and determined that a quantitative analysis was not required. There were no triggering events during the twelve months ended December 31, 2023 and 2022.
Key Operational and Business Metrics In addition to the measures presented in our 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: Twelve months ended December 31, 2022, 2021 and 2020 • Cases performed were 13,063, 11,050 and 5,885 in 2022, 2021 and 2020, respectively; • Revenue per case was $12,922, $12,065 and $10,665 in 2022, 2021 and 2020, respectively; • Same-center information; ◦ Same-center revenue per case increased 7.4% and 12.1% in 2022 and 2021, respectively; ◦ Same-center volume increased 0.7% and 55.5% in 2022 and 2021, respectively; • Net income (loss) was $(14.7) million, $10.6 million and $7.6 million in 2022, 2021 and 2020, respectively; • Adjusted EBITDA* was $43.2 million, $46.1 million and $17.5 million in 2022, 2021 and 2020, respectively; • Adjusted EBITDA Margin* was 25.6%, 34.6% and 27.9% in 2022, 2021 and 2020, respectively; • Loss per share (1) was $(0.26) and $(0.01) for 2022 and 2021, respectively; and • Adjusted Net Income per share (diluted)* was $0.37 and $0.08 in 2022 and 2021, respectively. * For a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Net Income per share, which are all non-GAAP measures, to the most directly comparable GAAP financial measures, information about why we consider them useful and a discussion of the material risks and limitations of these measures, please see “—Non-GAAP Financial Measures—Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income per Share.” (1) Prior to the IPO, the EBS Intermediate Parent, LLC structure included only LLC common units issued and outstanding to pre-IPO LLC members.
Key Operational and Business Metrics In addition to the measures presented in our 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: Twelve months ended December 31, 2023, 2022 and 2021 • Cases performed were 14,932, 13,063 and 11,050 in 2023, 2022 and 2021, respectively; • Revenue per case was $13,121, $12,922 and $12,065 in 2023, 2022 and 2021, respectively; • Same-center information; ◦ Same-center revenue per case increased 1.5% and 6.4% in 2023 and 2022, respectively; ◦ Same-center volume changed (1.4)% and 2.7% in 2023 and 2022, respectively; • Net income (loss) was $(4.5) million, $(14.7) million and $10.6 million in 2023, 2022 and 2021, respectively; • Adjusted EBITDA* was $43.2 million, $38.9 million and $44.6 million in 2023, 2022 and 2021, respectively; • Adjusted EBITDA Margin* was 22.1%, 23.0% and 33.4% in 2023, 2022 and 2021, respectively; • Loss per share (1) was $(0.08), $(0.26) and $(0.01) for 2023, 2022 and 2021, respectively; and • Adjusted Net Income per share (diluted)* was $0.28, $0.32 and $0.08 in 2023, 2022 and 2021, respectively. * For a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Net Income per share, which are all non-GAAP measures, to the most directly comparable GAAP financial measures, information about why we consider them useful and a discussion of the material risks and limitations of these measures, please see “—Non-GAAP Financial Measures—Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income per Share.” (1) Prior to the IPO, the EBS Intermediate Parent, LLC structure included only LLC common units issued and outstanding to pre-IPO LLC members.
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 $79.0 million and $52.2 million for the twelve months ended December 31, 2022 and 2021, respectively.
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 $71.3 million and $44.7 million for the twelve months ended December 31, 2022 and 2021, respectively.
Key Factors Affecting Our Performance Our results of operations and financial condition have been, and will continue to be, affected by a number of factors, including the following: Our Ability to Attract New Patients The decision to undergo an AirSculpt ® procedure is driven by patient demand, which may be influenced by a number of factors, such as: • general consumer confidence, which may be impacted by economic and political conditions; • individual levels of disposable income to pay for our procedures and the continued availability of financing for our patients; • the cost, safety and efficacy of AirSculpt ® relative to other aesthetic products and alternative treatments; • the success of our sales and marketing programs; • the perceived advantages or disadvantages of AirSculpt ® compared to other aesthetic products and treatments; • the extent to which our AirSculpt ® procedure satisfies patient expectations; • our ability to properly train our surgeons in performing AirSculpt ® procedures such that our patients do not experience excessive discomfort during treatment or adverse side effects; and • consumer sentiment about the benefits and risks of aesthetic procedures generally and AirSculpt ® in particular.
