XpresSpa Group, Inc. (Nasdaq: XSPA), a health and wellness company,
today announced financial results for the second quarter ended June
30, 2019.
Doug Satzman, XpresSpa Group CEO, stated, “We
are demonstrating significant progress in strengthening our
operations and financial condition and thank our XpresSpa team for
making this momentum possible. Comparable store sales rose 3.8%
during the second quarter 2019, increased 1.4% on a year-to-date
basis through June, and have been positive for five consecutive
months from March through July. The second quarter 2019 recorded a
reduction in our loss from continuing operations by 39.7% as well
as marking our first quarter of positive Adjusted EBITDA since the
fourth quarter 2017. This was driven not only by the strength in
our comparable store sales, but also growth in our average sales
per store of 4.5% and an improvement in our store margins of 320
basis points to 23.7%. A decrease in general and administrative
expenses and a decrease in loss from continuing operations resulted
in an Adjusted EBITDA of $441,000, an increase of $979,000 compared
to the Adjusted EBITDA loss of $(538,000) in the prior year period.
These ‘green shoots’ validate the strategy that we are executing
and we look forward to accomplishing more during the remainder of
this transitional year and beyond.”
Mr. Satzman continued, “The series of
transactions that we announced over the last two months, subject to
shareholder approval, will substantially improve our balance sheet
through the restructuring of our short-term secured debt to
long-term and the refinancing of that debt with a lower interest
rate and the addition of a conversion-to-common shares feature. In
addition, we announced a conversion of certain preferred shares to
common, subject to shareholders’ approval. We thank our investors
for their commitment and for providing us with greater flexibility
as we execute our nearer-term and longer-term priorities.”
Mr. Satzman added, “We are looking at
redeploying capital to maximize ROI through new store growth,
renovations, and closing unprofitable stores. This year we expect
to open three additional company-operated spas in airports where we
currently operate high-performing spas in other terminals, while in
the Austin-Bergstorm International Airport, we will be opening our
first franchise-operated spa and a company-operated spa. We expect
to complete five to seven renovation projects as well, making our
facilities more inviting to customers and further enhancing our
brand equity. Finally, we recently closed three low volume and
unprofitable spas out of lease cycle that we expect will provide an
immediate boost to our financial performance. This includes our
single non-airport location in the World Trade Center in New York
City, which alone lost over $0.5 million at the store-level over
the last four quarters.”
Mr. Satzman concluded, “Forging strategic
partnerships with brands committed to the wellness space are
critical to accelerating our business. We are therefore pleased to
have extended and broadened our relationship with Calm.com for
sleep, meditation, and relaxation products through July 31, 2021
and expanded our partnership to include XpresSpa’s international
portfolio. In addition, we will collaborate on testing an expanded
Calm.com brick-and-mortar experience at select domestic spas over
the next twelve months.”
Nearer-term priorities:
• Staffing up through recruiting, training, and retention while
managing labor costs more effectively;
- We are reinforcing our culture by building an "XpresSpa team"
mindset;
- The retooled field leadership team put into position last fall
continues to gain momentum;
- We named Scott Milford as Chief People Officer on July 15,
2019. Mr. Milford is now responsible for attracting top talent
across the organization, developing employees through training and
retention, fostering a people-first culture, and elevating the
customer experience;
- We have launched an online training tool that incorporates a
“gaming methodology” elevating the customer experience; and
- Labor costs as a percentage of total revenue decreased to 45.6%
in the second quarter of 2019 from 49.8% in the second quarter of
2018;
• Building transactions through scheduling, loyalty, and
launching an XpresSpa App;
- The first phase of a new in store App launched in May within
all domestic spas and has already enhanced scheduling, enabling us
to gather more customer data, and reduce the number of walkaways;
and
- The second phase of the App will be customer-facing and will
launch during the fourth quarter 2019 and will enable us to expand
our customer loyalty and increase the frequency of our best,
highest spend customers;
• Increasing the average ticket by fixing retail supply
chain issues and upselling services;
- Our retail supply chain issues have now been addressed,
providing our customers with a full assortment of the products that
they seek; and
- The average ticket rose 8.6% in the second quarter 2019
compared to the year-ago period although transactions declined 3.4%
from the previous period due to shifting enplanements;
• Selectively opening high performing new
spas through a strategic approach to development;
- We expect to open high-visibility new company-operated spas in
Hartsfield–Jackson Atlanta International Airport (terminal E),
Austin-Bergstrom International Airport (main terminal, section B),
Philadelphia International Airport (terminal B), and Las Vegas
McCarran International Airport (terminal B) during the third and
fourth quarters 2019; and
- Our first franchise spa will open in Austin-Bergstrom
International Airport (main terminal, section J) during the third
quarter 2019;
• Renovating spas to elevate brand perceptions;
- We expect to renovate five to seven spas during the second half
of this year;
• Closing spas with negative contribution;
- We closed two spas during the second and third quarters of 2019
and our only off-airport spa during the third quarter 2019. These
closures reflect our systematic pruning of underperforming
locations during this transition year.
