Airsculpt Technologies Inc Aktie

Greetings, and welcome to the AirSculpt Technologies Third Quarter 2026 Earnings Call.

[Operator Instructions]

Please note, this conference is being recorded. I will now turn the conference over to your host, Allison Malkin. Please go ahead.

Good morning, everyone. Thank you for joining us to discuss AirSculpt Technologies results for the third quarter of fiscal 2026. Joining me on this call today are Yogi Jashnani, Chief Executive Officer; and Michael Arthur, Chief Financial Officer. For this morning's call, Yogi will begin with a review of our third quarter results and highlight the progress made on our strategic priorities. Then Michael will share a detailed review of our third quarter performance and guidance.

Before we begin, I would like to remind you that this conference call may include forward-looking statements.

These statements may include our future expectations regarding financial results and guidance, market opportunities and our growth. Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we will file with the SEC, all of which can be found on our website at investors.airsculpt.com.

We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During our call today, we will also reference non-GAAP financial measures. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10-K, which will also be available on our website. With that, I'll turn the call over to Yogi.

Thank you, Allison, and good morning, everyone. Let me start with the quarter. Our third quarter results were disappointing. While we expected a revenue decline, our performance fell short of our goals, reflecting lower productivity from our marketing investments and underperformance in a handful of clinics. We understand what drove the shortfall, and we are moving with urgency to address it.

This quarter presented challenges, but it does not change our conviction in the strategy or the opportunity ahead of us. 3 things reinforce that conviction. First, we performed 250 GLP-1-related procedures in the quarter, representing nearly 10% of total cases. We believe we are in the early innings of GLP-1-related aesthetic procedure growth. Second, conversion held steady, which indicates that we continue to be effective once we engage our patients. And third, we also continue to strengthen the foundation of the business.

This morning, we announced the refinancing of our term loan, extending our maturity to 2031 and giving us greater financial flexibility to support long-term growth, including de novo expansion.

Now turning to the 2 areas that held back performance in the quarter. The first is marketing, specifically the growing impact of Google's AI Overviews on how consumers find us. The second is performance issues in a handful of centers.

Let me start with AI Overviews. AI is changing how consumers discover and evaluate aesthetic providers, and it is increasingly affecting many businesses that rely on search for discovery. According to separate industry reports, queries featuring AI Overviews have now risen to nearly 90% of health care-related queries. For us, this meant fewer Google clicks because Google increasingly keeps consumers on its own platform, while competition for those clicks remained unchanged. That led to 16% lower leads versus prior year and 26% higher cost per lead in the quarter, impacting both revenue and profitability.

Consumers are still interested in aesthetic procedures. We are focused on ensuring we appropriately capture that interest while the consumer search behavior is changing. We are beginning to see early signs of improvement in our presence in AI-generated search results.

We're also investing more in brand and local marketing to drive traffic that does not depend on Google.

Second, we experienced performance issues at a handful of centers. We recognize varying performance across centers is expected. However, this quarter, certain locations experienced operational challenges that we are working to course correct. These are within our control, and we are implementing targeted actions to improve performance at these locations. As we have shared in the past, transformations are not always linear, and this quarter reflects just that. I remain confident that we are better positioned today with a larger addressable market and the right actions in place to achieve sustained profitable growth.

Let me now turn to our progress on our 3 strategic priorities. As a reminder, these are: first, introducing new services to capture our GLP-1 market opportunity, enhancing our sales and marketing strategy; and maintaining strong financial discipline. First, introducing new services to capture our GLP-1 market opportunity. As a reminder, we introduced new services over the past year to capture the demand created by the GLP-1 transformation. We believe we are still in the early stages of this opportunity.

According to Gallup, 11% of U.S. adults or approximately 30 million people were using GLP-1 medications for weight loss in 2026, up from 3% in 2024. Additionally, McKinsey reports that 60% of U.S. consumers are actively trying to lose weight, while the American Society of Plastic Surgeons reported double-digit growth in several skin removal and lifting procedures in 2025.

Longer term, we believe procedures addressing the side effects of GLP-1s continue to represent a potential $100 million revenue opportunity across our existing center base. alloClae, which we announced last quarter, is another example of our focus on serving the GLP-1 patient population. With alloClae, we can reach patients we previously could not serve, including those without enough fat for a traditional fat transfer. It is currently available in a handful of centers. While early, we are encouraged by the initial response and are expanding it across our center network.

As we evolve from traditional fat removal to a more comprehensive body contouring platform, we are learning and refining our approach to patient education and sales execution. While these new procedures fit well within our existing business model, they require us to modify our marketing and sales compared to our traditional offerings. We are improving our ability to capture patient interest and convert that interest into completed procedures. We believe these efforts will enable us to accelerate the volume of newer procedures across our center network and increase center productivity.

Our second area of focus is enhancing our sales and marketing strategy. As I mentioned earlier, we are adapting our marketing strategy to changes in how consumers discover and evaluate aesthetic procedures. We continue to optimize our website for AI-driven search, including Google AI overviews and are strengthening our digital content, customer reviews and educational resources to improve visibility. While still early, we began to see encouraging movement in certain leading indicators following these changes.

We are also leveraging AI tools internally to improve patient follow-up and sales conversion, which further contributes to the relative stability in our conversion rates.

In addition, we are expanding our grassroot marketing efforts to build stronger connections within the communities we serve. We are increasing our focus on localized marketing initiatives and patient education opportunities to generate awareness, drive engagement and bring more prospective patients into our centers. Next week, on November 12, we will host our first-ever open house event across all 31 centers, bringing together surgeons and prospective patients through a combination of in-person experiences and virtual educational programming. The event is designed to engage prospective patients, reconnect with those who have previously expressed interest and drive consultations and bookings while extending our reach through local partnerships and digital content.

As it relates to brand marketing, we expect to spend an incremental $3 million versus last year. This amount is lower than the $5 million we indicated last quarter, which we believe is prudent given the environment and current business performance. We're also focused on improving sales productivity and execution across our center network. To this end, we are actively implementing best practices from our stronger performing locations across the portfolio to improve sales effectiveness and conversion.

Turning to our third priority, maintaining strong financial discipline. As I mentioned earlier, we have completed the refinancing of our existing term loan, providing greater financial flexibility to support our long-term strategy, including future de novo expansion. Michael will share more details on this shortly. We continue to make progress strengthening our financial position and ended the quarter with approximately $15 million in cash and $20 million in total available liquidity. While our near-term focus remains on improving same-center sales and strengthening execution across our existing centers, we continue to view de novo expansion, additional service lines and strategic partnerships as a meaningful long-term growth opportunity.

In summary, while our third quarter proved more challenging, we continue to see evidence that our GLP-1 strategy is the right one with growing demand from these patients and increasing traction across our expanded procedure offerings. We continue to make progress advancing our strategic initiatives and strengthening the foundation of our business. We are implementing targeted marketing initiatives and taking steps to improve performance across our centers. Our updated outlook contemplates third quarter performance trends continue into the fourth quarter, which we believe is prudent. That said, we are intently focused on returning to stability and accelerating our path to growth. With that, I will now turn the call over to Michael to review our third quarter financial results and outlook.

Thank you, Yogi, and good morning, everyone. I'd like to begin with this morning's announcement that we completed our debt refinancing. This has been a priority for us over the last 9 months, and we are pleased with the results. The new $44 million facility made up of $39 million term loan and a $5 million revolver matures in 2031 and gives us greater long-term financial flexibility. We filed the credit agreement this morning under an 8-K with the SEC. This is a significant milestone, and it's worth putting in context. We successfully deleveraged over the last 2 years, and that combined with improved financial performance and stabilization we achieved over the past 9 months is what allowed us to complete this refinance on the terms we did.

With that, let me walk through the third quarter results. Revenue was $31.9 million, a decrease of 8.7% versus the prior year quarter. On a same-center basis, excluding London, revenue declined approximately 7.5%, reflecting a 9.6% decline in case volume, partially offset by a 2.3% increase in average selling price. Average selling price was approximately $12,900, well within our historical range.

Gross margin expanded to roughly 60% of revenue compared to 57.5% in the prior year quarter. That expansion reflects broad-based operating efficiencies and cost disciplines across our centers, including the benefits of closing our London center. SG&A was approximately $20.3 million, an increase of about $700,000 versus the prior year quarter, primarily reflecting higher marketing spend and professional expenses. Customer acquisition cost was roughly $3,800 per case compared to approximately $3,100 last year.

As Yogi discussed, that increase is primarily driven by AI overviews, which impacted traffic and leads reaching our website in the period. We're responding by diversifying our channels and optimizing our digital presence to improve efficiencies. Adjusted EBITDA was approximately $400,000 or roughly 1.2% of revenue compared to $3 million or 8.7% of revenue in the prior year quarter. The decline primarily reflects lower revenue and reduced operating leverage, partially offset by continued cost disciplines.

Turning to guidance. As you saw in our release, we're updating our full year 2026 outlook to reflect third quarter performance and our expectations for the balance of the year. We now expect revenue of $144 million to $146 million compared to our previous outlook of $151 million to $157 million and adjusted EBITDA of $9 million to $10 million compared to our previous outlook of $12 million to $14 million. This outlook assumes the challenges we saw in Q3 continue through the fourth quarter, which we believe is the prudent approach.

As it relates to our balance sheet, we ended the quarter with roughly $15 million in cash and $5 million available on our revolver, resulting in roughly $20 million of liquidity available to the company at the end of the quarter. Transformations are rarely linear and Q3 was a clear example of that, but I'm proud of the progress that we've made, a much stronger balance sheet with greater long-term financial flexibility, a more efficient cost structure and a clear plan to address the challenges in front of us. With disciplined operations, continued cost efficiencies and the long-term financial flexibility our refinancing provides, I'm confident in our ability to execute and to capitalize on the growth opportunities ahead. And with that, I'll turn it back to Yogi for closing remarks.

Thank you, Michael. In closing, I want to thank our team for their hard work and dedication. While our third quarter performance was below the stability we achieved in the first half, we have made meaningful progress strengthening our business and have identified and are focused on the right strategies to improve our performance. Since last year, same-center sales trends have improved approximately 19 percentage points. We believe our expanded GLP-1-related procedures, evolving AI search strategy, enhanced lead generation efforts and continued focus on center-level execution position us well for growth. The combination of these efforts, along with the increased financial flexibility from our new term loan gives us a stronger platform to achieve sustainable, profitable long-term growth and value creation for our shareholders. With that, I'd like to turn the call over to the operator to begin the question-and-answer portion of the call.