Key Factors Affecting Our Performance Our results of operations and financial condition have been, and will continue to be, affected by a number of factors, including the following: Our Ability to Attract New Patients The decision to undergo an AirSculpt ® procedure is driven by patient demand, which may be influenced by a number of factors, such as: • general consumer confidence, which may be impacted by economic and political conditions; • individual levels of disposable income to pay for our procedures and the continued availability of financing for our patients; • the cost, safety and efficacy of AirSculpt ® relative to other aesthetic products and alternative treatments; • the increased market acceptance, availability and customer awareness of safer, more effective, easier to use and less expensive weight loss solutions, including weight loss drugs and other non-surgical weight loss and obesity solutions; • the success of our sales and marketing programs; • the perceived advantages or disadvantages of AirSculpt ® compared to other aesthetic products and treatments; • the extent to which our AirSculpt ® procedure satisfies patient expectations; • our ability to properly train our surgeons in performing AirSculpt ® procedures such that our patients do not experience excessive discomfort during treatment or adverse side effects; and • consumer sentiment about the benefits and risks of aesthetic procedures generally and AirSculpt ® in particular.
Long-Term Debt The carrying value of our total indebtedness was $83.5 million and $82.6 million, which includes unamortized deferred financing costs and issuance discount of $1.5 million and $1.7 million, as of December 31, 2022 and December 31, 2021, respectively.
Long-Term Debt The carrying value of our total indebtedness was $71.6 million and $83.5 million, which includes unamortized deferred financing costs and issuance discount of $1.2 million and $1.5 million, as of December 31, 2023 and December 31, 2022, respectively.
Interest payments in the table above were calculated using an interest rate of 7.0% for the debt which was the average interest rate applicable to the borrowing as of December 31, 2022.
Interest payments in the table above were calculated using an interest rate of 7.85% for the debt which was the interest rate applicable to the borrowing as of December 31, 2023.
As of December 31, 2022, we had $9.6 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 December 31, 2022.
As of December 31, 2022, we had $9.6 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility.
Net cash used in financing activities for the twelve months ended December 31, 2021 was $4.5 million. For the twelve months ended December 31, 2021, we made distributions to EBS Parent, LLC of $66.9 million, had borrowings under our credit agreement of $49.6 million and paid scheduled principal payments on our debt of $0.8 million.
For the twelve months ended December 31, 2021, we made distributions to EBS Parent, LLC of $66.9 million, had borrowings under our credit agreement of $49.6 million and paid scheduled principal payments on our debt of $0.8 million.
Total selling expenses were approximately $22.4 million and $13.5 million for the twelve months ended December 31, 2022 and 2021, respectively. Our customer acquisition costs were approximately $2,300 and $1,902 per customer in the twelve months ended December 31, 2022 and 2021, respectively.
Total selling expenses were approximately $30.1 million and $21.0 million for the twelve months ended December 31, 2022 and 2021, respectively. Our customer acquisition costs were approximately $2,300 and $1,902 per customer in the twelve months ended December 31, 2022 and 2021, respectively.
Revenue— Our revenue increased $35.5 million, or 26.6%, compared to the same period in 2021. The increase is the result of adding four de novo centers which increased our footprint from 18 centers to 22 centers as of December 31, 2022. We have also experienced strong revenue per case growth over the prior year of 7.1%.
The increase is the result of adding four de novo centers which increased our footprint from 18 centers to 22 centers as of December 31, 2022. We have also experienced strong revenue per case growth over the prior year of 7.1%.
