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XpresSpa (XSPA)

Participants
Douglas Satzman CEO
James Berry CFO
Michelle Analyst
Call transcript
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Operator

Greetings and welcome to XpresSpa Group Third Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. to conference like to now would turn over the Mr. I for opening Satzman remarks. Douglas Please begin, sir.

James Berry

Berry, Financial for the afternoon. James is This Chief for XpresSpa us in Thank Officer joining today interest and your Group. you good and

forward-looking our Comments These and Securities briefly variety those meaning update call results are Reform made unknown results. Litigation forward-looking earnings of first Important on XXXX. report and by review a the XXXX, in you forward advise with afternoon, a for contain statements financial I need materially contained XXXX today's Douglas to provides statements quarter Form might of over periodic on Before of filed CEO, as I involve we risks set the or that Private looking include well as to our now of reports statements. that assumptions turn current time-to-time current the release from and with business forth the may within Satzman differ Actual ended based such XX, the third Act the from and in and may like Doug. following. other including along on call - XX-Q opinions uncertainties. I cause and filings, factors differences would this PSEC. to those December XX-K year SEC issued Form such our our suggested. known

Douglas Satzman

everyone. We this hello you and us afternoon. today James, you join the Thank appreciate taking time to

to that are team that couldn't enhance extraordinary financial that remarkable $XX.X the for us business significantly in record-breaking us With speak know when a results. their truly aligned as appreciation Group I our our confidence and management sales day to their our institutional for the both very for XpresSpa and top-line revenues briefly both now working a Let I support in and legacy shareholders from and me let's prouder across for our here. quarterly quarter We for that I begin plan. a teams This ever hard of discuss value XpresCheck mind, Company. our every be was million expressing board retail continued our we of interests say we're including execute and all I is my for generated profitability with million consolidated by and contribution This $XX.X firmly XpresSpa getting Passing highest contribution from million, and a a $X.X business. our achievement. our entire and

full EBITDA income in in measured We million $X.X of achieved EBITDA. our $X.X and Net both as reached ever quarter by profitability net QX. million came first also and adjusted adjusted at income

third In a margin. $XX.X revenue this demonstrates profitability and segment net strong of and fact, revenue, with XpresCheck on or Group $XX,XXX, year-to-date million. the of XpresSpa income level, based million of operating quarter, At record generated it's of EBITDA of million, the which consolidated $XX XX.X% year-to-date a a incredibly profit adjusted XpresCheck reached has $X.X performance year-to-date of

also Our liquidity strong. remained position

concept, $X and and shortly, detail in debt. in the part million, we million X working charges. We a goal XpresSpa the the of reporting Recall our had $XXX.X distinct XpresCheck. by we that reflects million of they operating Our pivot Treat. capital each in recognizing to revenue our began first, believe how and brands a and distinct holding as including singular -XX test leading $XXX global to annual XpresSpa, volumes cash of balance to Company XpresCheck, XpresSpa, that pandemic have in we our how on clearly more X COVID will to now like full we're and XXXX, work brands; change is terms revenue generating of financials revenue contribute for I March in discuss But would economics and greater million a operating change walk a XXXX. has from will wellness result that sustainable patient onset $XX streams this under the in all testing grown positive through towards health James of with Company towards Group,

Our have others. to growth together, airports. to intention structure, XpresSpa runway corporate next global This unit with XpresCheck more testing for we each economics believe contribute airports, our generate Hartsfield is in collectively XXXX. revenue is a million true But of goal XX US is reach meaningful each E, will $XXX XpresCheck than that in the the XX they concourse and in million COVID International towards just the operating of to and in of an treat, targets in adjacent operating October. for our ahead efficient conversion and currently leverage we by in healthy relationships, recent With and our This which believe level Atlanta is to -- which to generate along experience of Company potential -Jackson largest locations includes and Today, ambitious operate airports. long-term truly $XXX have opened legacy few years, particularly us. Airport started an we're a the our getting

to locations in to to $XXX,XXX expect cost locations Looking note, XpresCheck a half, Currently, a X to than But we add X-month significantly that amazing. an cut in then, our ahead, is we build-out first modular period, less than enabling It X payback X XpresCheck XXXX. averaging open. each set more faster which since important truly cost have at is least developed payback. a has location is XpresCheck the