[Operator Instructions]

Our first question will come from Sam Eiber with U.S. Bancorp BTIG.

Maybe I can start on some of the challenges called out related to the Google AI search engine. And I just want to make sure I'm understanding this right. So it sounds like there's still patient interest in aesthetic procedures. They're using the search engines, but maybe they're just not being funneled at the same rate to your website. So I just want to make sure I'm understanding that right. And then I guess, second, how are you looking to maybe overcome some of those challenges? Do you need to redirect investments elsewhere? Just curious how you're looking to respond to that.

Sam, this is Yogi. Thank you for the question. Look, you're absolutely right. We continue to see that the demand for overall aesthetic procedures is staying consistent with past quarters, which is encouraging. And we are also seeing that our conversion rate is holding steady. So when we capture the lead, we are able to convert the patients, they are still showing the same interest and engagement with the AirSculpt brand.

A little bit more on what's been changing in Google AI search. So over the past few months, Google updated their AI search capabilities. That has progressively impacted how consumers research and find our services. Google tends to keep them within their own platform. This change in Google is impacting many consumer companies and many have called it out in the Q3 results. We have implemented countermeasures. That's things like being cited within AI answers and starting to see good traction there.

That's within our control, and that will help us overcome some of these challenges.

Secondly, we are building out our channels that don't depend on Google, such as local and community marketing and open house next week across all of our centers. And lastly, continuing to engage with patients to make sure that our conversion rate holds strong. So I have confidence that we are taking the right steps, and we're starting to see early signs of that. It will take some time for that to show up in our revenue numbers for sure, which is where the guidance comes in.

Okay. That's a really helpful explanation. And then maybe I can just use my follow-up here. It's a little bit of a higher-level question, but just curious on AirSculpt's brand and ability to still win and capture new patients. If that's changed at all just in terms of consumer reception to the brand? Is it still -- has it changed at all? And how you view AirSculpt within the marketplace generally versus other independent plastic surgeons?

Yes. Sam, thanks for that. We still see a very strong reason for us to win and take market share in the long term. Based that on 3 things, 1, as I said, when people engage with our brand, people are still searching for the AirSculpt brand and when they engage with us, we are seeing conversion holding steady. Secondly, our strategic bet on changes in aesthetics, particularly as it relates to GLP-1 procedures, you're starting to see that play out. So consumers are responding positively to that. That's partially the strength of the brand, which is coming into play. And thirdly, as you think about whether it's Google AI overviews or the likes, everyone is impacted equally with that. We have the marketing depth and frankly, the strength of the organization to be able to pivot, invest in that and overcome those challenges. I would argue, faster than anybody else. We just need to bring that to bear.

And our next question will come from Kyle Bauser with Titan Partners.

Maybe can you talk a little bit about trends in October and early November? It looks like the full year guidance assumes a step down in Q4 as well. So just kind of curious how things are kind of trending so far.

Yes. Kyle, this is Michael. On guidance, I think where our guidance landed in -- for the full year is basically a reflection of kind of Q3 trends continuing through Q4. And it's really what kind of will dictate that really is just the pace in which we're able to kind of evolve those 2 key areas that Yogi mentioned on the call, which is around our ability to kind of meet or evolve our marketing strategy around the AI reviews. And then second, there are a handful of centers that had executional issues in Q3 that we are improving and the pace of that is going to dictate, kind of, where Q4 lands in the full year.

Got it. And then I'm not sure I caught all the details, but any more terms of the refinance debt you can walk through kind of interest rate, et cetera?

Yes. Yes. So the terms, we're excited about where we landed on the refi. So it's a 5-year term loan, $44 million facility, $39 million term loan, $5 million revolver. Interest rate is around -- is SOFR plus 775 and it steps down as leverage decreases over time. That's about a 300-basis point increase from the old facility that we had in place. We also structured in a way and designed in a way that provides us a lot more flexibility short term, lower amort payments, more cushion on covenants to allow us to execute these key initiatives that we think are important for us and provide necessary liquidity short term to make necessary investments. And so yes, we're excited. It's -- frankly, it's a pretty plain vanilla term loan, but glad to have it past us and extend the maturity out to 2031.

And we'll go next to Jeremy Pearlman with Maxim Group.

So firstly, just I know you're attributing most of the same -- the case volume decline to the AI generated and how that's affecting getting in front of clients. But what gives you confidence that your client base really is not impacted at all by some maybe weakness in the economy, some inflation, higher gas prices, et cetera? Like how should we look at the profile of your customer base?

Jeremy, thank you for the question. This is Yogi. Look, for the consumer base, we've called it out -- as we've called it out before, consumer is still choppy. We continue to see that. Having said that, our consumer tends to be higher income, so average above $100,000. And this is someone with discretionary income that she's willing to invest in herself. We're seeing that population is slightly more insulated, certainly not completely insulated in the current economy. As it relates to Q3, though, we are seeing that demand, which we would measure through search intent, that held relatively stable. The bigger gap came from how that demand went from search intent to leads, and that's why we are calling that out as the primary driver over here in Q3.

Okay. Understood. And then just my second question relating to maybe, the GLP-1, the patients who are using that, is that a higher -- how should we look at the conversion rate for a patient who's coming in for the GLP-1 procedures versus maybe some of your legacy procedures?

Yes. So GLP-1 procedures, just as a reminder, are things like fat removal of stubborn fat deposits, addressing excess loose skin as well as loss of volume, which are the side effects of GLP-1s, which we are able to address. We introduced these approximately a year ago, and now they have grown to 10% of our total procedure mix. That growth, that acceleration is a strong indicator that the procedures are resonating. Our brand is resonating with these consumers as well. We continue to see that folks who are coming in for GLP-1-related procedures, they need a little bit more education on what are the options that are available to them. So the engagement is a little bit deeper and a little bit longer, but we continue to see that they are converting and they are engaging with the brand. There's a ton more upside. We're in really early innings over here. We see this as a long-term $100 million-plus as a revenue opportunity.

And our last question will come from Ben Haynor with Lake Street.

First off for me on the GLP-1-associated procedures, it seems like you've been ratcheting those higher by about 50 per quarter. Can you talk a little bit about how many centers that those are in and kind of when we should see an inflection beyond adding an additional 50 or so a quarter?

Ben, thank you for the question. So we now have GLP-1-related procedures in almost all of our centers. There is 1 or 2 which wouldn't have that or which wouldn't be doing that at scale.

From an inflection perspective, that's our next area of focus. So as you remember, what we had said and what we've been doing is, first, pilot new procedures, run it for a few months, make sure that the results are up to par to where we can stand behind those as a brand and our medical protocols and processes are refined. Those usually take a few months.

Now we've reached a point where all of that has been addressed. Now we are pivoting more towards how do we get more consumers in through the door. There is a slight different approach, as I alluded to earlier. Folks who are looking for solutions to GLP-1 side effects, they need a slightly different marketing approach. They need a slightly different sales approach. That's what we are actively working on, on how to accelerate the commercialization. I don't have the time line, but that's an active work in progress right now.

Okay. And can you talk a little bit about -- well, like the cohort of the first 5 that have those procedures available, how they're doing versus the ones that kind of just came on?

Yes. Ben, we don't have -- at these volumes, as you can imagine, we're not breaking it out as much into those cohorts. What I would say is across the board, we are seeing relatively stable consumer interest across all of our locations. I'm not seeing any degradation in cohorts that came online later. Remember, the activation was primarily marketing focused towards the end because we had already refined our procedures and our surgeons are more than skilled to do all of these procedures.

Okay. That makes sense. And then lastly for me on kind of the performance of centers, the operational issues that you've identified and corrected. Can you give any examples of what those are? People just forgetting to unlock the office? Is it more profound? What's the story on that?

Yes. Ben, thankfully, it's not forgetting to unlock the office for sure. But to operate a successful center, 3 main factors need to come together in our business: marketing to drive the leads, sales to convert them and operations to execute on those. As with any multiunit, there's always a variability in performance. At these handful of centers, we experienced challenges in 1 of these 3 areas that were more pronounced than what we would typically encounter in the normal course of business. Specific issues varied by location, but all fall within these 3 areas, whether it's marketing, sales or operations. And these performance challenges are within our control. It's something we're actively addressing. Some solutions are well underway and fixed and some will take a few months to address. But for the ones which are longer, we are taking steps to mitigate the impact in the meantime.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Yogesh Jashnani for closing comments.

Thank you again for joining us. We look forward to speaking with you at upcoming investor conferences and when we report Q4.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the AirSculpt Technologies, Inc. Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alison Malkin with ICR. Please begin.

Good morning, everyone. Thank you for joining us to discuss AirSculpt Technologies' results for the second quarter of fiscal 2026. Joining me on the call today are Yogesh Jashnani, Chief Executive Officer, and Michael Arthur, Chief Financial Officer. For this morning's call, Yogi will begin with a review of our second quarter results and the progress made on our strategic priorities, and Michael will share a detailed review of our second quarter and first six-month performance and guidance.

Before we begin, I would like to remind you that this conference call may include forward-looking statements. These statements may include our future expectations regarding financial results and guidance, market opportunities, and our growth. Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we will file with the SEC, all of which can be found on our website at investors.airsculpt.com. We undertake no obligation to revise or update any forward-looking statements or information except as required by law.

During our call today, we will also reference certain non-GAAP financial measures. We use non-GAAP measures in some of our financial discussions, as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10-K, which will also be available on our website. With that, I'll turn the call over to Yogi.

Thank you, Alison, and good morning, everyone. Welcome to AirSculpt's second quarter earnings call. I am pleased to share that our second quarter and first half results marked meaningful progress on our transformation. For the quarter, on a comparable basis, we delivered stable revenue and positive same-center case growth. Center sales began the quarter positively and saw moderating sales trends in June, which we attribute to a dynamic consumer environment. Overall, we generated a 21-percentage-point improvement in same-center sales versus Q2 last year and a 23-percentage-point improvement year-to-date.

Over the past 18 months, we have broadened our consumer reach to capture the growing opportunity presented by GLP-1 patients, bolstered our talent, invested in new marketing strategies, and strengthened our balance sheet to provide the financial flexibility to support future growth. Those actions are showing in the continued stabilization of the business with roughly flat same-center sales growth in the first half. Our near-term focus remains squarely on increasing same-center sales. Longer term, we believe there is meaningful growth in new procedures and de novo expansion. As our balance sheet and cash flow generation strengthen, we intend to expand our geographic footprint and center base over time.