This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. See the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.
This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. See the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in the forward-looking statements.
We consider Adjusted EBITDA and Adjusted Net Income each to be an important measure because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis.
We include Adjusted EBITDA and Adjusted Net Income because they are important measures on which our management assesses and believes investors should assess our operating performance. We consider Adjusted EBITDA and Adjusted Net Income each to be an important measure because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis.
The table also show the percentage relationship to revenue for the periods indicated: Twelve Months Ended December 31, 2022 2021 2020 ($ in thousands) Amount % of Revenue Amount % of Revenue Amount % of Revenue Revenue $ 168,794 100.0 % $ 133,315 100.0 % $ 62,766 100.0 % Operating expenses: Cost of service 62,781 37.2 % 44,536 33.4 % 23,471 37.4 % Selling, general and administrative 101,418 60.1 % 65,732 49.3 % 23,621 37.6 % Loss on debt modification 932 0.6 % 682 0.5 % — — % Depreciation and amortization 8,061 4.8 % 6,597 4.9 % 5,641 9.0 % Loss on disposal of long-lived assets 147 0.1 % — — % — — % Total operating expenses 173,339 102.7 % 117,547 88.2 % 52,733 84.0 % (Loss)/Income from operations (4,545) (2.7) % 15,768 11.8 % 10,033 16.0 % Interest expense, net 6,751 4.0 % 4,888 3.7 % 2,456 3.9 % Pre-tax net (loss)/income (11,296) (6.7) % 10,880 8.2 % 7,577 12.1 % Income tax expense 3,383 2.0 % 329 0.2 % — — % Net (loss)/income $ (14,679) (8.7) % $ 10,551 7.9 % $ 7,577 12.1 % Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021 Overview— Our financial results for the twelve months ended December 31, 2022 compared to the twelve months ended December 31, 2021 reflect the addition of four de novo centers.
The table also shows the percentage relationship to revenue for the periods indicated: Twelve Months Ended December 31, 2023 2022 2021 ($ in thousands) Amount % of Revenue Amount % of Revenue Amount % of Revenue Revenue $ 195,917 100.0 % $ 168,794 100.0 % $ 133,315 100.0 % Operating expenses: Cost of service 74,012 37.8 % 62,781 37.2 % 44,536 33.4 % Selling, general and administrative 102,381 52.3 % 101,418 60.1 % 65,732 49.3 % Loss on debt modification — — % 932 0.6 % 682 0.5 % Depreciation and amortization 10,253 5.2 % 8,061 4.8 % 6,597 4.9 % (Gain)/loss on disposal of long-lived assets (212) (0.1) % 147 0.1 % — — % Total operating expenses 186,434 95.2 % 173,339 102.7 % 117,547 88.2 % Income/(loss) from operations 9,483 4.8 % (4,545) (2.7) % 15,768 11.8 % Interest expense, net 6,485 3.3 % 6,751 4.0 % 4,888 3.7 % Pre-tax net income/(loss) 2,998 1.5 % (11,296) (6.7) % 10,880 8.2 % Income tax expense 7,477 3.8 % 3,383 2.0 % 329 0.2 % Net (loss)/income $ (4,479) (2.3) % $ (14,679) (8.7) % $ 10,551 7.9 % Twelve Months Ended December 31, 2023 Compared to Twelve Months Ended December 31, 2022 Overview— Our financial results for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 reflect the addition of five de novo centers which increased procedure rooms by 10.
The following table summarizes the net cash provided by (used for) operating activities, investing activities and financing activities for the periods indicated: Twelve Months Ended December 31, ($ in thousands) 2022 2021 2020 Cash Flows Provided By (Used For): Operating activities $ 24,447 $ 26,633 $ 13,957 Investing activities (12,921) (7,116) (3,689) Financing activities (27,257) (4,549) (5,017) Net (decrease)/increase in cash and cash equivalents (15,731) 14,968 5,251 Operating Activities The primary source of our operating cash flow is the collection of patient payments received prior to performing surgical procedures.