• Managing G&A expenditures;
- We will continue to streamline processes and reduce costs at
the field and corporate level; and
- G&A declined $1.4 million during the second quarter 2019
compared to the year-ago period and $1.1 million compared to the
first quarter 2019.
Longer-term opportunities:
- Elevating the customer experience;
- Developing a people first culture;
- Activating new partnerships; and
- Bringing health and wellness innovation to the spas through new
products, services, and technology.
Second Quarter 2019
Highlights
• Total revenue was $12.9 million
compared to $13.0 million in the prior year. The revenue decline
was due to a net loss of three spas compared to the year-ago
quarter, including one closure during the second quarter 2019,
offset by a 3.8% increase in comparable store sales. Average sales
per store increased 4.5%.
• Store margin increased 14.0% to $3.1 million, or 23.7% of
total revenue, from store margin of $2.7 million, or 20.5% of total
revenue, for the second quarter 2018.
- Labor costs and operating costs decreased due to leverage on
comparable store sales growth, cost saving initiatives taken by
management to streamline processes and reduce store level costs,
and the closure of underperforming locations.
• General and administrative expenses decreased 36.1% to
$2.5 million compared to $3.9 million in second quarter 2018. The
decrease is a result of our efforts to reduce administrative costs
through streamlined processes at the corporate level, along with a
reduction in stock-based compensation expenses versus the prior
year.
• Loss from continuing operations decreased to $1.9 million
compared to $3.1 million in the second quarter of 2018.
• Adjusted EBITDA* of $441,000 compared to Adjusted EBITDA
loss of $(538,000) in second quarter 2018.
*Adjusted EBITDA is a non-GAAP financial
measure; see "Use of Non-GAAP Financial Measures" below. See tables
below for abbreviated financial results for the second quarters
2019 and 2018.
Liquidity and Capital
Structure
XpresSpa Group, Inc. announced on July 8, 2019
that it has improved its capital structure and significantly
strengthened its financial condition through a series of debt and
equity transactions. This new round of funding provides the Company
the necessary working capital for operations, new initiatives to
improve the business and capital to continue to renovate existing
spas and build new spas by the end of 2019.
Additional information and context regarding
these transactions can be found in the press release issued July 8,
2019 as well as the accompanying webcast that can be accessed from
the Investor Relations section of the Company’s website at
http://xpresspagroup.com
Conference Call
XpresSpa Group, Inc. will host a conference call
today at 4:30 p.m. Eastern Time. The conference call can be
accessed live over the phone by dialing (201) 689-8263. A replay
will be available after the call and can be accessed by dialing
(412) 317-6671; the passcode is 13692999. The replay will be
available until August 21, 2019.
The webcast can be accessed from Investor
Relations section of the Company’s website at
http://xpresspagroup.com. Visitors to the website should select the
“Investors” tab and navigate to the “Events” link to access the
webcast.
About XpresSpa Group, Inc.
XpresSpa Group, Inc. (Nasdaq: XSPA) is a health
and wellness holding company. XpresSpa Group’s core asset,
XpresSpa, is a leading airport retailer of spa services and related
products, with 51 locations in 23 airports globally as of August
14, 2019. XpresSpa offers services that are tailored specifically
to the busy travel customer. XpresSpa is committed to providing
exceptional customer experiences with its innovative premium spa
services, as well as exclusive luxury travel products and
accessories. XpresSpa serves almost one million customers per year
at its locations in the United States, Netherlands, and the United
Arab Emirates. To learn more about XpresSpa Group, visit:
www.XpresSpaGroup.com. To learn more about XpresSpa, visit
www.XpresSpa.com
Forward-Looking Statements
This press release contains "forward-looking"
statements within the meaning of Section 27A of the Securities Act
of 1933, and Section 21E of the Securities Exchange Act of 1934.