Let me now turn to our progress on the three strategic priorities. As a reminder, these are, first, introducing new services to capture our GLP-1 market opportunity; second, enhancing our sales and marketing strategy; and third, maintaining strong financial discipline. First, introducing new services to capture our GLP-1 market opportunity. GLP-1 continues to represent a significant long-term growth driver for AirSculpt, with nearly 19 million potential patients interested in body contouring or related aesthetic procedures over time. Our core body contouring procedures continue to resonate with GLP-1 patients, and we are expediting the expansion of our portfolio of procedures to serve their evolving aesthetic needs.

During the quarter, we completed over 200 skin excision procedures and expanded the offering to additional centers. We also broadened our services to include upper blepharoplasty and mastopexy. These procedures further expand our addressable market and increase our center productivity, while allowing us to better serve the needs of our patients. We continue to expect this to represent a $100 million-plus long-term revenue opportunity across our existing base of centers with an increasing long-term potential as we resume de novos. As part of our strategy to expand our body contouring platform, today we are announcing a partnership with [ Tiger Aesthetics ] to offer [ Alloclay ] for patients.

[ Alloclay ] is a structural adipose tissue allograft used for non-surgical body contouring designed to add subtle, natural-looking targeted volume. We are excited about this partnership for several reasons. First, it allows us to reach patients we previously could not serve, including those without enough fat for a traditional fat transfer. Second, we expect a quicker ramp as many of our surgeons are trained in this procedure already. And finally, consumer interest in this category continues to grow as the use of GLP-1 creates the need for targeted restoration of volume. We believe this further strengthens our ability to serve consumers across their entire aesthetics journey.

[ Alloclay ] will start rolling into our centers later this quarter. Looking forward, we have additional procedures in the pipeline that are core to body contouring and are a strong fit for our brand. We remain focused on thoughtfully expanding our capabilities to enhance the patient experience and increase center productivity. Our second focus is enhancing our sales and marketing strategy. As we expand our portfolio of procedures, we're also evolving how we market and sell them. During the quarter, we refined our marketing through a test and learn approach, optimizing how we reach GLP-1 patients and educate prospective patients on our new procedures.

As we fine-tune our marketing investments in these procedures, we expect to achieve a higher return on that spend, driving revenue growth and greater marketing efficiency. At the same time, we trained our sales team and implemented additional sales optimization tools to make them more efficient and effective, recognizing that selling these procedures requires a different approach than a traditional body contouring business. We believe these investments will enable us to better reach patients and improve commercial execution as our portfolio continues to grow. Third area of focus is maintaining strong financial discipline.

Maintaining a strong balance sheet remains a key priority as we execute our long-term strategy. During the quarter, we raised approximately $5 million through our ATM program, which continues to provide us with the balance sheet flexibility and liquidity to support our growth. Michael will discuss our balance sheet in more detail shortly. In summary, we made progress in the second quarter, and while our results reflect the expected variability of a turnaround being executed in a dynamic consumer environment, we entered the second half of the year a stronger company with the right strategy and team.

Our addressable market is larger, our procedure mix is broader, and our operating platform is more disciplined than it was 12 months ago. Our focus for the balance of the year is unchanged. Convert the stabilization achieved year-to-date into sustained profitable growth. That means same-center sales, marketing efficiency, and consistent execution across our locations. We expect the actions underway to be reflected in our results in the quarters ahead. And with that, I will now pass it over to Michael.

Thank you, Yogi. Good morning, everyone. As Yogi mentioned, we are pleased to deliver our second consecutive quarter of stable revenue. We continue to see encouraging signs across the business. Underlying case volume increased year-over-year. Our newer procedures continue to gain traction, and we remain focused on executing the strategic priorities Yogi outlined. Turning to the second quarter, revenue for the quarter was $42.9 million, a decrease of 2.5% versus the prior year quarter. On a same-center basis, excluding the impact of London, revenue declined approximately 1%, reflecting positive 1% case growth in the quarter, the second consecutive quarter of year-over-year case growth, a continued sign of stabilization.

This was offset by a 2% decline in average selling price in the quarter. The decline in average selling price was primarily driven by our comparison against an unusually high average selling price in the prior year period. Average selling price for the quarter of approximately $12,700 remains well within our historical range. Cost of services was $16.6 million, resulting in gross margin expansion to roughly 61%. Selling, general and administrative expenses were approximately $23.4 million, an increase of approximately $750,000 compared to prior year. This reflects the deliberate choice to increase investment in marketing and brand development by $1.5 million in the quarter. This was offset by efficiencies in general and administrative expense.

Customer acquisition cost for the quarter was roughly $3,500 per case, compared to approximately $2,900 in the prior year quarter. While elevated, as Yogi mentioned, we made intentional investments in brand marketing. While the spend is not fully optimized today, we do expect these investments to pay off in the future. Overall, cost disciplines continue to be a priority. And equally important is being strategic about where we reinvest those savings to drive long-term shareholder value. As a result, adjusted EBITDA was $4.9 million, roughly 11.5% of revenue, a decrease of $900,000 from the prior year.

Through June 30, 2026, cash provided by operating activities after capital expenditures was approximately $3.8 million, up slightly year-over-year. Also, year-to-date, we raised roughly $20 million on our ATM and paid down debt of approximately $13 million. As it relates to our balance sheet, we ended the quarter with roughly $19 million in cash and $5 million available in our revolver, resulting in roughly $24 million of liquidity available to the company at the end of the quarter. Turning to our term loan, we ended the quarter with approximately $44 million of gross debt and remain in compliance with all covenants under our credit agreement. We recently signed an amendment extending the maturity of the facility to November 2027.

At the same time, we continue to make progress refinancing the facility. The continued stability in our business has allowed us to receive multiple term sheets that we believe are aligned with our long-term interests, and a maturity extension gives us additional time to achieve the right transaction. Now, turning to guidance. As you saw in our earnings release, we are reaffirming our outlook at the lower end of our revenue guidance and updating our adjusted EBITDA outlook to a range of $12 million to $14 million, which reflects our intentional investment and marketing of an additional $5 million this year to support future growth. We believe this will strengthen the business and support improving performance over time.

Our guidance assumes a stable macroeconomic environment through the balance of the year and does not contemplate any further deterioration in consumer demand. While we are not providing quarterly guidance, we thought it would be helpful to provide context for our expectations in Q3 versus Q4. On a comparable basis, excluding London center sales from 2025, we expect third quarter revenue to be down single digits. In Q4, we expect continued ramp of our existing and new service offerings and market efforts to deliver year-over-year growth in revenue and adjusted EBITDA on a comparable basis. Additionally, while we're introducing new procedures such as [ Alloclay ], our guidance does not include any contributions from these offerings given how early they are in the implementation process.

While we remain mindful of the current environment, we continue to be encouraged by the underlying fundamentals of the business, including continued growth in case volume, our strategic initiatives, and the early impact we're seeing from our expanded marketing efforts. We believe these investments position the business well for improving performance as we move through the remainder of the year. Importantly, we've made significant strides strengthening the business. In the past year alone, we have stabilized revenue trends, improved same-center sales from -23% in the first half of 2025 to flat year-to-date, reduced gross debt by over $30 million since the start of 2025, and increased cash by over $10 million since the start of 2025.

Overall, the business is much stronger on almost all accounts compared to a year ago. As we look towards the second half of the year, we remain focused on disciplined execution, maintaining financial flexibility, and continuing to invest in initiatives we believe will drive long-term shareholder value. And with that, I'll turn it back to you, Yogi, for closing remarks.

Thank you, Michael. In closing, I want to thank our team for their hard work and dedication. The progress we described today is a direct result of their efforts. While we remain mindful of the current environment, we are very grateful for your support. We are building momentum across the business through disciplined execution. We remain confident in the opportunities ahead and our ability to deliver long-term shareholder value. With that, I'd like to turn the call over to the operator to begin the question and answer portion of the call.

[Operator Instructions] Your first question comes from the line of [ Sam Ever ] with BTIG. Please go ahead.

Maybe I can start on the market environment, Yogi, and the trends that you've seen in July and into August, and then your ability to maybe sustain procedure volume growth for the back half of the year.

Sam, this is Yogi. Thank you for the question. Thanks for joining. First of all, I'm really pleased with the stability we've been able to deliver for two consecutive quarters. Underlying case volume growth for sure. And just the continued traction from the new procedures that we have, we've been able to accelerate those as well as just the discipline across the company. You see that in the cost initiatives as well. As it relates to trends, we did see the trends soften in June from earlier in the quarter, and that continued into July.

We attribute that to the fact that we're just executing a transformation in a choppy consumer environment, frankly, so that's what led us to make sure that we provide additional insight where we don't guide quarter to quarter. This time around, we wanted to provide additional insight on what to expect in Q3 and Q4. So we remain confident that what we have with what we're doing, the new services, the marketing, as well as just the disciplined execution will allow us to end the year with growth and at the lowest level, and of the guidance that we have provided at the beginning of the year in terms of revenue.

Okay, okay, that's really helpful. And maybe I can use a follow-up here on the [ Alloclay ] partnership. Maybe I can just get your thoughts on the strategic rationale there. Is this going after a separate patient demographic than your traditional core body contouring procedures? And then long-term, just the idea of AirSculpt maybe turning into what was formerly just a body contouring business into maybe a full service and suite of platforms that can offer patients different aesthetics needs.

Sam, great question. Thanks for that. I'll answer both parts of your question. On [ Alloclay ], we view that as a complementary procedure to body contouring. So if you think about what [ Alloclay ] does, it's a great opportunity to provide and extend or really reach to patients who have body contouring needs, but do not have either enough fat to transfer or have other reasons why they would want to, you know, external fat rather than their own fat for transfer. So in the near term, it allows us to expand our reach to patients who we could not serve earlier. More broadly, it fits within our brand. It fits within what we do.

It is body contouring, can be done in our facilities under local anesthesia. So as far as procedures are concerned, we think this is a great fit and expansion and complementary to fat transfers that we're doing. We are constantly looking at what procedures make sense for AirSculpt, what can we do within our four walls? And that pipeline is also very robust in what we are evaluating. So as far as are we looking to expand procedures, absolutely. The goal is how do we increase center productivity and drive same-store sales, we continue to do things which make sense and resonate with our patients.

Okay, great. Thanks for taking the questions.

Your next question comes from the line of Whit Mayo with Leerink Partners. Please go ahead.

This is [ Dean Rosaleson ] for Whit. We've heard commentary from the payer space expressing that some employers are dropping GLP-1 coverage intra-year. Have you experienced this potential headwind in your case volumes yet? And finally, how do you expect this would influence business in the mid and long term if GLP-1 uptake were to sort of moderate as payer dynamics shift?