We did not have any letters of credit outstanding as of December 31, 2022. 58 Table of Contents The following table summarizes the net cash provided by (used for) operating activities, investing activities and financing activities for the periods indicated: Twelve Months Ended December 31, ($ in thousands) 2023 2022 2021 Cash Flows Provided By (Used For): Operating activities $ 23,956 $ 24,447 $ 26,633 Investing activities (9,919) (12,921) (7,116) Financing activities (13,391) (27,257) (4,549) Net increase/(decrease) in cash and cash equivalents 646 (15,731) 14,968 Operating Activities The primary source of our operating cash flow is the collection of patient payments received prior to performing surgical procedures.
Further, we have increased spending on our clinical infrastructure and brand awareness to support future growth. At December 31, 2022, we had working capital of $(5.6) million compared to $13.0 million at December 31, 2021. The decrease in working capital is primarily due to paying a special dividend of $23.2 million during the twelve months ended December 31, 2022.
At December 31, 2022, we had working capital of $(5.6) million compared to $13.0 million at December 31, 2021. The decrease in working capital is primarily due to paying a special dividend of $23.2 million during the twelve months ended December 31, 2022.
Selling, General and Administrative Expenses —Selling, general and administrative expenses increased $42.1 million, or 178.3%, for the twelve months ended December 31, 2021 compared to the same period in 2020.
Selling, General and Administrative Expenses— Selling, general and administrative expenses increased $1.0 million, or 0.9%, for the twelve months ended December 31, 2023 compared to the same period in 2022.
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 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 expect these costs to continue to increase as we continue to open de novo centers and expand the support we provide to our centers. Selling, general and administrative expenses as a percent of revenue was 49.3% and 37.6% for the twelve months ended December 31, 2021 and 2020, respectively.
We expect our marketing and corporate support costs to continue to increase as we open de novo centers and expand the support we provide to our centers. Selling, general and administrative expenses as a percent of revenue were 52.3% and 60.1% for the twelve months ended December 31, 2023 and 2022, respectively.
At December 31, 2021, we had working capital of $13.0 million compared to $2.1 million at December 31, 2020. For the twelve months ended December 31, 2020, our operating cash flow increased by $9.0 million compared to the same period in 2019.
At December 31, 2023, we had working capital of $(4.4) million compared to $(5.6) million at December 31, 2022. For the twelve months ended December 31, 2022, our operating cash flow decreased by $2.2 million compared to the same period in 2021.
All of our revenue is earned from services provided by the Professional Associations we manage. See “Critical Accounting Policies and Estimates—Principles of Consolidation.” 51 Table of Contents Components of Results of Operations Revenue Our revenue is generated from our patented AirSculpt ® procedures performed on our patients.
All of our revenue is earned from services provided by the Professional Associations we manage. See “Critical Accounting Policies and Estimates—Principles of Consolidation.” 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.
Twelve Months Ended December 31, 2022 2021 Cases 10,497 10,421 Case growth 0.7 % N/A Revenue per case $ 12,895 $ 12,008 Revenue per case growth 7.4 % N/A Number of facilities 14 14 Number of total procedure rooms 28 22 For the years ended December 31, 2021 and 2020, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated since January 1, 2020.
Twelve Months Ended December 31, 2023 2022 Cases 12,859 13,041 Case growth (1.4) % N/A Revenue per case $ 13,114 $ 12,923 Revenue per case growth 1.5 % N/A Number of facilities 21 21 Number of total procedure rooms 45 45 For the years ended December 31, 2022 and 2021, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated for at least twelve months as of December 31, 2022.
We expect our effective tax rate to increase in the future as we will be a C corporation for the full financial periods presented. 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.
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.
