What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-03-10 · 75 added, 99 removed, 334 unchanged (34% of the section changed)

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See the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.

Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including those discussed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “Elite Body Sculpture,” “we,” “us” and “our” refer to AirSculpt Technologies, Inc.

Our actual results could differ materially from those anticipated in the forward-looking statements.

Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “AirSculpt,” “we,” “us” and “our” refer to AirSculpt Technologies, Inc.

and its consolidated subsidiaries and the Professional Associations.

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• the cost, safety and efficacy of AirSculpt ® relative to other aesthetic products and alternative treatments;

• the increased market acceptance, availability and customer awareness of safer, more effective, easier to use and less expensive weight loss solutions, including weight loss drugs and other non-surgical weight loss and obesity solutions;

• the success of our sales and marketing programs;

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◦ Same-center revenue per case increased 1.5% and 6.4% in 2023 and 2022, respectively;

◦ Same-center volume increased 0.7% and 55.5% in 2022 and 2021, respectively;

◦ Same-center volume changed (1.4)% and 2.7% in 2023 and 2022, respectively;

• Net income (loss) was $(4.5) million, $(14.7) million and $10.6 million in 2023, 2022 and 2021, respectively;

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We believe this provides the best approach for assessing our revenue performance and trends.

Our cases per procedure room is lower in the current period due to the recent addition of four de novo centers and expansions of existing centers which increased our procedure rooms by 15 over the prior year.

We believe this decline to be temporary as the new procedure rooms ramp up.

The expansion of procedure rooms will provide an ample platform for the Company's continued future growth.

Total Case and Revenue Metrics

Twelve Months Ended

2023 2022 2021

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Same-Center Information

For the twelve months ended December 31, 2022 and 2021, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated since January 1, 2021.

We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated since January 1, 2021.

For the twelve months ended December 31, 2023 and 2022, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated for at least twelve months as of December 31, 2023.

We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated for at least twelve months as of December 31, 2023.

Twelve Months Ended

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Number of total procedure rooms 45 45

For the years ended December 31, 2021 and 2020, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated since January 1, 2020.

We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated since January 1, 2020.

For the years ended December 31, 2022 and 2021, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that have been owned and operated for at least twelve months as of December 31, 2022.

We define same-center facilities and procedure rooms as facilities and procedure rooms that have been owned or operated for at least twelve months as of December 31, 2022.

Twelve Months Ended

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

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

We define Adjusted EBITDA as net income/(loss) excluding depreciation and amortization, net interest expense, income tax expense/(benefit), loss on debt modification, sponsor management fee, pre-opening de novo and relocation costs, restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation.

We define Adjusted Net Income as net income/(loss) excluding loss on debt modification, pre-opening de novo and relocation costs, restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation.

These items are tax effected when reconciling back to the closest GAAP measure of net income/(loss).

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

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

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

We include Adjusted EBITDA and Adjusted Net Income because they are important measures on which our management assesses and believes investors should assess our operating performance.

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(i) Adjusted EBITDA does not include results from equity-based compensation and (ii) Adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments.

Adjusted Net Income has limitations as an analytical tool including that Adjusted Net Income does not include results from equity-based compensation.

Adjusted Net Income has limitations as an analytical tool because it does not include results from equity-based compensation.

We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of revenue.

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IPO related costs — 731 11,837

Pre-opening de novo and relocation costs 4,293 1,556 879

Restructuring and related severance costs 5,488 4,111 850

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Adjusted EBITDA Margin 22.1 % 23.0 % 33.4 %

The Company's adjusted EBITDA was impacted by a full year's worth of public company costs during 2022.

This added an additional $6.7 million of incremental public company costs in 2022.

Normalizing 2021 for these costs, our adjusted EBITDA grew by $3.7 million or 9.4%.