Thank you for that question. So the short answer to what you're saying is, as employers are dropping coverage, we've not seen that have an impact or noticeable impact on our business. Broadly, the GLP-1 trend has been up and to the right in terms of adoption by consumers. And we see that in consumers coming to us as well. So the patients who are reaching out to us, who are doing the consultations, including increasing amounts of them are on GLP-1s. The new procedures are resonating with them. We're pleased with what we have and continue to expand over there.

If it does create a bit of a hiccup for GLP-1 adoption, I think it would be well within, frankly, what would work for us in terms of being able to serve both people who have GLP-1 side effects and if people end up not going down the GLP-1 route and need traditional fat removal, fat transfer, then we can do that as well.

Thank you so much. Your next question comes from the line of Jonah Kim with Cowen and Company. Please go ahead.

The first one is what evidence do you have that increased marketing spend is generating higher ROI for you and how do you just see your marketing strategy evolve over time? And second one, what KPIs do you monitor throughout the year and how are you reflecting on these KPIs real-time to make improvements?

Jonah, thank you so much for the questions. I'll answer it in the order you asked them. So as far as marketing investments are concerned, you think about marketing investments as if I'm investing a dollar today, over the life of that dollar, am I going to get more than a dollar back in terms of profit essentially. So that does a couple of things. We are not looking at just spending to the average, looking at every, you know, effectively every dollar and whether that's working hard for us or not. Some of those are done within the quarter and some of those would return outside the quarter, that's how we are focusing on the ROI that's being generated.

And currently, the results in many ways speak for themselves. We've had stability for two consecutive quarters with case growth. That's a trend change from where the business has been for multiple quarters, if not multiple years. So that's been, part of that has been the enhanced marketing strategy that we have put in place. Going forward, as we said, we're going to continue to invest. A lot of those investments are also going into the new services, which is working. We're seeing that show up in our numbers. We expect to get more efficient as we learn how to market to GLP-1 customers, as we learn what's the best way to drive value over there.

So in future quarters, I completely expect that our marketing will get even more efficient. We are committed to making sure that we are driving growth within the organization. And that's where the marketing investments come in.

Thank you. Your next question comes from the line of Nick Sherwood with Maxim Group. Please go ahead.

How long had the building in that [ Alloclay ] capability, how long did that process take from evaluating to implementing it? And then was this a direct response to some of the concerns of your customers who had been up taking GLP-1s and are you serving customers who are taking GLP-1s to find out what procedures you should add to your portfolio?

Nick, this is Yogi. Thank you for those questions. Over the last year or so, I would say we have, if I can talk more broadly about how we are evaluating procedures, over the last year or so, we've done an outreach and understood what's the universe of body contouring procedures, what makes sense within what we're doing. So really started with patient needs. What are patients needing? Where can those needs be met better? And as part of that, we have a constant evaluation process where we're looking at different solutions.

[ Alloclay ] was one which has been, even before it hit the market, it has been something that we've been talking to [ Tiger Aesthetics ] with. We have a deep relationship with them. We provide other services that they have as well. So this one is something which, just like other things, it's well thought out. We keep an eye on it, and when the time is right, which we feel is now, we look to bring that in. We start with a few locations and then expand it as we get learnings, as we understand how to market this, how to serve the patients better.

And broadly, that's what we're doing. We're looking constantly for what's the best. What's on the market? What makes sense? In this particular case, it fits the need. It solves a problem for the patient, which is, I don't have enough fat to transfer. We do hear it and we hear it increasingly from our patients. So that's a little bit of the insight on how we go about these. We have a medical advisory board, which also guides our attendees along the way.

Yes, thank you for that detail. And then thinking about some of the new marketing spend, how are you adapting, how are you evaluating and adapting that spending strategy across the quarters? What kind of KPIs are you bringing in in real time? And then how are you also responding to that new sort of AI search landscape where, you know, click-through rates are really low on Google right now, and how are you making sure that you're getting potential customers onto your website?

Nick, thanks for that. As far as how we are doing marketing spending across the quarters and the KPIs, we covered some of this in Jonah's question as well. We take an approach of for every dollar that we're putting in, what's the expected return over the life of that dollar? And is that driving profitability. As it relates to new procedures, what we are seeing is how we reach out to GLP-1 patients. We're testing different channels, different messaging, different creatives, different landing pages. So it's a heavy test and learn approach that we are taking, both in the channels which we are present in and in new forums as well.

That's the plan. We're committed to it because we see the need, we see the demand from patients. Now it's up to us to crack the code on how do we have an efficient outreach to them so that they allow us to serve their needs. The AI search landscape, like any direct-to-consumer market will tell you, that is definitely having an impact. I'm glad we're able to maintain stability and drive results despite a choppy consumer environment and despite AI search overviews creating headwinds as far as clicks are concerned. That's an evolving area. We continue to invest in how we show up when these search engines or when the LLMs are being turned to, whether it's Google, whether it's OpenAI, whether it's Claude.

So that's one area. The other area is also where they don't have reach currently. Never say never, but things where people are looking for guidance, whether it's ratings, reviews, conversations. Also, how do you make sure that our presence over there is robust is the other way we're looking to beat the system. So there's more around how we show up well in AI and then when people are not turning to AI, but turning to other people, how do we show up well over there as well.

Understood. Thank you for the answer to my questions. I'll return to the queue.

Your next question comes from the line of [ Kyle Bowser ] with [ Titan Partners ]. Please go ahead.

Maybe could you talk a little bit more about some of the newer procedures that you talked about in the past, like standalone skin tightening and skin removal? And you mentioned more today on the call. How many of the 31 centers are conducting these, and how does that economics or margins kind of compare with the existing services?

Kyle, I'll bucket it into three groups, essentially. We do skin tightening, which is your, as the name suggests, you're going in just slightly underneath the skin, tightening it. We do it either as standalone, or in most cases, actually, along with fat removal and fat transfers. That's available in all of our centers. The second bucket would be skin removal or skin excisions. There is four or five body areas where we do skin removal, skin excisions. Those are roughly in, I would say, 20 out of 30 locations or so, 20 out of the 31 locations that we have. That number continues to go up and certain procedures are in some locations.

It all depends upon surgeon availability, surgeon preference, and we're working with our surgeons to expand that further. The third bucket is [ Alloclay ], which we just announced on the call today. That's going into pilot later this quarter. So our first centers will start treating patients with [ Alloclay ] sometime later this quarter. As far as the economics are concerned, skin tightening and skin removal, the gross margin profile and the economics of that are very similar to our core fat removal, fat transfer business. So roughly a gross margin of 60-ish percent, which has been ticking up of late, if you might have noticed. So that we continue to expect to have a similar gross margin profile.

Now, many of these are combined with other procedures. So the average ticket ends up being higher. So while we do have some patients who are doing standalone skin tightening, for example, most are combining it with either fat removal or fat removal and fat transfer. So anytime it's an add-on, we see the ticket price is higher for those. Same dynamic on skin removal as well. It's too early to know how [ Alloclay ] would work. Once we have it in our clinics, we have more insights. [ Alloclay ] does have a product cost. So the gross margin profile over there would be different. Gross margin percentage would be lower. The expectation is that the gross margin dollars would go higher so that net it's accretive to the business on a dollar perspective.

Got it. Appreciate that. And you mentioned, you know, the marketing to become a bit more efficient as you learn how to better market to GLP-1 patients moving forward. I think the customer acquisition cost is about, you mentioned $3,500, pretty similar with the last couple of quarters, maybe a slight step up. How should we anticipate the customer acquisition costs trending over the balance of the year based on investments you're making in marketing?

Hey, this is Michael. Yes, I can take that one. Yes, so as you alluded to, CAC was approximately $3,500 in the quarter, which was up roughly relative to Q2 of last year, which was $2,900 a year ago. So it's a consistent step up in marketing investment as we discussed. A meaningful portion of that spend is top of the funnel brand building investments that don't necessarily show up in this quarter's case volume, but over time, it's designed to lower CAC as we expand our reach, improving lead quality and the like. And so as case volume builds and these investments mature, we do expect CAC to come down and marketing to turn back towards our lower percentage of revenue as well. It's another way we look at it, which, you know, last year was around 18% and year-to-date we've been around 20% of revenue.

Okay, great. Thanks so much. Thanks for taking the question.

This now concludes our question and answer session. I would like to turn the floor back over to management for closing comments.

Thank you everyone for joining us for our second quarter earnings call. We look forward to connecting with many of you at investor events over the next few days and weeks, and then also report back on our third quarter in a few months. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

Hello, and welcome to the Annual Meeting of Stockholders of AirSculpt Technologies, Inc., which will be referred to throughout the meeting as AirSculpt or the company. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Brent Wadman, General Counsel and Secretary for AirSculpt.

Good morning, ladies and gentlemen, and welcome to AirSculpt's Annual Meeting of Stockholders being held virtually. I am the General Counsel and Secretary for the company, and I will act as Chair of the meeting. The directors of the company are as follows: Yogesh Jashnani, Michael Doyle, Adam Feinstein, Daniel Sollof, Caroline Chu, Thomas Aaron and Kenneth Higgins. We are holding today's meeting virtually through an online platform provided by Computershare. This format allows for broader participation and ensures the safety and convenience of our stockholders. The meeting will now come to order.

On or about April 15, 2026, a proxy statement, proxy card and the annual report were made available to all stockholders of record as of March 13, 2026. The affidavit, along with copies of the proxy statement and proxy card, will be filed with the minutes of the meeting. In addition, [ Leah Zeitzu ], who is acting as our Inspector of Election is in attendance and has signed the oath to serve in this capacity. The oath of Inspector of Election will be filed with the minutes of this meeting. The Inspector of Election has advised me that we have present in person, virtually and by proxy, a sufficient number of shares to constitute a quorum. Therefore, the meeting is duly constituted. We will vote by virtual ballot today.

If you have already submitted a proxy or voted via telephone or the Internet and do not intend to change your vote, no further action is necessary. Those of you who have not yet voted or who wish to change your vote should do so now by clicking the Vote Here button on your screen. We will tabulate the results of all virtual ballots and proxies at the end of the formal business segment of the meeting. It is now 8:32 a.m. Eastern Daylight Time. The polls are now open for voting. Upon the closing of the polls, no virtual ballots, proxies or votes nor any revocations or changes will be accepted. The meeting is lawfully convened and ready to transact business. The proxies and any substitutions of proxies presented to the meeting are hereby ordered filed with the records of the company.