During the twelve months ended December 31, 2022, we made distributions to our former member of $1.2 million, paid cash dividends to shareholders of $23.2 million, and made payments of taxes withheld through vested equity-based compensation of $2.0 million. Finally, we made principal payments on our debt of $84.3 million offset by borrowings of new debt of $83.5 million.
Net cash used in financing activities for the twelve months ended December 31, 2022 was $27.3 million. For the twelve months ended December 31, 2022, we made distributions to our former member of $1.2 million, paid cash dividends to shareholders of $23.2 million, and made payments of taxes withheld through vested equity-based compensation of $2.0 million.
The expansion of procedure rooms will provide an ample platform for the Company's continued future growth. 48 Table of Contents Total Case and Revenue Metrics 2022 2021 2020 Cases 13,063 11,050 5,885 Case growth 18.2 % 87.8 % N/A Revenue per case $ 12,922 $ 12,065 $ 10,665 Revenue per case growth 7.1 % 13.1 % N/A Number of facilities 22 18 14 Number of total procedure rooms 47 32 23 Same-Center Case and Revenue Metrics Same-Center Information For the twelve months ended December 31, 2022 and 2021, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated since January 1, 2021.
We believe this provides the best approach for assessing our revenue performance and trends. 51 Table of Contents Total Case and Revenue Metrics Twelve Months Ended December 31, 2023 2022 2021 Cases 14,932 13,063 11,050 Case growth 14.3 % 18.2 % N/A Revenue per case $ 13,121 $ 12,922 $ 12,065 Revenue per case growth 1.5 % 7.1 % N/A Number of facilities 27 22 18 Number of total procedure rooms 57 47 32 Same-Center Case and Revenue Metrics Same-Center Information For the twelve months ended December 31, 2023 and 2022, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated for at least twelve months as of December 31, 2023.
If, however, the fair value of the reporting unit is less than its book value, then the carrying amount of the goodwill is reduced by recording an impairment loss in an amount equal to the excess. We review goodwill for impairment annually in the month of October.
If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the fair value of the reporting unit is less than its book value, then the carrying amount of the goodwill is reduced by recording an impairment loss in an amount equal to the excess.
Adjusted Net Income has limitations as an analytical tool including that Adjusted Net Income 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 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.
This increase is related to cost incurred with our IPO of $11.8 million and an increase in equity-based compensation of $6.9 million primarily related to awards granted in connection with our IPO. We also incurred additional expenses related to marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers.
This increase is related to 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, offset by a decrease in our equity-based compensation expense.
For the twelve months ended December 31, 2022, our operating cash flow decreased by $2.2 million compared to the same period in 2021. This decrease is primarily driven by $6.7 million of additional public company costs in the twelve months ended December 31, 2022, which did not exist in the prior year period.
This decrease is primarily driven by $6.7 million of additional public company costs in the twelve months ended December 31, 2022, which did not exist in the prior year period. Further, we increased spending on our clinical infrastructure and brand awareness to support future growth.
We are in compliance with all covenants and have no letters of credit outstanding as of December 31, 2022 and December 31, 2021. 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.
As of December 31, 2023, the interest rate was 7.85%. 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.
Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020 Overview —Our financial results for the twelve months ended December 31, 2021 compared to the twelve months ended December 31, 2020 reflect the addition of four de novo centers which increased our procedure rooms by eight.
Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021 Overview— Our financial results for the twelve months ended December 31, 2022 compared to the twelve months ended December 31, 2021 reflect the addition of four de novo centers. Revenue— Our revenue increased $35.5 million, or 26.6%, compared to the same period in 2021.
We define Adjusted EBITDA as net income/(loss) excluding depreciation and amortization, net interest expense, income tax expense/(benefit), loss on debt modification, sponsor management fee, pre-opening de novo and relocation costs, restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation. 49 Table of Contents We define Adjusted Net Income as net income/(loss) excluding loss on debt modification, pre-opening de novo and relocation costs, restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation.