The following table uses tax-adjusted amounts to reconciles Adjusted Net Income and Adjusted Net Income per Share to net loss, the most directly comparable GAAP financial measure:

For the twelve months ended December 31, 2023, 2022, and 2021 pre-opening de novo and relocation costs were $3.3 million, $4.3 million, and $1.6 million, respectively.

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

Twelve Months Ended

Net loss $ (14,679) $ (393)

($ in thousands) 2023 2022 2021

Net (loss)/income $ (4,479) $ (14,679) $ (393)

Equity-based compensation 18,224 29,457 4,725

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IPO related costs — 731 317

Pre-opening de novo and relocation costs 3,177 —

Restructuring and related severance costs 5,488 4,111 —

(Gain)/loss on disposal of long-lived assets (212) 147 —

Tax effect of adjustments (2,732) (2,195) (192)

Adjusted net income $ 16,289 $ 18,504 $ 4,457

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Diluted 57,611,469 57,918,005 58,329,428

(1) In 2021, basic and diluted weighted average shares outstanding and loss per share represent only the period from October 28, 2021 to December 31, 2021 (see Note 7).

As the Company completed its IPO in 2021, we do not believe adjusted net income per share is a meaningful metric for the 2020 period.

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

Impact of COVID-19

In 2022, we experienced only minor impact at our centers, primarily due to staffing challenges brought on by COVID-19.

We continue to monitor the current COVID-19 situation in each market where we perform procedures and will react accordingly.

(2) In 2021, basic and diluted weighted average shares outstanding and loss per share represent only the period from October 28, 2021 to December 31, 2021 (see Note 7).

Our Operating Structure

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The following table and notes summarize certain results from the statements of operations for each of the periods indicated and the changes between periods.

The table also show the percentage relationship to revenue for the periods indicated:

The table also shows the percentage relationship to revenue for the periods indicated:

Twelve Months Ended

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Depreciation and amortization 10,253 5.2 % 8,061 4.8 % 6,597 4.9 %

Loss on disposal of long-lived assets 147 0.1 % — — % — — %

(Gain)/loss on disposal of long-lived assets (212) (0.1) % 147 0.1 % — — %

Total operating expenses 186,434 95.2 % 173,339 102.7 % 117,547 88.2 %

(Loss)/Income from operations (4,545) (2.7) % 15,768 11.8 % 10,033 16.0 %

Income/(loss) from operations 9,483 4.8 % (4,545) (2.7) % 15,768 11.8 %

Interest expense, net 6,485 3.3 % 6,751 4.0 % 4,888 3.7 %

Pre-tax net (loss)/income (11,296) (6.7) % 10,880 8.2 % 7,577 12.1 %

Pre-tax net income/(loss) 2,998 1.5 % (11,296) (6.7) % 10,880 8.2 %

Income tax expense 7,477 3.8 % 3,383 2.0 % 329 0.2 %

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Twelve Months Ended December 31, 2023 Compared to Twelve Months Ended December 31, 2022

Overview— Our financial results for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 reflect the addition of five de novo centers which increased procedure rooms by 10.

Revenue— Our revenue increased $27.1 million, or 16.1%, compared to the same period in 2022.

The increase is the result of adding five de novo centers which increased our footprint from 22 centers to 27 centers as of December 31, 2023.

Cost of Service— Our cost of service increased $11.2 million, or 17.9%, compared to the twelve months ended December 31, 2022.

This increase is primarily attributable to opening five de novo centers since the 2022 period.

Cost of service was 37.8% and 37.2% as a percentage of revenue for the twelve months ended December 31, 2023 and 2022, respectively.

Selling, General and Administrative Expenses— Selling, general and administrative expenses increased $1.0 million, or 0.9%, for the twelve months ended December 31, 2023 compared to the same period in 2022.

This increase is related to additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers, offset by a decrease in our equity-based compensation expense.

We expect our marketing and corporate support costs to continue to increase as we open de novo centers and expand the support we provide to our centers.

Selling, general and administrative expenses as a percent of revenue were 52.3% and 60.1% for the twelve months ended December 31, 2023 and 2022, respectively.