These include statements preceded by, followed by or that otherwise
include the words "believes," "expects," "anticipates,"
"estimates," "projects," "intends," "should," "seeks," "future,"
"continue," or the negative of such terms, or other comparable
terminology. Forward-looking statements relating to expectations
about future results or events are based upon information available
to XpresSpa Group as of today's date, and are not guarantees of the
future performance of the company, and actual results may vary
materially from the results and expectations discussed. Additional
information concerning these and other risks is contained in
XpresSpa Group’s most recently filed Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, recent Current Reports on Form 8-K
and other SEC filings. All subsequent written and oral
forward-looking statements concerning XpresSpa Group, or other
matters and attributable to XpresSpa Group or any person acting on
its behalf are expressly qualified in their entirety by the
cautionary statements above. XpresSpa Group does not undertake any
obligation to publicly update any of these forward-looking
statements to reflect events or circumstances that may arise after
the date hereof.
Investor Relations:ICRRaphael
Gross(203) 682-8253
XpresSpa Group, Inc. and
Subsidiaries
CONSOLIDATED CONDENSED BALANCE
SHEETS
(In thousands, except share and per share
data)
|
|
June 30, 2019
(Unaudited) |
|
|
December 31, 2018 |
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,259 |
|
|
$ |
3,403 |
|
Retail inventory |
|
|
892 |
|
|
|
782 |
|
Other current assets |
|
|
559 |
|
|
|
1,465 |
|
Assets held for disposal |
|
|
109 |
|
|
|
109 |
|
Total current
assets |
|
|
3,819 |
|
|
|
5,759 |
|
Restricted cash |
|
|
429 |
|
|
|
487 |
|
Property and equipment,
net |
|
|
9,684 |
|
|
|
11,795 |
|
Intangible assets, net |
|
|
8,023 |
|
|
|
9,167 |
|
Operating lease right-of-use
assets, net |
|
|
8,882 |
|
|
|
— |
|
Other assets |
|
|
2,442 |
|
|
|
3,376 |
|
Total
assets |
|
$ |
33,279 |
|
|
$ |
30,584 |
|
Current
liabilities |
|
|
|
|
|
|
|
|
Accounts payable, accrued
expenses and other |
|
$ |
8,411 |
|
|
$ |
8,132 |
|
Senior secured note |
|
|
— |
|
|
|
6,500 |
|
Convertible notes, net |
|
|
— |
|
|
|
1,986 |
|
Liabilities held for
disposal |
|
|
40 |
|
|
|
40 |
|
Total current
liabilities |
|
|
8,451 |
|
|
|
16,658 |
|
Senior secured note |
|
|
6,500 |
|
|
|
— |
|
Derivative warrant
liabilities |
|
|
1,096 |
|
|
|
476 |
|
Operating lease
liabilities |
|
|
8,882 |
|
|
|
— |
|
Other liabilities |
|
|
125 |
|
|
|
315 |
|
Total
liabilities |
|
|
25,054 |
|
|
|
17,449 |
|
Commitments and
contingencies (see Note 15) |
|
|
|
|
|
|
|
|
Stockholders’ equity
* |
|
|
|
|
|
|
|
|
Series A Convertible Preferred
stock, $0.01 par value per share; 6,968 shares authorized; 348
issued and none outstanding |
|
|
— |
|
|
|
— |
|
Series B Convertible Preferred
stock, $0.01 par value per share; 1,609,167 shares authorized;
80,458 issued and none outstanding |
|
|
— |
|
|
|
— |
|
Series C Junior Preferred
stock, $0.01 par value per share; 300,000 shares authorized; none
issued and outstanding |
|
|
— |
|
|
|
— |
|
Series D Convertible Preferred
Stock, $0.01 par value per share; 500,000 shares authorized; 23,760
shares issued and 21,287 shares outstanding with a liquidation
value of $20,436 |
|
|
4 |
|
|
|
4 |
|
Series E Convertible Preferred
Stock, $0.01 par value per share, 1,473,300 shares authorized;
48,387 shares issued and outstanding with a liquidation value of
$3,023 |
|
|
10 |
|
|
|
10 |
|
Common stock, $0.01 par value
per share; 150,000,000 shares authorized; 2,320,045 and 1,761,802
issued and outstanding as of June 30, 2019 and December 31,
2018, respectively |
|
|
360 |
|
|
|
352 |
|
Additional paid-in
capital |
|
|
300,438 |
|
|
|
295,904 |
|
Accumulated deficit |
|
|
(296,224 |
) |
|
|
(286,913 |
) |
Accumulated other
comprehensive loss |
|
|
(442 |
) |
|
|
(251 |
) |
Total stockholders’
equity attributable to common shareholders |
|
|
4,146 |
|
|
|
9,106 |
|
Noncontrolling interests |
|
|
4,079 |
|
|
|
4,029 |
|
Total stockholders’
equity |
|
|
8,225 |
|
|
|
13,135 |
|
Total liabilities and
stockholders’ equity |
|
$ |
33,279 |
|
|
$ |
30,584 |
|
|
|
|
|
|
|
|
|
|
*Adjusted, where applicable, to reflect the impact of the 1:20
reverse stock split that became effective on February 22, 2019.