We define Adjusted Net Income as net income/(loss) excluding restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, loss on debt modification, equity-based compensation and the tax effect of these adjustments.
We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated since January 1, 2021.
We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated for at least twelve months as of December 31, 2023.
We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated since January 1, 2020.
We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated for at least twelve months as of December 31, 2022.
Twelve Months Ended December 31, 2021 2020 Cases 8,851 5,692 Case growth 55.5 % N/A Revenue per case $11,917 $10,630 Revenue per case growth 12.1 % N/A Number of total facilities 11 11 Number of total procedure rooms 19 19 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 and Adjusted EBITDA Margin, which are non-GAAP financial measures.
Twelve Months Ended December 31, 2022 2021 Cases 11,352 11,050 Case growth 2.7 % N/A Revenue per case $12,836 $12,065 Revenue per case growth 6.4 % N/A Number of total facilities 18 18 Number of total procedure rooms 38 32 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. 52 Table of Contents We define Adjusted EBITDA as net income/(loss) excluding depreciation and amortization, sponsor management fees, loss on debt modification, net interest expense, income tax expense/(benefit), restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based 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.
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. 60 Table of Contents Critical Accounting Policies and Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
Pursuant to the new 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. The proceeds were used, in part, to pay off the Company’s $83.6 million outstanding principal balance under its existing credit facility.
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 $5.0 million.
Our effective tax rate is (29.9)% for the twelve months ended December 31, 2022.
Our effective tax rate is (29.9)% for the twelve months ended December 31, 2022. The main drivers of the difference between the effective and statutory rates are due to the Reorganization and non-deductible officer compensation expense.
We continue to monitor the current COVID-19 situation in each market where we perform procedures and will react accordingly. Our Operating Structure The Company owns and operates non-clinical assets and provides Management Services, through its wholly-owned subsidiaries, to our affiliated Professional Associations located across the United States under the MSAs.
(2) In 2021, basic and diluted weighted average shares outstanding and loss per share represent only the period from October 28, 2021 to December 31, 2021 (see Note 7). Our Operating Structure The Company owns and operates non-clinical assets and provides Management Services, through its wholly-owned subsidiaries, to our affiliated Professional Associations located across the United States under the MSAs.
Material Cash Requirements The following table summarizes our material cash requirements as of December 31, 2022: Payments due by Period ($ in thousands) Total Less than 1 Year 1-3 Years 4-5 Years More than 5 Years Debt – principal $ 85,000 $ 2,125 $ 6,375 $ 76,500 $ — Interest expense (1) 26,925 5,876 11,231 9,818 — Operating lease agreements 22,547 3,858 7,604 7,182 3,903 Total $ 134,472 $ 11,859 $ 25,210 $ 93,500 $ 3,903 ___________ (1) Amounts in the table reflect the contractually required interest payable pursuant to borrowings under our debt related to our Credit Agreement.
During the twelve months ended December 31, 2021, we received proceeds from our IPO of $13.5 million, net of issuance costs of $10.4 million. 59 Table of Contents Material Cash Requirements The following table summarizes our material cash requirements as of December 31, 2023: Payments due by Period ($ in thousands) Total Less than 1 Year 1-3 Years 4-5 Years More than 5 Years Debt – principal $ 72,875 $ 2,125 $ 10,625 $ 60,125 $ — Interest expense (1) 19,451 5,644 10,392 3,415 — Operating lease agreements 38,328 6,329 12,734 10,364 8,901 Total $ 130,654 $ 14,098 $ 33,751 $ 73,904 $ 8,901 ___________ (1) Amounts in the table reflect the contractually required interest payable pursuant to borrowings under our debt related to our Credit Agreement.