vastly patient travel a COVID has very when security testing often similar all COVID-XX entry vaccinated, requirement international to that is to necessary X-XX. test as rise. Israel, rates of initial out portion test and and a a extended required. a PCR outside measures XpresCheck think still not for vaccination surpassed the countries certainly become of they came our which additional a our many expose foresee changing in expectations, standard Even negative countries prior have going do the we the rate as vital since require policy if We like U.S. concept to it will arrival. was future. forward, remain this Because want launch International travel has even of near citizens risk. service do not challenging, represents prior this to base to While higher our much countries significant their than U.S. other or vaccination even

launch built compared XXXX, of Of XpresCheck the for and that arise are where And in infectious lower course, border in vaccination this contest important XXX,XXX we've the for infrastructure even and quarter. it's the to more rest is June airports XX,XXX administered the that than second COVID future increased nearly patient Since world, Specific to our of the other diseases remember rates quarter, XpresCheck XX% safety. U.S. threaten in XXX,XXX, to third could to volume has that tests. true

had administered $XX the during majority the airport international the in a test, which terms business, destinations, months are test. per quarter, XXX boosted volumes we of increased point generate our increase. of to sequential choosing million traffic, patient particularly dramatically to $XXX This $XXX rapid success While since in price the what is operating of PCR quarter, driving day year, XpresCheck, $X dollar significantly cash profile the and per a substantially through enabled XXX at tests the margin is has to launched PCR rapid first third in the Notably, us the our standard of XX% versus elevated second we test, versus X flow. patients higher the been our has representing PCR

quarter, and a As of in tests all percentage during September. grown the have to XX% tests, rapid PCRs COVID were third XX%

to towards patterns QX. As early rise this the also traveling before resumption next negative the fully allow revised seasonally COVID-XX expect citizens year of we with policy down enter again normal are travel enter its of who year, periods CDC would of due for vaccinated to the one we volumes testing tourists more test. slowing seasonal to has in busiest to non-U.S. a further U.S. international month, the the Furthermore,

we we form is do to COVID-XX relationships this working major benefit tourists believe Also and airlines that driving depending agencies. into these XpresCheck government ability when directly re-entry. While incoming requirements traffic additional success, return of countries, does respective their with the benefit for not will on our testing U.S., XpresCheck home international

with for passengers several testing as provide United to locations. have traveling airlines arrangements such and We Delta COVID we which El through select Al,

We with CDC. have relationship the and the a contracted Center Disease Prevention, for Control

at tracking As this aimed we in for such for Airport million U.S. pilot Liberty first the airports. XpresCheck very they could pleased and positive to contract, received Delta have that, JFK COVID major have as variant were This it X-week We Airport. new a granted demonstrates -- Francisco surfacing approval X contract announced placed at contagious the the Newark in existing $X International been the is as International Liberty with shown brand. surveillance an program, Airport, resurfacing bio the International results. has or in San start variants, and including August, highly that CDC The confidence identifying we

this testing multiple maximize we're of are So results. methods far pilot, and during numbers increasing seeing to participation

in we that monitor an COVID anticipate revenue to the and is and regions in this as Africa. X Eastern X recognize Germany, certain began based this only In began related uptick can also contract infections in agreement. not The We revenue this in recognition program on this the -- quarter September, other we the with like, Europe to associated see third were UK, milestones contract. expanded, during countries launches specified South the or may to able any in launches September where be only

to quarter. revenue able of be recognize about XX% fourth during should we However, our

coming country. CDC place. could XpresCheck already Importantly, implemented business extension similarly foundation the expands, this the beyond potentially significant this this eventually Upon a be as of port contract we this program any in government if line for airports discretion, CDC 's the with program see incoming for can into

of early Turning business, regards legacy are beginning with previously signs to of see to we now reopening encouragement performing to airport locations. the XpresSpa our high spa

over more us has to restoring select we fact, believe time, there led to come. several profitability spas reopen path additional In a which towards is segment with