Since no stockholder proposals were filed in advance of this meeting, the business of this meeting is limited to the matters contained in the notice of meeting, which are as follows: number one, the election of 3 Class II directors to serve until the company's 2029 Annual Meeting of Stockholders or until their respective successor is duly elected and qualified; and number two, the ratification of the appointment of Grant Thornton as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026. The polls remain open. If you have not yet voted or wish to change your vote, you may do so now by clicking the Vote Here button on your screen. If you have already submitted a proxy or voted via telephone or the Internet and do not intend to change your vote, no further action is needed at this time. We will leave the polls open for another minute to allow anyone who chooses to vote electronically to cast their ballots.

[Voting]

Please note that upon closing of the polls, no additional ballots, proxies or votes nor any changes or revocations will be accepted. The time is now 8:34 a.m. Eastern Daylight Time, and the polls are now closed. Inspector of Election, would you please report on the votes taken with respect to both proposals?

A majority of the outstanding shares of common stock present virtually or represented by proxy that are entitled to vote at the meeting has been cast in favor of both proposals. Proposal 1 and Proposal 2 have been adopted. The 3 Class II directors have been elected and the appointment of Grant Thornton LLP as the company's independent registered public accounting firm for fiscal year ending December 31, 2026, has been ratified.

Thank you. The final number of votes will be set forth in a report of the Inspector of Election and included in the minutes of the meeting. We will also report the final voting results on a Form 8-K, which we will file with the Securities and Exchange Commission within 4 business days of today's date. This concludes the formal business of the meeting. I would like to thank all of our stockholders for voting and your continued faith in our mission and vision. The meeting is now adjourned. I invite you to ask any questions you may have regarding the company and its business. Please follow the instructions provided in the virtual meeting screen to submit questions. We will review and respond to all questions submitted during the session. Thank you.

This concludes the meeting. You may now disconnect.

Greetings, and welcome to the AirSculpt Technologies First Quarter Fiscal Year 2026 Earnings Call.

[Operator Instructions]

As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Allison Malkin, Partner with ICR. Thank you. You may begin.

Good morning, everyone. Thank you for joining us to discuss AirSculpt Technologies results for the first quarter of fiscal year 2026. Joining me today on this call are Yogi Jashnani, Chief Executive Officer; and Michael Arthur, Chief Financial Officer. Before we begin, I would like to remind you that this conference call may include forward-looking statements.

These statements may include our future expectations regarding financial results and guidance, market opportunities and our growth. Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from the currently projected results are described in this morning's press release and the reports we will file with the SEC, all of which can be found on our website at investors.airsculpt.com. We undertake no obligation to revise or update any forward-looking statements or information, except as required by law.

During our call today, we will also reference certain non-GAAP financial measures. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10-K, which is available on our website. With that, I'll turn the call over to Yogi.

Thank you, Allison, and good morning, everyone. Nice to speak with you and share our positive start to the year. For this morning's call, I will start with a review of our first quarter performance, followed by an update on strategic priorities, which are driving our return to growth. Michael will then take you through our first quarter financials and 2026 outlook.

The first quarter marked a key turning point for our company. We stabilized revenue year-over-year and delivered positive same-center sales for the first time in over 2 years. We expanded gross margin and made important investments in marketing and talent. At the same time, we reduced nonconsumer-facing expenses, which combined generated healthy profitability.

We also strengthened our balance sheet, ending the quarter with over $16 million in cash and leverage below 2.5x, a reduction of over a turn compared to the same time last year. Our positive start to the year reflects the success of the transformational work completed in 2025.

This gives us a solid foundation from which to grow. While still early, we are encouraged by the progress made and the trajectory of our business as we enter the second quarter.

Today, we are well positioned in an attractive and growing industry with the right team and strategies in place to capitalize on the meaningful opportunity ahead. We remain confident in our outlook and our ability to deliver sustained long-term profitable growth and value creation for our shareholders. Let me now share highlights of our progress on the strategic priorities that have repositioned our company for sustainable and consistent growth.

As a reminder, these are introducing new services to capture our GLP-1 market opportunity, enhancing our sales and marketing strategy and maintaining strong financial discipline. First, introducing new services to capture our GLP-1 market opportunity. GLP-1 medications continue to fundamentally reshape the aesthetics landscape.

The GLP-1 user base is expected to grow from approximately 5 million in 2023 to 25 million by 2030, a roughly 400% increase that creates a significant and durable tailwind for body contouring in a $200 billion GLP-1 market with 63% of these patients indicating interest in treatment.

This translates to nearly 19 million potential patients pursuing body contouring or related procedures. AirSculpt is a desired solution for these patients. Our minimally invasive procedures have little downtime and address the need for additional fat removal, which is the mainstay of our business and has been a catalyst to expand our offering to address GLP-1 user needs.

Our recently introduced procedures such as stand-alone skin tightening and skin removal are the latest examples. Combined, we are effectively addressing the side effects from GLP-1 use and helping patients achieve their desired look.

While not a meaningful contributor today, traction for these newer procedures is growing. We completed over 150 skin excision procedures in Q1 alone. Combined with fat removal and fat transfer, these procedures have the potential to unlock more than $100 million in long-term revenue across our existing centers.

Second, enhancing our sales and marketing strategy. The marketing initiatives we launched at the end of 2025 are translating into more consistent demand. We continue to see benefits from our expanded media mix, including connected TV, increased influencer engagement and more targeted campaigns across skin tightening and skin removal.

At the same time, improvements to our digital funnel and website are driving higher quality leads and better conversion. Sales execution has improved as well through better training, deeper product understanding and aligned incentives, our teams are converting demand more effectively.

As a result, we are seeing improvement in conversion rates and revenue. Third, maintaining strong financial discipline. Debt reduction remains a key focus of our capital allocation strategy. As discussed in our last call, we repaid nearly $30 million of debt over the last 5 quarters, bringing our leverage below 2.5 turns, a reduction of over a turn.

We are also in process to refinance our term loan and look forward to sharing the details when we report our Q2 results. As we look ahead, we remain focused on continuing to advance our strategic priorities and are pleased to begin our seasonally strongest quarter of the year with continuing positive momentum.

In the second quarter, we are targeting sequential improvement in same-store sales as we build upon the progress made in Q1.

In summary, we had a strong start to 2026 as our actions to reposition the business are bearing fruit. AirSculpt has always had a strong differentiation in the marketplace given its highly effective and minimally invasive body contouring procedures. Our Q1 results demonstrate that our strategic priorities are working. We remain focused on building this momentum and driving sustainable growth to create value for our shareholders.

And with that, I will now pass it over to Michael.

Thank you, Yogi, and good morning, everyone. As Yogi mentioned, our first quarter results are clear evidence that the improvements we made to our business last year are driving our growth today. We are very pleased with our start to 2026 and the momentum we continue to see in Q2. Now turning to the first quarter. Revenue for the quarter was $39.4 million, flat versus the prior year quarter and up 1% on a same-store basis, excluding the impact of London.

Same-store revenue growth was driven by higher case volume. This also reflects a 19% sequential improvement. Cost of services was $15.6 million, resulting in gross margin expansion of roughly 1% to 60% of revenue. Selling, general and administrative expenses were approximately $22.6 million, an increase of approximately $800,000 compared to prior year.

This reflects a deliberate choice to increase investment in marketing and brand development, which contributed to our first quarter revenue growth and the first time in 9 quarters. Cost discipline continues to be a priority. Equally important is being strategic about where we invest those savings to drive long-term shareholder value.

Customer acquisition cost for the quarter was roughly $3,400 per case, compared to $3,130 in the prior year quarter. Adjusted EBITDA was $3.3 million or roughly 8.4% of revenue, a decrease from 9.5% in the prior year.

Now turning to our balance sheet. As of March 31, 2026, cash was $16.7 million. We paid down $11 million of debt in the quarter, resulting in gross debt outstanding of approximately $46 million at quarter end. Under our credit agreement, we are in compliance with all covenants, and we are making progress to refinance our term loan.

We look forward to sharing the details with you when we report our Q2 results. Cash flow from operations for the quarter was approximately $5 million compared to approximately $1 million in 2025.

Turning to our outlook. We are reaffirming our full year 2026 outlook and continue to expect revenue in the range of $151 million to $157 million and adjusted EBITDA in the range of $15 million to $17 million.

We continue to expect the business to build momentum as the year progresses, with the midpoint of our revenue range reflecting approximately 3% comparable growth, excluding London from 2025.

As a reminder, our London center contributed 1% to comps in 2025, and our guidance does not contemplate any de novos in the period. As we enter Q2, a seasonally stronger quarter, we expect to deliver sequential improvement in both revenue and EBITDA in absolute dollars versus Q1.

The initiatives we have in place have strengthened the fundamentals of the business, providing us with a solid platform to deliver long-term growth.

Looking ahead, we continue to monitor the broader macro environment, including factors such as consumer sentiment, and we will remain agile in managing the business as conditions evolve. As I wrap up, we are pleased with our strong start to the year and the momentum in the business. We remain focused on disciplined execution, and we are well positioned to deliver on our full year objectives.

And with that, I'll turn it back to Yogi for closing remarks.

Thank you, Michael. In conclusion, we are pleased with our start to 2026 and the acceleration in our business with our enhanced sales and marketing strategy and new procedures driving growth.

We are delivering on what we set out to do and are intently focused on building upon our positive performance and achieving our goal to generate long-term sustainable profitable growth and value creation for our shareholders. With that, I'd like to turn over the call to the operator to begin the Q&A portion of the call.

[Operator Instructions]

Our first question comes from the line of Sam Eiber with BTIG.

Yogi, maybe I can start on the Q1 results. Clearly, it looks like demand has stabilized. Revenue results are starting to trend back up in the right direction. I guess what's been working well so far in the quarter?

How much would you attribute it to the enhanced marketing strategy versus the new skin tightening services versus maybe just a better demand environment overall for body contouring procedures?

Sam, thank you so much for the question. So we see that -- first of all, obviously, we are pleased with the results in Q1 and continue to build on that. We're seeing that it was the actions we took and we are taking, which is driving the improvements, primarily around the enhanced marketing strategy and what that's doing, not just to leads and consults, but showing up in revenue as well.

All of those actions and the underlying performance metrics that are going into it are working. So the building blocks are there to deliver growth. As far as the expanded procedures are concerned, we continue to be excited about the early progress from the pilot and the learnings we've gained to date around skin removals.

They're still in pilot phase and being rolled out across centers. So they've not been a meaningful incremental contributor yet to what we are doing. The consumer environment is still, I'd say, challenging, especially for considered purchases. So in summary, the improvement we are seeing, we are able to tie back directly to the enhancements to sales and marketing and all of the foundational work we did in 2025, and we have more upside, particularly as we go through the year, particularly as we see the new procedures expand and go from there.