In addition, we expanded one of our existing facilities from one to two procedure rooms. Revenue —Our revenue increased $70.5 million, or 112.4%, compared to the same period in 2020. The increase is the result of adding four de novo centers and adding a procedure room to an existing facility which expanded our footprint from 14 centers to 18 centers.
Revenue— Our revenue increased $27.1 million, or 16.1%, compared to the same period in 2022. The increase is the result of adding five de novo centers which increased our footprint from 22 centers to 27 centers as of December 31, 2023.
Total selling expenses were approximately $21.0 million and $9.5 million for the twelve months ended December 31, 2021 and 2020, respectively. Our customer acquisition costs were approximately $1,902 and $1,619 per customer in 2021 and 2020, respectively. We intend to continue investing in our sales and marketing capabilities and expect these costs to increase on an absolute dollar basis.
Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $36.8 million and $30.1 million for the twelve months ended December 31, 2023 and 2022, respectively. Our customer acquisition costs were approximately $2,465 and $2,300 per customer in the twelve months ended December 31, 2023 and 2022, respectively.
This increase is the result of opening four de novo centers and expanding an existing facility by one procedure room during the 12 months ended December 31, 2021 and having a full twelve months of depreciation in 2021 for facilities opened during the 2020 period.
Depreciation and Amortization— Depreciation and amortization increased to approximately $10.3 million for the twelve months ended December 31, 2023 compared to $8.1 million for the same period in 2022. This increase is the result of having five additional de novo centers during the twelve months ended December 31, 2023 as compared to the 2022 period.
Net cash used in investing activities during the year ended December 31, 2020 was $3.7 million which was primarily to fund capital expenditures to open de novo centers. 56 Table of Contents Financing Activities Net cash used in financing activities during the twelve months ended December 31, 2022 was $27.3 million.
Investing Activities Net cash used in investing activities for the twelve months ended December 31, 2023 and 2022 was $9.9 million and $12.9 million, respectively. Investing activities during both periods were attributable to the expansion of multiple existing facilities and opening of de novo locations.
During the twelve months ended December 31, 2021, we received proceeds from our IPO of $13.5 million, net of issuance costs of $10.4 million.
Financing Activities Net cash used in financing activities during the twelve months ended December 31, 2023 was $13.4 million.
For the twelve months ended December 31, 2021, our operating cash flow increased by $12.7 million compared to the same period in 2020.
For the twelve months ended December 31, 2023, our operating cash flow decreased by $0.5 million compared to the same period in 2022. The decrease is related to having more restructuring and related severance costs and the timing of working capital payments primarily related to lease deposits on upcoming de novo projects.
Removed
Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including those discussed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Added
Cost of Service— Our cost of service increased $11.2 million, or 17.9%, compared to the twelve months ended December 31, 2022. This increase is primarily attributable to opening five de novo centers since the 2022 period. Cost of service was 37.8% and 37.2% as a percentage of revenue for the twelve months ended December 31, 2023 and 2022, respectively.
Removed
We believe this provides the best approach for assessing our revenue performance and trends. Our cases per procedure room is lower in the current period due to the recent addition of four de novo centers and expansions of existing centers which increased our procedure rooms by 15 over the prior year.
Added
General and administrative expense were approximately $65.6 million and $71.3 million for the twelve months ended December 31, 2023 and 2022, respectively. This reduction is due to a decrease in equity-based compensation. We expect to continue growing our corporate team to support the opening of new centers and growth at existing facilities.
Removed
We believe this decline to be temporary as the new procedure rooms ramp up.
Added
(Gain)/loss on disposal of long-lived assets— For the twelve months ended December 31, 2023, we recognized a $212,000 gain related to the disposal of previous property, plant, and equipment as a result of relocation to expand certain centers.
Removed
These items are tax effected when reconciling back to the closest GAAP measure of net income/(loss). 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.
Added
Interest Expense, net— Interest expense decreased to $6.5 million from $6.8 million for the twelve months ended December 31, 2023 and 2022, respectively. The decrease is due to the lower principal balance resulting from the Company's voluntary $10 million prepayment made in 2023.