The accompanying notes form an integral part of these
consolidated condensed financial statements.
XpresSpa Group, Inc. and
Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except share and per share
data)
|
|
Three months ended June 30, |
|
|
|
2019 |
|
|
2018 |
|
Revenue |
|
|
|
|
|
|
|
|
Products and services |
|
$ |
12,908 |
|
|
$ |
13,038 |
|
Other |
|
|
— |
|
|
|
— |
|
Total
revenue |
|
|
12,908 |
|
|
|
13,038 |
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
|
|
|
|
|
|
Labor |
|
|
5,888 |
|
|
|
6,490 |
|
Occupancy |
|
|
2,052 |
|
|
|
2,160 |
|
Products and other operating costs |
|
|
1,913 |
|
|
|
1,709 |
|
Total cost of
sales |
|
|
9,853 |
|
|
|
10,359 |
|
General and administrative |
|
|
2,496 |
|
|
|
3,904 |
|
Depreciation and amortization |
|
|
1,579 |
|
|
|
1,843 |
|
Impairment of fixed assets |
|
|
830 |
|
|
|
— |
|
Impairment of goodwill |
|
|
— |
|
|
|
— |
|
Total operating
expenses |
|
|
14,758 |
|
|
|
16,106 |
|
Loss from continuing
operations |
|
|
(1,850 |
) |
|
|
(3,068 |
) |
Interest expense |
|
|
(661 |
) |
|
|
(405 |
) |
Other non-operating income (expense), net |
|
|
(3,551 |
) |
|
|
589 |
|
Loss from continuing
operations before income taxes |
|
|
(6,062 |
) |
|
|
(2,884 |
) |
Income tax (expense) benefit |
|
|
(31 |
) |
|
|
48 |
|
Loss from continuing
operations after income taxes |
|
|
(6,093 |
) |
|
|
(2,836 |
) |
Loss from discontinued operations, net of income taxes |
|
|
— |
|
|
|
(510 |
) |
Net loss |
|
|
(6,093 |
) |
|
|
(3,346 |
) |
Net income attributable to noncontrolling interests |
|
|
(245 |
) |
|
|
(177 |
) |
Net loss attributable
to common shareholders |
|
$ |
(6,338 |
) |
|
$ |
(3,523 |
) |
|
|
|
|
|
|
|
|
|
Loss from continuing
operations |
|
$ |
(6,093 |
) |
|
$ |
(2,836 |
) |
Other comprehensive loss from continuing operations |
|
|
(170 |
) |
|
|
(136 |
) |
Comprehensive loss
from continuing operations |
|
|
(6,263 |
) |
|
|
(2,972 |
) |
Comprehensive loss from discontinued operations |
|
|
— |
|
|
|
(510 |
) |
Comprehensive
loss |
|
$ |
(6,263 |
) |
|
$ |
(3,482 |
) |
|
|
|
|
|
|
|
|
|
Loss per share
attributable to common shareholders |
|
|
|
|
|
|
|
|
Loss per share from continuing operations |
|
$ |
(3.22 |
) |
|
$ |
(2.24 |
) |
Loss per share from discontinued operations |
|
|
— |
|
|
|
(0.38 |
) |
Basic and diluted net loss per common share |
|
$ |
(3.22 |
) |
|
$ |
(2.62 |
) |
Weighted-average
number of shares outstanding during the period*: |
|
|
|
|
|
|
|
|
Basic |
|
|
1,970,117 |
|
|
|
1,342,298 |
|
Diluted |
|
|
1,970,117 |
|
|
|
1,342,298 |
|
|
|
|
|
|
|
|
|
|
*Adjusted to reflect the impact of the 1:20
reverse stock split that became effective on February 22,
2019. The accompanying notes form an integral part of these
consolidated condensed financial statements.
XpresSpa Group, Inc.