XpresCheck and looking be beyond. through However, forward, XXXX Treat to and our businesses predominant expect we

our third reopened. were X on and quarter, fourth locations XpresSpa discussed our another last the pedicure. modified we These one of the United XpresSpa and Company Arab planning, XpresSpa And top-performing XX openings additional XpresSpa Emirates, manicure, the Dubai opened locations call, massage, are of X before the These limiting were spas with U.S. the Since reopened mid-September. operating. As We're while X X domestic additional Xst, operated Netherlands. the to there beginning throughout Internationally, in X of end services Airport X year. July while hours, International quarter, locations today, as by operated the conference and there are in locations Schiphol Amsterdam of X in U.S. franchise locations the location. consists in currently additional Airport, X in by

We in are considering further hubs expansion the to future. global major other

during X the price domestic increase Our XpresSpa fourth XX levels. day, compared are hours also a XX locations, pre and We touchless -pandemic. new pre approximately mid-October quarter. are the hours spa about to With hours, test of to volumes implemented massage services planning the busiest per and some sales retail XX% operating during in -pandemic day, to per new items

Our approaches the some operations further airport return spa especially see airports. pre airport's increase, review team, during find traffic the we operating to continuing services And travel during at as opportunities times. season, levels, beyond our for vaccinations busiest efficiencies rates only is -pandemic holiday to and

as spa location the each continue and monthly Of learnings portfolio is evaluating reactivated. review course, we'll

and approach Now, emergency security beyond premium of analysis, guided we meditation will let's passengers a Treat in journey Through dwell a assortment our care, integrated to lifestyle. that, ahead, of typically acts discuss care in concierge, centers, Empowering include vaccines, well during Treat, providing providing Right options offer brand like services see travelers of boarding wellness want believe minutes, the take wellness prescriptions, world. that therapies, flights. in XX clear a virtual travel customers also seamlessly such Treat, items services. clearing to be and medical and wellness not wellness comprehensive and around passengers post-pandemic now, there time collection. return need We eating to highly concept, to dwell airport including and can yoga, access as centers, to to as occupy their wellness vitamin-IV a are fitness, and travel, and airport health their as services drinking, airport time, into and travel On-Site care private health testing, services a will health-first many and wellness have fit travel. health services, Retail a between wellness filled the Treat anxiety the a new and wellness our can shopping. to this inside a curated

Xst, Treat treat.com mobile we launched on As then app XXXX. June we previously was XXXX. August website launched disclosed, XXth, on The

select an annual on-demand customers targeted With virtual customers receive offered have app. the X memberships name PCR test, launched will premium rapid membership, the at $XXX, annual Treat We few free for flu-vaccine, as to a we care benefits. and unlimited valued of initial

December, beyond. Phase XXXX wellness We in then XXXX in first, additional Wellness Airports III year. when Airport U.S. across Treat Terminal quarter and expect the first major to X, in-airport Phoenix next launch center JFK by open Centers we followed roll and We Sky Harbor in of intend to our in

Sometimes estate, leveraging our existing locations. real times, securing new other

The revenue estate. that, and success achieved, and supporting through that, travel, Digital this term, and tools than wellness. health, we provide envision both, revenue digital be opportunities airport will provide subscription-based care long stream Treat of our significant Products, will real Over profit for more the services growth

As our opportunities strategic would retail and offerings in to combination new new liquidity growth, to concept. XpresSpa this and service further and beyond interest our evolving transactions the acquisitions Group future broaden in considering strong in looks other accretive are with in also position invest we

with as inside our outside expanding airports, focus we shareholders. you can and vision further have services So increase see, XpresSpa products nimble being elevating brands, and clear value our a and all for to on the

wellness for results long-term it have enhance success built year, global that seeing turn laying build already which while and Company. this over the strong will and our Importantly, contributing enable the to brands the omni us to over the We believe, of the today, health long foundation term. portfolio value, to extremely that, developing outstanding -channel we of shareholder James. I'll past is team With management an we're