Removed
This added an additional $6.7 million of incremental public company costs in 2022.
Added
Income Tax Expense— Our effective tax rate is 249.4% and (29.9)% for the twelve months ended December 31, 2023 and 2022, 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.
Removed
Normalizing 2021 for these costs, our adjusted EBITDA grew by $3.7 million or 9.4%. 50 Table of Contents The following table uses tax-adjusted amounts to reconciles Adjusted Net Income and Adjusted Net Income per Share to net loss, the most directly comparable GAAP financial measure: Twelve Months Ended December 31, 2022 2021 Net loss $ (14,679) $ (393) Plus Equity-based compensation 28,801 4,615 Loss on debt modification 690 — IPO related costs 541 235 Pre-opening de novo and relocation costs 3,177 — Restructuring and related severance costs 3,042 — (Gain)/loss on disposal of long-lived assets 109 — Adjusted net income $ 21,681 $ 4,457 Adjusted net income per share of common stock (1) (2) Basic $ 0.39 $ 0.08 Diluted $ 0.37 $ 0.08 Weighted average shares outstanding (1) Basic 55,684,701 55,640,154 Diluted 57,918,005 58,329,428 (1) In 2021, basic and diluted weighted average shares outstanding and loss per share represent only the period from October 28, 2021 to December 31, 2021 (see Note 7).
Added
We intend to continue investing in our sales and marketing capabilities as we add new centers and further increase our brand awareness, which will also drive further same-center growth. As a result, we expect these costs to increase on an absolute dollar basis.
Removed
As the Company completed its IPO in 2021, we do not believe adjusted net income per share is a meaningful metric for the 2020 period.
Added
During the twelve months ended December 31, 2023, we made principal payments on our debt of $12.1 million, which included a voluntary prepayment of $10.0 million, paid cash dividends to shareholders of $0.4 million, and made payments of taxes withheld through vested equity-based compensation of $0.2 million.
Removed
(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. Impact of COVID-19 In 2022, we experienced only minor impact at our centers, primarily due to staffing challenges brought on by COVID-19.
Added
Finally, we made principal payments on our debt of $84.3 million offset by borrowings of new debt of $83.5 million. Net cash used in financing activities for the twelve months ended December 31, 2021 was $4.5 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−1 removed0 unchanged
Biggest changeUnder the new 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.
Biggest changeIf the Company's total leverage ratio is below 1x, the applicable per annum margin is 1.0% or 2.0% for base rate or SOFR, respectively. As of December 31, 2023, we had term loan borrowings of $72.9 million in principal amount under the Loan Agreement.
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.
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 2x. If the Company's total leverage ratio is equal to or greater than 1x and less than 2x, the applicable per annum margin is 1.5% or 2.5% for base rate or SOFR, respectively.
Inflation Risk Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.
There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.
As of December 31, 2022, we had term loan borrowings of $85.0 million in principal amount under the Loan Agreement. Based on the amount outstanding, a 100 basis point increase or decrease in market interest rates over a twelve-month period would result in a change to interest expense of approximately $0.9 million.
Based on the amount outstanding, a 100 basis point increase or decrease in market interest rates over a twelve-month period would result in a change to interest expense of approximately $0.7 million. Inflation Risk Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results.
Interest Rate Risk Our primary market risk exposure is changing interest rates. Interest rate risk is highly sensitive due to many factors, including United States monetary and tax policies, United States and international economic factors and other factors beyond our control.
Interest rate risk is highly sensitive due to many factors, including United States monetary and tax policies, United States and international economic factors and other factors beyond our control. Under the new Credit Agreement, all outstanding loans bear interest based on either a base rate or SOFR plus an applicable per annum margin.
Removed
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.
Added
Item 7A. 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 Item 7A. Interest Rate Risk Our primary market risk exposure is changing interest rates.

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