That's really helpful. Maybe just a quick follow-up on the balance sheet now strengthened. Does that maybe -- do you look at maybe the opportunity to look at opening de novo centers again later this year? Is that still maybe a 2027 dynamic? I guess how should we be thinking about reinvesting back into opening new centers again?

Sam, this is Michael. Yes, I mean, as of right now, our plan doesn't contemplate any de novos in 2026. However, we do continue to be excited about the long-term center opportunity, and we'll open de novos at the appropriate time. In the short term, as Yogi kind of mentioned, we're still really focused on improving our same-center sales growth.

It's our #1 priority, and Q1 is a big step in that, right, with the positive comp growth. But right now, that's our short-term focus. But certainly, de novos is an opportunity for us, but nothing contemplated in the year.

[Operator Instructions]

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Jashnani for any final comments.

Thank you, Melissa, and thank you, everyone, again, for joining us. We look forward to speaking with you when we report Q2 and meeting with some of you at upcoming investor conferences.

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

Greetings, and welcome to the AirSculpt Technologies, Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Allison Malkin of ICR. Allison, please go ahead.

Good morning, everyone. Thank you for joining us to discuss AirSculpt Technologies results for the fourth quarter and 2025 fiscal year. Joining me on the call today are Yogi Jashnani, Chief Executive Officer; and Michael Arthur, Chief Financial Officer. Before we begin, I would like to remind you that this conference call may include forward-looking statements. These statements may include our future expectations regarding financial results and guidance, market opportunities and our growth. Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC, all of which can be found on our website at investors.airsculpt.com.

We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During our call today, we will also reference non-GAAP financial measures. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10-K, which will also be available on our website.

With that, I'll turn the call over to Yogi.

Thank you, Allison and good morning, everyone. I will begin with a review of our fourth quarter and fiscal year performance, followed by our progress on our strategic priorities, which have returned the business to stabilization and beginning in February inflected to positive same-store sales growth. I'll then provide an overview of our strong liquidity position reinforced by the actions we have taken over the past few months.

Michael will then review our fourth quarter and fiscal 2025 financial performance and provide the 2026 outlook. Michael will also discuss what led to the delay in our 10-K filing. In the fourth quarter, we delivered sequential improvement in same-store sales versus the first 9 months of the year and higher adjusted EBITDA compared to Q4 2024. We also saw improvements in our lead and consult volumes, which has continued into 2026 and is now converting into improved revenue trends.

Stepping back, 2025 represented a year of rebuilding and transformation. We added talent, improve business processes, implemented a new go-to-market strategy and added new procedures that expanded our market potential. In addition, we strategically exited our only clinic outside of North America to streamline operations.

Finally, we strengthened our balance sheet, issuing equity and utilizing our ATM to meaningfully reduce our net debt. The result of this work is already evident. Our core business has stabilized with same-store sales improving from down 22% at the start of 2025 to positive in Feb 2026.

Our trends continued favorably in March, and we expect Q1 same-store sales to be flat, which would be the midpoint of the revenue range previously provided. As we prepare for our busiest quarter, we are seeing broad-based improvement in revenue across our centers. This improvement is tied directly to the actions we took starting in Q4. Our achievements reflect strong progress advancing our strategic priorities. As a reminder, these include: first, introducing new services to capture our GLP-1 market opportunity; second, enhancing our sales and marketing strategy; and third, maintaining strong financial discipline, both with margins and capital allocation. Let me share an update on each.

First, introducing new services to capture our GLP-1 market opportunity. GLP-1 medications have fundamentally reshaped how consumers approach weight loss and wellness. They have also created demand for aesthetic procedures such as skin tightening, contour restoration and overall reshaping after weight loss, all of which play into our existing brand and capabilities. Fat removal and skin tightening represent some of the largest opportunities in aesthetics today. According to the American Society of Plastic Surgeons, skin tightening and skin removal market is as large as fat removal when measured in terms of procedures done in 2024. This gives us a $100 million-plus sales opportunity long term. You might recall, we rolled out stand-alone skin tightening to all centers in the second half of last year and introduced a skin excision pilot, also known as skin removal in Q4. Skin removal procedures represent another proof point of our expanded revenue opportunity. And while early, we are pleased with the performance of these additions. Patients are seeing great results, which is giving us terrific exposure as a destination for these procedures. Skin removal provides us with more levers to grow center productivity and utilization. Just in Q4 2025, we have completed more than 100 skin removal surgeries, and we expect this to ramp in 2026 as we expand this capability across all locations. We have also deployed marketing efforts to raise awareness of our unique positioning to serve these patients. These new procedures strengthen our body contouring service and revenue streams using our existing base of centers and clinic talent. Second, enhancing our sales and marketing strategy. Starting Q4 2025, we implemented an enhanced marketing strategy that is beginning to show measurable results. This included expanding into new mediums such as connected TV, increasing influencer engagement, launching focused campaigns for skin tightening and skin removal, improving website functionality and conversion flows and optimizing spend towards higher-value audiences. These marketing enhancements directly contributed to the recent improvement in volume trends, and we expect the momentum to continue. We have also improved our patient financing options to further drive conversion while maintaining our policy of full upfront payment. Turning to our third area of focus, maintaining strong financial discipline, both in our margins and capital allocation. As mentioned in the past, debt reduction has been the focus of our capital allocation strategy. We repaid over $30 million of debt over the last 5 quarters, bringing our leverage below 2.5 as of the current date.

Operationally, we simplified the business and reduced costs, generating over $4 million in annualized savings in 2025 while reinvesting selectively in growth initiatives and talent. Speaking to talent, in the first quarter, we added highly experienced executives across finance, legal and operations with significant expertise in managing multiunit operations. These additions, along with our existing sales and marketing organization, provide us with a strong leadership team and the right structure to execute and deliver on our growth goals.

In summary, the work completed in 2025 meaningfully repositioned the company, setting the foundation to support long-term sustainable growth by building the engine, infusing talent and strengthening our processes. Our strategy is starting to pay off. In 2026, we are experiencing accelerating sales and demand trends. Our priority is to execute consistently, build on this momentum and drive disciplined growth in order to create value for our shareholders. And with that, I will now pass it over to Michael.

Thank you, Yogi, and good morning, everyone. I'm pleased to join you today on my first conference call as CFO of AirSculpt. This morning, I will share my background and then provide perspective regarding the delay in our 10-K filing. Following this, I will review our 2025 fourth quarter and fiscal year results and 2026 outlook. I come to AirSculpt with experience across public consumer and lifestyle businesses, most recently serving as Chief Financial Officer of Inspirato, a luxury subscription travel company. During my 3 years there, I helped lead a comprehensive turnaround, strengthening operating disciplines, improving margins and restoring profitability, which ultimately culminated in a take-private transaction at a 50% premium to the prevailing trading price.

I chose to join AirSculpt for 2 primary reasons. First and foremost, the underlying economics and long-term opportunity of the business is highly compelling. AirSculpt combines strong unit level performance, a differentiated offering and a brand with the right to win in a growing aesthetics market. With attractive clinic level contribution margins and a significant white space for expansion, both geographically and across adjacent procedures, the platform is well positioned for sustained scalable growth. Second, I was drawn to the team and the culture. There's an alignment across the organization to improve operational discipline, ensure accountability and create long-term value. It is clear the leadership team understands the opportunities ahead and the work required to unlock them. That level of focus and commitment is energizing to step into as the CFO. We have the right strategic initiatives underway to advance our turnaround, and I'm excited to partner with Yogi and the team to accelerate those efforts.

Before I discuss business performance, I want to address a few reporting items that came up at year-end. During the close process, we identified a reconciliation matter related to intercompany transactions, which led us to conduct a broader review of certain accounting treatments, including lease accounting under ASC 842. As a result of that review, we recorded immaterial changes to prior year balances in our 10-K filing. This had no impact to revenue, cash or our day-to-day operations, and we remain fully compliant with our bank covenants.

The correction included the gross up of our ROU asset and lease liability by approximately $3.8 million and $3.5 million, respectively, for the prior year ending December 31, 2024. Additionally, there was corrections to prior year rent expense that decreased expense by $239,000 in 2023 and $233,000 in 2024. We recognize these issues should have been identified earlier and count ourselves accountable. We are taking steps to strengthen our financial processes and controls going forward.

Now let me turn to a review of our fourth quarter. Revenue for the quarter was $33.4 million, down approximately 15% versus the prior year quarter. Same-store revenue, which excludes centers opened for less than a year, declined 16%. The decline in revenue reflects lower case volume amidst a challenging consumer spending environment.

The percentage of patients using financing to pay for procedures was approximately 50%. As a reminder full payment for all procedures upfront, and we have no recourse related to patients who finance their procedures with third-party vendors. Cost of services decreased $3.1 million to $13.7 million, a decline of 18% compared to prior year period, contributing gross margin expansion of roughly 2% to approximately 59%.

The Selling, General and Administrative expenses were approximately $18.2 million, a decline of approximately $5 million in the quarter compared to the same period in fiscal 2024. Seen a decline was primarily a byproduct of the cost initiatives taken throughout 2025, as Yogi called out earlier.

Our customer acquisition cost for the quarter was roughly $3,300 per case flat to prior year quarter. Adjusted EBITDA was $2.5 million or 7.4% of revenue, an increase of $0.6 million and 2.8% margin expansion versus prior year, driven by gross margin expansion and operational leverage in SG&A. For the full year, we reported revenue of $151.8 million, a decrease of approximately 15.8% than fiscal 2024. Adjusted EBITDA was approximately $15 million, resulting in an adjusted EBITDA margin of approximately 10%.

This compares to adjusted EBITDA of approximately $21 million or an adjusted EBITDA margin of 12% in fiscal 2024.

Turning to our balance sheet. As of December 31, 2025, cash was $8.4 million. We paid down $19 million of debt in 2025, $14 million on the term loan and $5 million on the revolving credit facility. Gross debt outstanding was $56 million at year end. Under our credit agreement, our leverage ratio was below 3x, and we are in compliance with all covenants at year-end.

Furthermore, as Yogi mentioned, we raised an additional $14.8 million from the at-the-market facility in Q1 and paid down an additional $11 million of debt principal in the period. We expect to refinance our term loan before it becomes current, targeting a net debt leverage ratio below 2.5x. The cash flow from operations for the year was $3.1 million compared to $11.4 million in fiscal 2024.

Turning to our outlook. In 2026, we expect revenue in the range of $151 million to $157 million. We expect the business to build momentum as the year progresses, but the midpoint of our revenue range, reflecting approximately 3% comparable growth, excluding London from 2025. As a reminder, our London Center contributed 1% to comps in 2025.