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel.

Total selling expenses were approximately $36.8 million and $30.1 million for the twelve months ended December 31, 2023 and 2022, respectively.

Our customer acquisition costs were approximately $2,465 and $2,300 per customer in the twelve months ended December 31, 2023 and 2022, respectively.

We intend to continue investing in our sales and marketing capabilities as we add new centers and further increase our brand awareness, which will also drive further same-center growth.

As a result, we expect these costs to increase on an absolute dollar basis.

Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources.

General and administrative expense were approximately $65.6 million and $71.3 million for the twelve months ended December 31, 2023 and 2022, respectively.

This reduction is due to a decrease in equity-based compensation.

We expect to continue growing our corporate team to support the opening of new centers and growth at existing facilities.

Depreciation and Amortization— Depreciation and amortization increased to approximately $10.3 million for the twelve months ended December 31, 2023 compared to $8.1 million for the same period in 2022.

This increase is the result of having five additional de novo centers during the twelve months ended December 31, 2023 as compared to the 2022 period.

(Gain)/loss on disposal of long-lived assets— For the twelve months ended December 31, 2023, we recognized a $212,000 gain related to the disposal of previous property, plant, and equipment as a result of relocation to expand certain centers.

Interest Expense, net— Interest expense decreased to $6.5 million from $6.8 million for the twelve months ended December 31, 2023 and 2022, respectively.

The decrease is due to the lower principal balance resulting from the Company's voluntary $10 million prepayment made in 2023.

Income Tax Expense— Our effective tax rate is 249.4% and (29.9)% for the twelve months ended December 31, 2023 and 2022, respectively.

The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.

Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021

Overview— Our financial results for the twelve months ended December 31, 2022 compared to the twelve months ended December 31, 2021 reflect the addition of four de novo centers.

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Our effective tax rate is (29.9)% for the twelve months ended December 31, 2022.

Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020

Overview —Our financial results for the twelve months ended December 31, 2021 compared to the twelve months ended December 31, 2020 reflect the addition of four de novo centers which increased our procedure rooms by eight.

In addition, we expanded one of our existing facilities from one to two procedure rooms.

Revenue —Our revenue increased $70.5 million, or 112.4%, compared to the same period in 2020.

The increase is the result of adding four de novo centers and adding a procedure room to an existing facility which expanded our footprint from 14 centers to 18 centers.

Our revenue increase was also driven by our same-center case and revenue per case growth of 55.5% and 12.1%, respectively, for the twelve months ended December 31, 2021 as compared to the same period in 2020.

This increase was primarily due to continued growth at our existing centers as we continue to increase our social media and marketing capabilities to drive our brand awareness and increase consumer acceptance for our procedures.

Further, during the twelve months ended December 31, 2020, our facilities were shut down for two to three months as a result of the COVID-19 pandemic.

Cost of Service —Our cost of service increased $21.1 million, or 89.7%, compared to the twelve months ended December 31, 2020.

This increase is primarily attributable to our increase in revenue related to our de novo centers and our same-center case and revenue per case growth.

The increase in our cost of service also relates to the increase in our same center volumes and revenue.

Cost of service was 33.4% and 37.4% as a percentage of revenue for the twelve months ended December 31, 2021 and 2020, respectively.

This decrease is due to leveraging certain fixed costs, such as rent at our facilities, as well as improved efficiencies with our clinical staff.

Selling, General and Administrative Expenses —Selling, general and administrative expenses increased $42.1 million, or 178.3%, for the twelve months ended December 31, 2021 compared to the same period in 2020.

This increase is related to cost incurred with our IPO of $11.8 million and an increase in equity-based compensation of $6.9 million primarily related to awards granted in connection with our IPO.

We also incurred additional expenses related to marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers.

We expect these costs to continue to increase as we continue to open de novo centers and expand the support we provide to our centers.

Selling, general and administrative expenses as a percent of revenue was 49.3% and 37.6% for the twelve months ended December 31, 2021 and 2020, respectively.