James Berry

's be now financial enthusiasm Thank Doug to and our I'm greater sharing outstanding results with certainly them share you, detail. Doug. I pleased you in for

involve recognize Let or that, certain the expected practice Xst, all a Recall, interest healthcare insufficient PCs that, volumes we these test. that interest management their require upon not are not that, These revenue. these equity VIE these enabled and patient our assess -- to closely did management a These that, VIEs determine management of to fee. non-licensed be were and for and (ph) risk, MSAPs accounting holders modified actually traffic, evaluations which Accounting have patient me have our have corporations -- to assessed commensurate VIE. us variable first more charging based Prior provide to were at them. conditions we if patients. may exists supplies, a provide PCs with we're the that space, that explain capital there agreements the complex and services professional MSA's, our we services arrangements a variable in actual staff, were per associated the billings much how a standards Effective in July variable change and reflects the VIE. to of define, because return determine office the services equipment interest are we we judgment. in It PCs entity assessed and into entered with patients

legal This Now, affiliated group, it most at the medical the absorb residual is primary to returns. that power a been groups, adequacy beneficiary medical the the arrangements of investment, shareholders, nominee between of significantly risk, contractual and interest their shareholders nominated the Company, the nominee performance meets is, the the changed form to the criteria: PCs, us, affect the following ownership in make both notwithstanding characteristic equity of changes and equity the in decisions shareholders, medical of are the beneficiary. obligation or the have way and because The economic the losses. that, not has the economic of affiliated groups primary as of has

the million. increase revenue third primarily the revenue prior and due to of Given quarter totaling recognition to for of able we XXXX locations the from $XX.X consolidation million in XX of to recognize the third The $XX.X of was compared XpresCheck in are $X.X of quarter million, year. change, the revenue

million $X.X the in in the cost due variable from XpresSpa year, the in in from generated to decrease the incurred occupancy's matters, associated $X.X received associated the increase of sales primarily The $X.X quarter. XXXX third resolution XpresCheck, sales fees. were due cost, the of to of The services realized an cutting We cost by cost related litigation reduced XpresSpa products cost to expenses fees, increase in was initiatives airports. XpresSpa by locations. ago in and location of compared of offset related $XX.X revenue primarily, was XpresCheck, Treat, and cost, period. in prior and decline to administrative increase the related to closed also professional and the a comparable to concessions did salaries, in million variable and primarily for related as development XpresSpa Cost benefits legal to of year of million decreases control million, the offset reopened from additional the cost with rent and million with occupancy, certain result General throughout revenues the $X.X instituted XXXX, start-up

the operating of to year we We in third on million the of of higher prior warrants report Primarily, $X.X and quarter $X.X conversion quarter. million, XXXX. in to proud in an realized recognized the are loss loss operating that, compared revenue revaluation due options profits and to

$X.X common the Net also $X.X for quarter. third compared to common to in Income to very of a loss of the million shareholders proud, quarter year, million, attributable shareholders prior We are to report Net attributable

September totaling of a XXXX, equivalents repurchased the its with with blackout GAAP XXXX. stock $XXX.X and outside of Company liquidity million, financials, our periods. of to shares the our common respect strong, quarter during XXX,XXX of as Also cash XX, cash Finally, third remains

XX, As XX.XX million all. of at August periods which XX of repurchase Management blackout on in remained continue program shares repurchased use to discretion its from XX, share the if conditions shares available, September time-to-time, XXXX, outside announced XXXX. under, the under million may will be determining

before disposal good presents an of interest, the EBITDA of to adjusted in stock-based assets. XpresCheck. adjusted an for the performance EBITDA to excludes to expense, represents related not amortization it's compared that activities, is investors of operations. indicator investors XpresCheck program. This meaningfully analyze the In wellness operating cash useful our understand define of a operating $X.X We continue We depreciation, is and and do quarter. believe, earnings the which transactions EBITDA be adjusted EBITDA million believe of to repurchase adjusted a third and particular, compensation investment consider a $X.X our We these primarily loss our excluding are indicative business, million $XX. was we transactions and profitability. taxes, basis, performance On undervalued certain our related for tools analysts million to important in stock price adjusted as non-GAAP impairment to prior-year, or like core adjusted believe and XpresCheck allows EBITDA centers. with core opportunity 's for improvement of We that cash share to

to Form details, further XX-Q refer filed today. on our please For report annual

growth serving more patients we metrics Rapid the review those have in but release, at more and choosing also over more with that options. rapid convenience, that, and we and rapid past the Please furnished -- these are opting some that tests. to lucrative with for PCR PCR more We is that, takeaway percentage of the are think in patients the are more your here earnings the along tested in we quarters, interesting X the respect

our to for Thank are million you As published. and now questions questions so expect ask as been would to XXXX. call target turn about afternoon. $XX for we have your time to reiterating will it be We generate that the to mentioned, much happy Michelle $XXX by revenue this relates and in guidance your and long-term take we over also of million to the Doug we revenue, XXXX

Operator

we'll conducting time, questions. At you Michelle, this proceed the be you. question-and-answer now a with may Thank session.

