Greetings and welcome to the Aeroscope Technologies, Inc. second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. 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 Yogi 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. Then 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 four 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.airstop.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 their 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. Same 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 a 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 Novo's. 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 to 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 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 the 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% of revenue. Selling general 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. That was offset by efficiencies in general 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. And 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, or 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 on 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 system. 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 transactions. 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 in 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 Michael Jashnani. Thank you. and Mark in efforts to deliver year-over-year growth in revenue and justice 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, progress over 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 negative 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 for 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 discipline 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 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 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.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. We ask to please ask one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from the line of Sam Iver with BTIG. Please go ahead.

Hi, good morning. Thanks for taking the questions here. 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, you know, volume growth for the back half of the year.

Yeah. 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, driving 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 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 strategy, as well as just the disciplined execution will allow us to end the year with growth and at the low end 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. If this is 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 Allocate, we view that as a complementary procedure to body contouring. So if you think about what Allocate does, it's a great opportunity to provide and extend our 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 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. And 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 freedom expansion and complementary to fact transfers that we're doing. We're constantly looking at what procedures make make sense for S-culpt? 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 try same-store sales. We continue to introduce 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 Lyrinc Partners. Please go ahead.

Good morning and thank you for the question. 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 pair dynamic shift. Thank you.

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, 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 and 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 Jona Kim with Cowan & Company. Please go ahead.

Thank you for taking our question. 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? Thank you so much.

John, 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, we 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. We're looking at effectively every dollar and whether that's working hard for us or not. Some of those return within the quarter, and some of those would return outside the quarter. But effectively, that's how we are monitoring. 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 part of that has been the enhanced marketing strategy that we have put in place. Going forward, as we said, we are 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 the next 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.

Thank you for taking my questions. How long had the building in that aloe clay 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 sort of what procedures you should add to your portfolio?

Nick, this is Yogi. Thank you for those questions. So 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 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 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 factory 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 advises us on these along the way.

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, you know, that spending strategy, you know, across the quarters? What, you know, 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're 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're presenting 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 do 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 answering my questions. I'll return to the queue.

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

Hi. Good morning. Thanks for taking my question. 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 do the economics or margins kind of compare with the existing services?

Kyle, I'll bucket it into three groups, essentially.

We have, 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 our 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 picking 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 is accretive to the business on a dollar perspective.

Got it. Appreciate that. And Yogi, you mentioned 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. Yeah, I can take that one. Yeah, 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 are lower percentage of revenue as well. It's another way we look at it, which last year was around 18%. And here today, 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.