We expect fiscal 2026 adjusted EBITDA in the range of $15 million to $17 million. This outlook incorporates the benefit of improved revenue growth and the annualization of our 25 cost actions. At the same time, we plan to reinvest a portion of these savings in the targeted growth initiatives to support top line expansion. As it relates to de novos, while we have plenty of runway ahead to open new centers, our guidance does not contemplate any openings this year as we continue to focus our efforts and resources on our revenue growth in our existing base.

As many of you are aware, peeling plasma, perform skin tightening procedures, while we maintain a diversified network of suppliers, a meaningful portion of the global supply is currently offline due to higher income. We are monitoring the situation closely, and we will manage the business accordingly. Well, lastly, before I turn it back to Yogi, I want to reiterate how excited I am to be part of AirSculpt and the leadership team and to engage with our investors. There's significant opportunity ahead and I look forward to helping unlock long-term value for all shareholders. And with that, back to Yogi for closing remarks.

Thank you, Michael. In conclusion, we begin 2026 with positive momentum and enhanced marketing strategy, strengthen liquidity and the opportunity for stronger future growth. With that, I'd like to turn the call over to the operator to begin the question-and-answer portion of the call.

[Operator Instructions]

Our first question is coming from Josh Raskin from Defra Research. .

I've got 2 here. I guess just first on the numbers. The guidance for 1Q, the revenues indicate a slight decline on a year-over-year basis, whereas full year 2026 revenue is expected to be up slightly. So I heard the building momentum commentary, but what's causing a little bit of that change in seasonality to make the revenues a little more back-end loaded this year? .

Josh, this is Yogi. Thank you for the question. Look, we are being measured in how we guide over here. The trend has improved meaningfully as we mentioned, and exiting the year and our trajectory has come from in down 2022, '24 to positive comps. That underpins our confidence in the full year outlook. But at the same time, we do recognize that we must deliver consistent results. to make sure that we can hit our numbers, and we are focused on execution at the moment.

Okay. Perfect. And then maybe if we could just take a step back, bigger picture on the body sculpting trends outside of GLP-1-related procedures, is there any way for you to isolate just sort of market like trends for the core business prior to the skin tightening and skin removal in some of the new products? .

It's Josh. Great question. We continue to see that the core business around body contains and trace removal is holding relatively steady. I think all of aesthetics saw a bit of a boom coming out of COVID. And our belief is now we are also starting to find paid clients. Now with this industry, there is constant change, and we do see GLP-1 being the next wave of that change, where we are well positioned to take advantage of that, and the demand that arises from skin laxity or loose skin does play and do really well into our brand and our capabilities. That's why you hear the focus on GLP-1s.

Thank you. Next question is from Sam Eiber from BTIG.

Maybe I can start on the exceptional procedures. I think I called in the prepared remarks about 100 procedures in Q4 as part of that pilot. I guess I'd love to hear what you're hearing from customers and surgeons that were part of the pilot phase and then how that maybe is going to inform the go-to-market as this rolls out into more of a broader launch across all your centers?

So what we are seeing is that we are able to provide excellent results for our patients. Our patients are coming in, they are getting good results from the procedures. We are -- as you know, for our procedures, it takes a few months before you see the final results, but the early signs are very encouraging from surgeons as well, this is something that they are -- many of them are comfortable with. All of them are highly effective at it.

So thus far, we are pleased with both the volume and also the quality of results that we are getting with the additional procedures. As the year goes along, we would ramp it up. As a reminder, typically the -- as I said, it takes about 3 months minimum to see the full results for a patient. So we want to make sure we look through those make any collections that are needed. Thus far, we've not seen anything major and then expand it from that.

Okay. That's very helpful. And maybe I can just as a follow-up here on a question on the balance sheet. I know you guys paid down some debt this quarter. Leverage ratio is down to 2.5x. I guess how should we be thinking about capital allocation going forward? Appetite for continued debt paydown versus the comfort right now at 2.5x.

Sam, this is Michael Arthur. Thanks for the question. Yes. We -- our #1 priority still is to get the balance sheet in a healthy position. And we've done a lot of that work in the last year or so. As I mentioned, we are in early stages, but looking to refinance the debt, but targeting around the levels we're at now and somewhere below net debt of 2.5x. Beyond that, the capital allocation strategy hasn't changed much, which is really investing back into the business, both on sales and marketing and then ultimately, probably not in 2025, but new de novos as well as we look to expand our funding portfolio.

We've reached end of our question-and-answer session. I'd like to turn the floor back over to Yogi for any further closing remarks.

Thank you, Kevin, and thank you for joining us this morning. I also want to thank the ECA team and our network of surgeons that provide excellent care and results to our patients. Together, we are powering the next chapter in AirSculpt -- we look forward to sharing our progress when we report Q1 results.

Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Good morning, ladies and gentlemen and welcome to the AirSculpt Technologies, Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded.

I will now hand the call over to Allison Malkin of ICR. Please go ahead.

Good morning, everyone. Thank you for joining us to discuss AirSculpt Technologies results for the third quarter of fiscal 2025. Joining me on the call today are Yogi Jashnani, Chief Executive Officer; and Dennis Dean, Chief Financial Officer.

Before we begin, I would like to remind you that this conference call may include forward-looking statements. These statements may include our future expectations regarding financial results and guidance, market opportunities and our growth. Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we will file with the SEC, all of which can be found on our website at investors.airsculpt.com. We undertake no obligation to revise or update any forward-looking statements or information except as required by law.

During our call today, we will also reference certain non-GAAP financial measures. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10-Q, which will also be available on our website. For today's call, Yogi will begin with an overview of our third quarter and share an update on our strategic priorities. Then Dennis will review our financial results in more detail and provide our outlook.

With that, I'll turn the call over to Yogi.

Thank you, Allison and good morning, everyone. During the quarter, we made strong progress on our key initiatives that focused on new growth opportunities, margin improvement and debt reduction. While third quarter revenue was lower than anticipated, this is reflective of timing instead of trajectory of our business. Most significantly, we are setting the stage to realize a broader market opportunity to provide body contouring solutions that address the unwanted side effects related to GLP-1 use. This represents a long-term growth engine for AirSculpt. Our capabilities, scale and brand uniquely position us to capture this major opportunity in aesthetic surgery, which we are calling the GLP-1 transformation.

To that end, we have expanded and refined our strategy to focus on 3 key areas: introducing new services to capture the GLP-1 opportunity, enhancing our sales and marketing strategy and financial discipline in the areas of margin improvement and capital allocation. First, we are introducing new services to capture our GLP-1 market opportunity, which is broader and more durable than I initially expected. We see our skin tightening pilot programs as part of a long-term opportunity that is highly complementary with our core body contouring business. GLP-1 medications have fundamentally reshaped how consumers approach weight loss and wellness and we are seeing this change is beginning to create demand for aesthetic procedures that align to our existing brand and capabilities. In the long term, we believe these procedures can account for a significant portion of AirSculpt's revenue and drive meaningful growth.

For context, global GLP-1 prescriptions have grown at roughly 38% annually between 2022 and 2024, with total sales expected to reach $100 billion by 2030, according to a study from McKinsey & Company. GLP-1 therapies are reshaping the aesthetics landscape with 63% of GLP-1 patients seeking aesthetic treatments post use, representing new consumers to the market. Equally encouraging is that nearly 2/3 of patients that have lost 11% to 30% of their body weight have multiple concerns with GLP-1 medication side effects, driving growth in patient needs for skin tightening and overall reshaping after significant weight loss. At AirSculpt, we have begun to serve this patient base as our protocols, scale and brand trust give us a meaningful head start to further capitalize on this opportunity. While it's still early, in our pilots, we are seeing higher conversion rates amongst GLP-1 patients. The first step towards realizing this potential was our successful pilot of skin tightening that began in Q2 and has recently been expanded to multiple centers.

While we saw a lift in tightening services in the third quarter, we found that many clients coming in for this procedure have lose skin beyond what skin tightening can address. As a result, we have begun to add new procedures to address loose skin when skin tightening alone is not sufficient, thus expanding our total addressable market. This represents a natural extension for us as the scale player in this space. Looking ahead, we will continue to invest to capture this meaningful opportunity. Our second area of focus is enhancing our sales and marketing strategy. In Q3, we adapted our marketing spend to align with the moderation in our revenue trend and prioritized initiatives that drive higher conversion. As we move forward, our marketing approach will balance near-term lead generation with longer-term brand building with a more diversified media mix, including targeted influencer campaigns and television advertising. This is designed to strengthen lead quality, improve conversion and deepen our focus on the affluent consumer base.

With our sales team, we are implementing new training modules and tools as we remain focused on improving conversion. Finally, we have also improved financing options for our patients. Our third area of focus is maintaining strong financial discipline, both in our margins and capital allocation. Year-to-date, we have generated more than $3 million in annualized cost savings, net of investments in new growth initiatives. We expect to continue unlocking incremental value from our current operations, which we anticipate will expand our operating margin going forward. Turning to capital allocation. We have repaid nearly $18 million of our debt year-to-date. Debt repayment continues to be the primary focus of our capital allocation strategy in the near term. Beyond that, we will continue to invest in growth initiatives, including new procedures.

In Q3, we made the decision to close our center in London. As part of a strategic review of all our centers, we saw this was the only unprofitable center and would have required significant investment to turn around. Instead, we have chosen to focus our resources on delivering growth to our North America locations where we continue to see considerable opportunity. We are updating our annual outlook and expect 2025 revenue of approximately $153 million as compared to our previous guidance in the range of $160 million to $170 million. We expect 2025 EBITDA of approximately $16 million, the bottom end of our guidance of $16 million to $18 million. For the fourth quarter, we are seeing improving same-store sales performance compared to a year-to-date trend. Additionally, our implied fourth quarter EBITDA guidance highlights stronger margins, both sequentially and year-over-year.

Turning to personnel news. This morning, we announced Michael Arthur will be joining AirSculpt as Chief Financial Officer starting January 2026. He assumes the CFO position from Dennis Dean, who will retire, as we had previously announced following a transition period. Michael is a seasoned executive who brings public market experience and has led financial organizations through growth, complexity and change. I am confident he will add meaningful strength to our leadership team. Over the next few weeks, Dennis will work closely with Michael to ensure a seamless transition and I'm looking forward to working with him as we position AirSculpt to realize its true growth potential. Secondly, on Wednesday, we filed an 8-K announcing that Dr. Aaron Rollins has resigned from the Board citing personal reasons. He confirmed this was not due to any disagreements between him and the company, its management or the Board on any matter related to the company's operations, policies or practices. We thank Aaron for all his contributions to AirSculpt and wish him all the best.