Michelle

more the today a position repurchasing very is, The we first great million Balance we with $XXX shares, question in have but a in in Sheet, of Doug, can are cash QX? expect over you not QX, activity be to we're on Hi, aggressive

Douglas Satzman

reflection balances, create a businesses the which officially for blackout to days to cash our amount therefore the shareholder official the prior The question. our current accounts Company, view ended. thanks a buying and prevented discounted and until Yes, documented want be. intrinsic value. value current the own aggressive discount, The are I the its to repurchased is Based purchasing quarter and share period, we on blackout the just of was price, believe, undervalued by third open of any share in repurchase how our further shares not at can compared prospective program, our and stock at -- overall period

So, expect more.

Michelle

Doug. Thanks

Given will respect to for program, question, indications have my part second your the you And or CDC the to them do the be renewed? from it extension enthusiasm you then think will with when expansion?

Douglas Satzman

closely we include may with incoming a first of or be that, first testing working very week. that, very bio-service as in in. the airports. is The very participation ever believe it Well, going program that come regions, we're that, proven other the proud extended developing implement and in flights this implementing while is pilot we had of CDC well, countries we're new national the U.S. and fact We to program increasing we've can Program, have each CDC execute for passenger all,

what We're some You as Germany it's but terms. mentioned announce. I with countries. UK Europe, are that nothing to before, the hard say conversations the Africa. CDC, COVID having with we watch, is Eastern said, be in when while very ready South uptick to that this like, closely even there's expanded and or cases working But, would under can or

Michelle

the be XpresSpa be consolidated Doug. gains or Thanks, on with losses you basis you're XpresCheck? from to on making Great. a X on profitable will expect Do now that forward? will limit incurring going you And

Douglas Satzman

and with our year-to-date, first we're and saying, the believe, by a corner marginally the year Well, finish profitable. believe we're continue to profitable we've turned profitably. position we let expanding in quarter We me start

of and focus highly is out success nimble Our lot costs very difficult revenue work focused increasing environment. by has management and on equally in managing team, come a who and of hard this talented

question, and business of is second build leader to the determined itself each to part to bring are the rebuild XpresCheck long-term Now, while shareholder line airport testing, the in sustain COVID and currently we value.

So --

Michelle

Thanks, airport why with are If discuss not XpresSpa so at (ph) all? that Doug. every or XpresCheck? a spa go profitable, Okay. do had into XpresChecks it you Why by Treat and it an just replace

Douglas Satzman

answer and me airport whether the Let a front additional and saying full is XpresCheck distractions. further through center, level. on through partnership an and CDC that or national first not by receiving focus XpresSpa it's expansion, Treat at expanded are locations with

In fact, wants Today, we conversations our with and XpresSpa incorporate their not only spaces. approval COVID for every airports converting testing X all any airport of our require businesses.

security, portfolio As to many and are move have. existing I mentioned real it's just we XpresSpa of allowed post before, have necessarily gaining and as to very part advantage to allowed right frankly, use -- locations estate quickly contracts aren't some our XpresSpa airport. our Most as new contracts pre us or But small. which us the difficult, are in too and are the

to business so of many line void and airports and build that's where wellness in today. said, receives significant healthcare to are the With this that providing demand grow future airports, on the continuing capture profitable additional by Treat in fill forward the focus continuing can health a which So, more focusing services. of is XpresCheck

Michelle

Doug. to And Treat? you Thanks see we from begin some revenue do when think, will

Douglas Satzman

is was next past, month. first in complementary airport, in a in is open value as Leading we And now. travel. in focused long-term offers website Phase Well, talked to in but see multiple We'll launching health Phase extend position mentioned about see that play We're phases. open which and outside the leadership Phase model a getting very our to creation. more getting reminder, brick-and-mortar app. contribute revenue I've X, our Treat today, on as was as airport. is up. not robust X, as to also And and an launched our begin mid-term We the channels, our location, set like but Treat revenue X, with just field wellness business to Treat the XXXX. XpresCheck