Reconciliation of Operating Loss From Continuing
Operations to Adjusted EBITDA Income
(Loss) ($ in thousands)
|
|
Three months ended June 30, |
|
|
|
2019 |
|
|
2018 |
|
Revenues |
|
|
|
|
|
|
|
|
Products and services revenue |
|
$ |
12,908 |
|
|
$ |
13,038 |
|
Other |
|
|
— |
|
|
|
— |
|
Total Revenues |
|
|
12,908 |
|
|
|
13,038 |
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
|
|
|
|
|
|
Labor |
|
|
(5,888 |
) |
|
|
(6,490 |
) |
Occupancy |
|
|
(2,052 |
) |
|
|
(2,160 |
) |
Products and other operating costs |
|
|
(1,913 |
) |
|
|
(1,709 |
) |
Total cost of
sales |
|
|
(9,853 |
) |
|
|
(10,359 |
) |
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairment |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(1,579 |
) |
|
|
(1,843 |
) |
Impairment of fixed assets |
|
|
(830 |
) |
|
|
— |
|
Impairment of goodwill |
|
|
— |
|
|
|
— |
|
Total depreciation,
amortization and impairment |
|
|
(2,409 |
) |
|
|
(1,843 |
) |
|
|
|
|
|
|
|
|
|
Total general and
administrative expense |
|
|
(2,496 |
) |
|
|
(3,904 |
) |
|
|
|
|
|
|
|
|
|
Loss from continuing
operations |
|
|
(1,850 |
) |
|
|
(3,068 |
) |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(661 |
) |
|
|
(405 |
) |
Other non-operating income (expense), net |
|
|
(3,551 |
) |
|
|
589 |
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income taxes |
|
|
(6,062 |
) |
|
|
(2,884 |
) |
Income tax (expense) benefit |
|
|
(31 |
) |
|
|
48 |
|
Loss from continuing
operations |
|
|
(6,093 |
) |
|
|
(2,836 |
) |
Loss from discontinued operations, net of income taxes |
|
|
— |
|
|
|
(510 |
) |
Net loss |
|
|
(6,093 |
) |
|
|
(3,346 |
) |
Net income attributable to noncontrolling interests |
|
|
(245 |
) |
|
|
(177 |
) |
Net loss attributable
to common shareholders |
|
$ |
(6,338 |
) |
|
$ |
(3,523 |
) |
|
|
|
|
|
|
|
|
|
Operating loss from
continuing operations |
|
$ |
(1,850 |
) |
|
$ |
(3,068 |
) |
Add
back: |
|
|
|
|
|
|
|
|
Depreciation, amortization and impairment |
|
|
2,409 |
|
|
|
1,843 |
|
Goodwill impairment |
|
|
— |
|
|
|
— |
|
Merger and acquisition, integration, and one-time costs |
|
|
— |
|
|
|
605 |
|
Stock-based compensation expense |
|
|
127 |
|
|
|
259 |
|
Less: |
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests |
|
|
(245 |
) |
|
|
(177 |
) |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(loss) |
|
$ |
441 |
|
|
$ |
(538 |
) |
|
|
|
|
|
|
|
|
|
XpresSpa Group, Inc. Same Store Sales
Growth ($ in thousands)
XpresSpa regularly measures comparable store
sales, which it defines as current period sales from stores opened
more than 12 months compared to those same stores’ sales in the
prior year period (“Comp Store Sales”). The measurement of Comp
Store Sales on a daily, weekly, monthly, quarterly and year-to-date
basis provides an additional perspective on XpresSpa’s total sales
growth when considering the influence of new unit contribution.
Revenue from Comp and Non-Comp Store sales is presented below:
|
|
Six Months Ended June 30, 2019 |
|
|
Six Months Ended June 30, 2018 |
|
|
% Inc/(Dec) |
|
|
|
Comp Store |
|
|
Non-Comp Store |
|
|
Total |
|
|
Comp Store |
|
|
Non-Comp Store |
|
|
Total |
|
|
Comp Store |
|
Products and Services |
|
$ |
23,301 |
|
|
$ |
653 |
|
|
$ |
23,954 |
|
|
$ |
22,976 |
|
|
$ |
1,862 |
|
|
$ |
24,838 |
|
|
|
1.4 |
% |
Comp Store Sales increased 1.4% during the six
months ended June 30, 2019 as compared to the same period in 2018.
XpresSpa had 54 open locations during the first half of 2019 and 57
open locations during the first half of 2018. Comp Store sales
increased despite having 3 fewer stores open primarily due to an
increase in the average ticket per transaction and by fixing retail
supplier issues and upselling services.
We plan to grow XpresSpa by continuing to focus
on spa-level productivity and leveraging retail partnerships to
increase units per transaction, which will contribute to the growth
of the Comp Store Sales and through the opening of new
locations.
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