In summary, we have expanded and refined our strategy to focus on 3 key areas: introducing new services to capture the GLP-1 opportunity, enhancing our sales and marketing strategy and financial discipline in the area of margin improvement and capital allocation. While near-term revenue reflects a period of transition, our growing suite of procedures, balanced marketing strategy and disciplined execution give us the confidence in our long-term trajectory.

And with that, I will now pass it over to Dennis.

Thank you, Yogi and good morning, everyone. As I mentioned in my remarks last quarter, I'd like to thank the team at AirSculpt for the opportunity to lead this organization as Chief Financial Officer for the past 4 years. It has been an exciting journey and I'm certain that Michael is the right choice for CFO. I'm committed to ensuring a smooth transition of my responsibilities and look forward to watching AirSculpt reach greater heights after I exit the business.

Now turning to our financial performance. As mentioned, revenue for the quarter was $35 million, a 17.8% decline versus the prior year quarter, with same-store revenue down approximately 22%. Cases declined 15.2% to 2,780 with same-store cases down approximately 20% and average revenue per case for the quarter was $12,587, a decline of approximately 3% from the prior year quarter but above the midpoint of our historical range of $12,000 to $13,000. The percentage of patients using financing to pay for procedures was 52%, which is comparable to what we experienced in the second quarter. As a reminder, we receive full payment of all procedures upfront and we have no recourse related to patients who finance their procedures with third-party vendors. Cost of services decreased by $2.9 million compared to the prior year period and as a percentage of revenue increased to 42.5% versus 41.8%.

Selling, general and administrative expenses decreased $6 million in the quarter compared to the same period in fiscal 2024, which reflects the impact of our cost management activities and reductions in our equity-based compensation. Our customer acquisition cost for the quarter was approximately $3,100 per case as compared to $2,900 in the prior year quarter. Adjusted EBITDA was $3 million compared to $4.7 million for the fiscal 2024 second quarter. Adjusted EBITDA margin was 8.7% compared to 11% in the prior year quarter. The declines in adjusted EBITDA and adjusted EBITDA margin is the result of our revenue declines. Net loss for the quarter was $9.5 million and adjusted net loss for the quarter up $2.4 million or $0.04 per diluted share. Our net loss included 2 noncash charges recorded during the quarter.

The first relates to our Salesforce technology project. When we initially started the Salesforce project in Q4 of 2022, we planned for it to cover everything from marketing and sales to operations and clinical processes but we realized that the strength of the platform lies in marketing and sales. So that is where we are focusing our energy. As a result, we recorded a noncash impairment charge of $4.6 million during the quarter related to those components we do not expect to be used. For operations and clinical needs, we are pursuing alternative solutions that are better tailored to those workflows and for our business.

We continue to be pleased with the portion of this project that we have implemented related to marketing activities and expect to complete the rest of the Salesforce implementation related to the sales function in the first quarter of 2026. We also recorded a loss of approximately $2.3 million related to the closure of our facility in London. This charge primarily relates to an impairment to the long-term assets we have recorded at the center. Additionally, we recorded approximately $1 million to selling, general and administrative expense during the quarter related to accelerating the amortization of the right-of-use asset at this facility. This increase in lease expense had no impact to cash.

During the quarter, we generated $400,000 of revenue at the London center and our adjusted EBITDA was a negative $150,000. For the 9 months ended September 30, 2025, we recorded revenue at our London center of $1.4 million and our adjusted EBITDA was a negative $600,000. Turning to our balance sheet. As of September 30, 2025, cash was $5.4 million and gross debt outstanding was $57.9 million and our $5 million revolver remains undrawn. Our leverage ratio as calculated according to our credit agreement was 3.04x on September 30, 2025 and we are in compliance with all covenants under the terms of our credit agreement. As a reminder, during the second quarter, we repaid $16 million of debt, including $5 million on our revolver and a $10 million prepayment as a result of using proceeds from our capital raise and cash from operations. These activities reflect our ongoing commitment to strengthening the balance sheet, which allows us to move forward with an improved capital structure and enhanced flexibility.

Cash flow from operations for the quarter was a use of cash of $225,000 compared to an increase of cash of $1.8 million in the third quarter of 2024. Turning to our outlook. For 2025, we are updating our revenue outlook to approximately $153 million versus our previous revenue guidance in the range of $160 million to $170 million. We are reiterating the low end of our adjusted EBITDA guidance of approximately $16 million within our range of $16 million to $18 million. For the fourth quarter, our revenue guidance implies a smaller year-over-year decline and we are seeing improving same-store sales performance compared to our year-to-date trend. At the same time, our implied Q4 EBITDA guidance highlights stronger margins, both sequentially and year-over-year.

I will now turn the call over to the operator to begin the question-and-answer portion of the call.

[Operator Instructions] Our first question comes from Joshua Raskin of Nephron Research.

This is actually Marco on for Josh. So cost controls actually looked pretty strong relative to our estimates for the quarter. So I was just wondering if you could go a little deeper on the cost-cutting measures you have taken by line, whether it be G&A or cost of service. And then looking forward, how should we think about the sustainability of the savings you're generating? Should we expect those to continue into the fourth quarter and into next year as well?

Marco, it's Dennis. Thanks for the question. Yes, a lot of our cost controls, as we had kind of communicated over the past couple of quarters, has focused primarily in the SG&A realm. There are some things that we've done within the cost of services. But primarily, it's been in our SG&A and our support that we've had at regional positions and things of that nature. So that's been primarily the focus on it. We're continuing to heavily focus on that. Clearly, as we kind of guided our number into the fourth quarter, even though we are experiencing some -- the revenue softness, the cost controls are really kind of helping bridge some of that gap for us. So really pleased with that. We keep uncovering things as we kind of push on various vendors and those sorts of things and are identifying additional opportunities. So we expect to continue on this approach being diligent but most of that was in the SG&A line.

Great. That's helpful. And if I could just squeeze one more in. It was good to hear about the progress you're seeing with the stand-alone skin tightening service. But could you just go into a little more detail on what you're seeing there in terms of uptake and how you envision the pace at which that's expanded across the rest of the centers? And then also, if you could just go a little deeper on what new services you're looking to add to address that GLP-1 population.

Marco, this is Yogi. Thanks for the question. As it relates to skin tightening, our thesis is proving out in that we are seeing there's demand for solutions that address loose skin. Now what we are also seeing is that the pool of qualified candidates for stand-alone skin tightening was smaller than we anticipated, mainly because the loose skin was beyond what skin tightening could address. So while that meant Q3 revenue was muted, we see this as a broader and more enduring opportunity for a suite of procedures to further address additional loose skin. That comes in the form of skin excisions or skin removals, for example. And many of those can be done in our clinics under local.

It fits within our model pretty perfectly. So we have started to pilot some of that already. Skin tightening has been expanded to multiple centers. Skin excisions is in pilot right now. And even without marketing it, we are starting to see good demand for that. So we will continue to expand on that. Just as a quick reminder, for all of these procedures, it takes 3 to 6 months for patients to see full results. And so while we are starting off on these, it will take us a few months to get the before and afters and then turn those around into marketing and expand it from there.

[Operator Instructions] Our next question comes from Sam Eiber of BTIG.

Maybe I can start on a Q3 question and then I definitely want to come back to the GLP-1 opportunity. But Yogi, you talked about a timing issue this quarter. Would love, I guess, your thoughts on exactly maybe what happened here. I know last quarter, leads and consultations were stepping up a bit. So I would just love to better understand the timing issue in Q3.

Yes. All right. Sam, thank you for the question. So for Q3, we continue to operate in a challenging consumer environment, especially for considered purchases. That hasn't changed since Q2. While we saw leads and consults continue to remain strong, they were strong in Q2 and they continue to remain strong in Q3. We continue to see that consumers are hesitant to go from, I'm interested, I want to talk to you guys, I want to get a quote, to purchasing. However, we are seeing Q4 same-store sales trends are better than year-to-date. And as we are transforming the business, we realized there is a bigger opportunity with GLP-1 users than we initially thought.

We initially thought skin tightening would be able to address a broader sliver but we are seeing that the demand is bigger and the needs are broader, which we can address. And we are already starting to see that GLP-1 users are converting better than non-GLP-1 users. So the strategic play is with introducing the new procedures, adapting our marketing and sales to capitalize on that. So in summary, while short-term revenue is lower than expected, we are excited about the broader GLP opportunity in front of us.

Okay. That makes sense. Very helpful, Yogi. All right. Maybe coming to the GLP-1 opportunity. I would love to, I guess, better understand surgeon interest in the skin excision opportunity within AirSculpt centers, right, their ability to capture maybe some of the economics for these procedures among these patients. And then maybe as a follow-up to that, how you're thinking about any shifts in marketing or brand awareness for AirSculpt to go after this opportunity? Does that need to change at all as you kind of go after this new subsegment of patients?

Sam, I'll address both parts of that question. As it relates to surgeon interest and expertise, I think you were asking about both, if I understood your question correctly. Look, there is -- both are actually a pretty strong positive for us. I had to -- at a couple of points, slow things down and make sure that we are doing a pilot in fewer locations than where I had surgeon interest. So surgeon base is definitely interested in doing skin excisions and that is evident in our pilot as well. And surgeons are more than capable -- we have an elite network of over 80 surgeons, plastic and cosmetic, who provide excellent care. And many of them have the abilities and have been doing this in their -- whether it's in their private practice or in their past lives as well.

So no concerns from that perspective. Now there will be -- to your other question, there will be changes in marketing and sales. It is much more about making sure that we get the messaging right to people who are GLP-1 users or who have loose skin. So that's where we are testing into what is the right messaging, what is the right targeting and what is the right place in the cycle of GLP-1 use that people are looking for loose skin as a problem. Remember, we've been talking about loose skin and also fat removal is another big idea here because with GLP-1, there is uneven weight loss and uneven volume loss. So we continue to see people coming in for removing those stubborn fat deposits that GLP-1 was unable to address as well.

Thank you. Ladies and gentlemen, we have reached the end of the Q&A session. I will now hand back to Yogi Jashnani for closing remarks.

Thank you again for joining us. I also want to thank the AirSculpt team and our network of over 80 surgeons that provide excellent care and results to our patients. Together, we are powering the next chapter in AirSculpt's growth. We look forward to share our progress when we report Q4 results and wish you a happy and healthy holiday season.

Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending and you may now disconnect your line.