This increase is tied to the previously mentioned cost incurred with the IPO, increase in equity-based compensation and growth in our infrastructure supporting our centers.

We expect this percentage to decrease over time as we expand our national footprint, however, we do expect additional absolute dollar increases as we expand our footprint and related support services.

Additionally, we expect our selling, general and administrative expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that we incur as a public company.

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel.

Total selling expenses were approximately $21.0 million and $9.5 million for the twelve months ended December 31, 2021 and 2020, respectively.

Our customer acquisition costs were approximately $1,902 and $1,619 per customer in 2021 and 2020, respectively.

We intend to continue investing in our sales and marketing capabilities and expect these costs to increase on an absolute dollar basis.

Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our investments.

General and administrative expense were approximately $44.7 million and $14.1 million for the twelve months ended December 31, 2021 and 2020, respectively.

We expect our general and administrative expenses to increase over time in absolute dollars following the closing of our IPO due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company.

General and administrative includes our sponsor management fees of $1.6 million and $0.5 million for the twelve months ended December 31, 2021 and 2020, respectively.

The twelve months ended December 31, 2021 includes a one-time $1.0 million termination fee related to our sponsor management and advisory agreement.

Loss on Debt Modification —We recognized a $0.7 million loss related to amending our existing credit agreement in May 2021, adding an incremental $52.0 million of senior secured term loans.

Depreciation and Amortization —Depreciation and amortization increased to approximately $6.6 million for the twelve months ended December 31, 2021 compared to $5.6 million for the same period in 2020.

This increase is the result of opening four de novo centers and expanding an existing facility by one procedure room during the 12 months ended December 31, 2021 and having a full twelve months of depreciation in 2021 for facilities opened during the 2020 period.

Interest Expense, Net —Interest expense increased to $4.9 million from $2.5 million for the twelve months ended December 31, 2021 and 2020, respectively.

The increase is the result of adding an incremental $52.0 million of senior secured term loans in May 2021.

Income Tax Expense —As a result of the Reorganization, the Company became subject to taxation as a C corporation for periods after October 28, 2021.

Our effective tax rate is 3.0% and 0% for the twelve months ended December 31, 2021 and 2020, respectively.

We expect our effective tax rate to increase in the future as we will be a C corporation for the full financial periods presented.

The main drivers of the difference between the effective and statutory rates are due to the Reorganization and non-deductible officer compensation expense.

Liquidity and Capital Resources

We principally rely on cash flows from operations as our primary source of liquidity and, if needed, up to $5.0 million in revolving loans under our revolving credit facility.

Our primary cash needs are for payroll, marketing and advertisements, rent, capital expenditures associated with de novo locations and new procedure room additions, as well as information

technology and infrastructure, including our corporate office.

Our primary cash needs are for payroll, marketing and advertisements, rent, capital expenditures associated with de novo locations and new procedure room additions, as well as information technology and infrastructure, including our corporate office.

We believe that the cash expected to be generated from operations and the availability of borrowings under the revolving credit facility will be sufficient for our working capital requirements, liquidity obligations, anticipated capital expenditures relating to the opening of de novo centers, and the addition of new procedure rooms to our existing locations, and payments due under our existing credit facilities for at least the next 12 months.

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As of December 31, 2022, we had $9.6 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility.

We do not have any letters of credit outstanding as of December 31, 2021.

We did not have any letters of credit outstanding as of December 31, 2022.

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

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Financing activities (13,391) (27,257) (4,549)

Net (decrease)/increase in cash and cash equivalents (15,731) 14,968 5,251

Net increase/(decrease) in cash and cash equivalents 646 (15,731) 14,968

Operating Activities

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For the twelve months ended December 31, 2023, our operating cash flow decreased by $0.5 million compared to the same period in 2022.

The decrease is related to having more restructuring and related severance costs and the timing of working capital payments primarily related to lease deposits on upcoming de novo projects.