Michelle

Doug. Thanks,

now opportunity question complete nationally can it open going about programs? that the far we the be $X million you pilot today rolled travel? CDC, is, their Next with the so to borders talk as the in U.S. have you Is out

Douglas Satzman

Yes. to Well, take from steps further also keep continues our country. threats, they House safe well White open as entering our country to infectious responsible our borders, the as are diseases, to as COVID

service states. surveillance country's The is the across supply last grip bio most there country largest Ebola administration as You XpresCheck, the the not largest this to as operating recognition read and have a prepared multiple is come the while do ago, a in little world, across There of identified is country. tool might fear up. In our has a seriously. infrastructure very taking again. our natural CDC, critical and for testing of things pandemic uniquely only these in strategic trying capabilities, was that, this a threats future for is positioned preparation the and to airports take

-- useful than very tool more remain can national we're in optimistic least T ever. So we even be today. that in a bio-surveillance, we our at airports

Michelle

big Thanks, in contract Company? CDC Doug. And to one, of the revenue be next can how this the terms

Douglas Satzman

become, do program know don't can large the can how this you we but math. Obviously,

can from country, on extended or India. see become this If million focused flights multiply. is into could testing countries that, airports years, time the other can in one we're Program any how even engaged program you expand a $X big additional X-week that, add see for dollars. expanded to we're X program can Currently, You to airports,

Michelle

of required international fly before Great. thanks, Doug. would help, which as increase entering home be home their substantially, country? to Does reopening could passengers the test number travel the U.S.

Douglas Satzman

international The reopening will our to countries. tourists, a vaccinated not should when economy, traveling but only fully for waiting country demand back this. of for We've Absolutely. various been create our help in to testing also boost

to our proven PCR extra we ensured centers product that, and have of our our has one Rapid secured of testing of this be supply many from We chain outside Tests, airports. differentiators have highest value as

prepared more are anticipating and we So activity. even

Michelle

sustainable down? do now rolled are Thank you. business coming numbers out How and vaccines case you the that, testing view are

Douglas Satzman

interestingly, testing Well, case numbers go while and numbers rates our seen down. we've go go vaccination up, up

yet. to well our negative type vaccine out, but U.S. I in to be foreseeable most our which movement how prior will With around here, a domestic to Congress the test having variants, to long with passengers test breakthrough be to surveillance as some There know the resurgence do country's can't the again, of play play with negative will a positioned to testing require not countries. prior we're prior to cases, test with El country, will flying implemented future share other a entry. relationship In those uniquely this discussions of in XpresCheck, similar countries is I is airlines, Al, think major for as bio and boarding in for the term, some program to require role. We flights even

Michelle

to of the is that cash, businesses buybacks thought, the you the made up given my Thanks, create shareholder have business you have to the of And your cap one -- businesses anything value? question, outside unlock to Great. Is entirely for it Doug. possible you spin market out final have. of value

Douglas Satzman

value little reported those of while cap placed the should improve businesses, future we're operating or on market market results. has from Well, today's the our anticipating even businesses,

in and In of relevance unplanned testing case, any beyond. and COVID present may additional and to infectious XXXX the disease across, opportunities significant other many travel future expansion in value shareholder create the in options we're However, considering future.

fast-changing in management this to potential I value, roll the opportunistic board not ability has demonstrated be including unlock agile options any this and team spin-offs. would to out As and environment, uncertain and

Michelle

no have today, Doug. questions I further

Douglas Satzman

thank a than see and brought off lot again, pandemic. long team ago of Thank opportunistic, yet Michelle, and the more sorting be to have strategy as to who through, in for was have for just and sharing continue then, those our was shareholders X, to them from forward a you, great great business. the want who going still to that's and know management and remaining product track. been business especially dealing mid term years we the revamp very as building it's -- Have similar. you. QX results this that a the share you as you down go Hats the look on all much pandemic. very the submitted can I agile, for opportunistic this during to But future, end, turn supportive, long the excited this further I being I with grown Thank to and around X.X results to Well questions. thank of the are team we I fruits Thank recognize we and day. labor,

James Berry

Thank you.

Operator

you. thank your concludes this This you at for have lines today's disconnect teleconference, participation and may Thank great you day. your time. a And