At December 31, 2023, we had working capital of $(4.4) million compared to $(5.6) million at December 31, 2022.

For the twelve months ended December 31, 2022, our operating cash flow decreased by $2.2 million compared to the same period in 2021.

This decrease is primarily driven by $6.7 million of additional public company costs in the twelve months ended December 31, 2022, which did not exist in the prior year period.

Further, we have increased spending on our clinical infrastructure and brand awareness to support future growth.

Further, we increased spending on our clinical infrastructure and brand awareness to support future growth.

At December 31, 2022, we had working capital of $(5.6) million compared to $13.0 million at December 31, 2021.

The decrease in working capital is primarily due to paying a special dividend of $23.2 million during the twelve months ended December 31, 2022.

For the twelve months ended December 31, 2021, our operating cash flow increased by $12.7 million compared to the same period in 2020.

This increase is primarily driven by improved income from operations related to opening four new centers in the 12 months ended December 31, 2021 and an increase in same store volumes which were impacted by the COVID-19 pandemic in the second quarter of 2020.

At December 31, 2021, we had working capital of $13.0 million compared to $2.1 million at December 31, 2020.

For the twelve months ended December 31, 2020, our operating cash flow increased by $9.0 million compared to the same period in 2019.

This increase is primarily driven by improved income from operations related to opening four new centers in the 12 months ended December 31, 2020 and an increase in same store volumes.

At December 31, 2020, we had working capital of $2.1 million compared to $(1.8) million at December 31, 2019.

Investing Activities

Net cash used in investing activities for the twelve months ended December 31, 2023 and 2022 was $9.9 million and $12.9 million, respectively.

Investing activities during both periods were attributable to the expansion of multiple existing facilities and opening of de novo locations.

Net cash used in investing activities for the twelve months ended December 31, 2022 and 2021 was $12.9 million and $7.1 million, respectively.

The increase in investing activities during the twelve months ended December 31, 2022 as compared to the twelve months ended December 31, 2021 was attributable to capital expenditures for adding four de novo centers, construction related to adding procedure rooms to five existing facilities, and investments in improving our medical equipment and technology.

The increase in investing activities during the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020 was primarily attributable to the impact of COVID-19 limiting our ability to fully execute our de novo center growth strategy during 2020.

Net cash used in investing activities during the year ended December 31, 2020 was $3.7 million which was primarily to fund capital expenditures to open de novo centers.

Financing Activities

Net cash used in financing activities during the twelve months ended December 31, 2023 was $13.4 million.

During the twelve months ended December 31, 2022, we made distributions to our former member of $1.2 million, paid cash dividends to shareholders of $23.2 million, and made payments of taxes withheld through vested equity-based compensation of $2.0 million.

During the twelve months ended December 31, 2023, we made principal payments on our debt of $12.1 million, which included a voluntary prepayment of $10.0 million, paid cash dividends to shareholders of $0.4 million, and made payments of taxes withheld through vested equity-based compensation of $0.2 million.

Net cash used in financing activities for the twelve months ended December 31, 2022 was $27.3 million.

For the twelve months ended December 31, 2022, we made distributions to our former member of $1.2 million, paid cash dividends to shareholders of $23.2 million, and made payments of taxes withheld through vested equity-based compensation of $2.0 million.

Finally, we made principal payments on our debt of $84.3 million offset by borrowings of new debt of $83.5 million.

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(1) Amounts in the table reflect the contractually required interest payable pursuant to borrowings under our debt related to our Credit Agreement.

Interest payments in the table above were calculated using an interest rate of 7.0% for the debt which was the average interest rate applicable to the borrowing as of December 31, 2022.

Interest payments in the table above were calculated using an interest rate of 7.85% for the debt which was the interest rate applicable to the borrowing as of December 31, 2023.

Long-Term Debt

The carrying value of our total indebtedness was $71.6 million and $83.5 million, which includes unamortized deferred financing costs and issuance discount of $1.2 million and $1.5 million, as of December 31, 2023 and December 31, 2022, respectively.

Term Loan and Revolving Credit Agreement

On August 11, 2022, we amended the Credit Agreement to provide for (i) the payment of cash dividends in an amount not to exceed $23.0 million on or prior to September 30, 2022 and (ii) the payment of cash dividends in an amount not to exceed $2.0 million with respect to securities that are not vested at the time such cash dividend is paid.

In doing so, we incurred an amendment fee of $0.2 million.

On November 7, 2022, we entered into a new credit agreement with a syndicate of lenders (the "new Credit Agreement") maturing November 7, 2027.

Pursuant to the new Credit Agreement, there is (i) an $85.0 million aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $5.0 million.

The proceeds were used, in part, to pay off the Company’s $83.6 million outstanding principal balance under its existing credit facility.

Under the new Credit Agreement, all outstanding loans bear interest based on either a base rate or SOFR plus an applicable per annum margin.

On November 7, 2022, the Company entered into a credit agreement with a syndicate of lenders (the "Credit Agreement") maturing November 7, 2027.

Pursuant to the Credit Agreement, there is (i) an $85.0 million aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $5.0 million.

The proceeds were used, in part, to pay off the Company’s $83.6 million outstanding principal balance under its previous credit facility.

On September 29, 2023, the Company voluntarily pre-paid $10.0 million of the principal of the term loans under the Credit Agreement using cash on hand.

Under the Credit Agreement, all outstanding loans bear interest based on either a base rate or SOFR plus an applicable per annum margin.

The applicable per annum margin is 2.0% or 3.0% for base rate or SOFR, respectively, if the Company's total leverage ratio is equal to or greater than 2.0x.

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If the Company's total leverage ratio is below 1.0x, the applicable per annum margin is 1.0% or 2.0% for base rate or SOFR, respectively.

All borrowings under the credit facility are collateralized by substantially all our assets.

We are subject to certain restrictive financial covenants including quarterly total leverage ratio and fixed charge ratio requirements.

We are in compliance with all covenants and have no letters of credit outstanding as of December 31, 2022 and December 31, 2021.

As of December 31, 2023, the interest rate was 7.85%.

JOBS Act Accounting Election

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The surgeons contracted by the Professional Associations are exclusively in control of, and responsible for, all aspects of the practice of medicine.

Each surgeon owner of a Professional Association (each a “Surgeon Owner,” and collectively, the “Surgeon Owners”) is also party to a continuity agreement (each, a “Continuity Agreement,” and collectively, the “Continuity Agreements”), which (i) prohibits the applicable surgeons from freely transferring or selling their interests in the Professional Associations, (ii) provides for the ability to add a second surgeon equity holder to help ensure continuity of the Professional Association, and (iii) provides for the automatic transfer of ownership upon the occurrence of certain events, save that, due to limitations under New York law, there is no Continuity Agreement in place with respect to the New York Professional Association.

events, save that, due to limitations under New York law, there is no Continuity Agreement in place with respect to the New York Professional Association.

See “Business—Surgeon Practice Structure—Continuity Agreements.”

In accordance with relevant accounting guidance, each of these Professional Associations is determined to be a variable interest entity.

Elite Body Sculpture has the ability, through the Management Services and (with the exception of New York) Continuity Agreements to direct the activities (excluding clinical decisions) that most significantly affect the Professional Associations’ economic performance.

AirSculpt has the ability, through the Management Services and (with the exception of New York) Continuity Agreements to direct the activities (excluding clinical decisions) that most significantly affect the Professional Associations’ economic performance.

Accordingly, we are the primary beneficiary of the Professional Associations, and, in accordance with GAAP, we consolidate the Professional Associations into our financial statements.

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The quantitative analysis involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill.

If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no

additional steps are necessary.

If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary.

If, however, the fair value of the reporting unit is less than its book value, then the carrying amount of the goodwill is reduced by recording an impairment loss in an amount equal to the excess.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis