XpresSpa Group, Inc. (Nasdaq: XSPA), a health and wellness company,
today provided a business update and announced that it has filed
financial results on SEC Form 10-Q for the third quarter ending
September 30, 2020.
Doug Satzman, XpresSpa Group CEO, stated, “Our
framework for a travel health and wellness brand that will
transform the way people access healthcare through technology and
personalized services is coming together and we intend to share
more specific details on our plans as time unfolds. We view
XpresCheck’s current services of COVID-19 and other communicable
diseases testing, administering vaccinations for the seasonal flu,
and hopefully becoming part of a COVID-19 vaccination rollout, as
only the first steps towards advancing health and wellness care
within airports for airport employees and the traveling
public.”
Mr. Satzman continued, “We are currently
operating XpresCheck Wellness Centers in JFK, Newark, and Logan
airports with additional expansion coming shortly. Although current
patient volumes are far below capacity due to severely limited
airport traffic, they have increased meaningfully over the past
several weeks due primarily to the rollout of Rapid Testing for
COVID-19. We have also developed a freestanding and non-structural
‘pop up’ prototype that will enable us to accelerate our rollout to
additional airports at a lower cost.”
Business
Update
XpresSpa Traditional ServicesOn March 24, 2020,
XpresSpa temporarily closed all of its global spa locations in
response to COVID-19. The Company did not reopen any domestic spa
locations during the third quarter 2020 nor does it anticipate
doing so in the near-term. The Company did reopen its two XpresSpa
spas in Dubai International Airport, UAE on July 7, 2020 for select
spa services but performance has been underwhelming given limited
airport traffic.
Existing XpresCheck Wellness Center Services The
Company launched the XpresCheck brand under its XpresTest, Inc.
subsidiary to address the urgent needs caused by the COVID-19
pandemic that adds risk and uncertainty related to domestic and
international air travel as well as to the front line airport
workforce. COVID-19 testing options include a rapid molecular
COVID-19 test, the Polymerase Chain Reaction (PCR) Test, and a
Blood Antibody Test.
XpresCheck has since built out more
comprehensive health and wellness service capabilities and expects
to continue to do so over time. In late October, the brand expanded
its testing services beyond COVID-19 to include additional rapid
testing services for other communicable diseases that include
influenza, mononucleosis and group A streptococcus, supporting the
health and wellbeing of airport and airlines employees and the
traveling public. XpresCheck is also now offering this season’s
2020/21 flu vaccination as well as a quadrivalent high-dose flu
vaccine recommended for seniors. All insurance plans are accepted
outside of network and all information will remain private and
HIPAA-compliant.
Upon FDA approval of a COVID-19 vaccine and
availability, XpresCheck’s medical staff of state licensed
physicians and nurse practitioners, who operate under a management
service agreement, intend to be able to administer it to airport
employees and travelers.
XpresSpa / XpresCheck Longer-Term Brand
VisionThe Company will continue to grow XpresCheck, but based on
the early air travel numbers that it is seeing unfold, the internal
leadership team has started the concept work to develop a long term
plan, bringing together its unique position of leveraging its
historic Travel Wellness experience and new-found Healthcare
expertise. The Company sees this upcoming concept evolution as a
significant future opportunity to create a new niche industry where
it can leverage its existing real estate, airport experience as
well as technology to be a category leader in providing travelers
with peace of mind.
The strategic brand pillars will be Health,
Wellness and Travel which puts its experience and assets directly
in the sweet spot of the intersection of these three categories. In
Healthcare, the Company is differentiated because it is
travel-focused and in airports, while in Wellness, the Company is
differentiated because it is a travel industry retailer and expert.
In Travel, the Company is differentiated because it has health and
wellness experience and capabilities as well as the medical data it
generates.
Current XpresCheck Wellness Center Footprint and
Expansion Opportunity
- On June 22, 2020, the Company
opened its first XpresCheck Wellness Center at JFK International
Airport in the Arrivals Hall of Terminal 4.
- On August 17, 2020, the Company
opened its second XpresCheck Wellness Center, located at Newark
Liberty International Airport in Terminal B.
- On October 9, 2020, the Company
opened its third XpresCheck Wellness Center, located at Boston
Logan International Airport in Terminal E.
- The Company will open its fourth
XpresCheck Wellness Center, and first on the West Coast, in late
November. It will be located at Phoenix Sky Harbor International
Airport in the Terminal E mall. This location will then be followed
by additional openings through the end of December and throughout
the spring.
There are approximately 30 major U.S. airports
with an average of 30,000 employees who support airport activity
(“Large Hubs”) airports and an average of 22 million annual
travelers. There are also another 30 secondary U.S. airports with
an average of 15,000 employees who support airport activity
(“Medium Hubs”) airports with an average of 5 million annual
travelers. The Company considers these 60 U.S. airports as initial
priority, in addition to various international locations, as it
develops the XpresCheck Wellness Center concept. The Company
currently has XpresSpa spas in 19 of the Tier One airports and 4 of
the Tier Two airports.
The Company is in active discussions with
multiple U.S. airports (primarily Large Hubs) to open new wellness
centers or convert existing XpresSpa spas to XpresCheck Wellness
Centers. More often, airports are providing access to better
positioned sites leading to control of additional real estate at
favorable times.
The Company has also developed a substantially
lower cost “pop up” clinic prototype that will be freestanding and
non-structural while being regulatory compliant, offering a
significantly faster approval and construction timeline. This is
designed to unlock additional real estate opportunities and thereby
accelerate the rollout of COVID-19 testing to additional airports.
These units can be built for under $200,000 when compared to the
higher cost of constructing the initial Wellness Centers, which
each averaged between $500,000 and $1.0 million.
Other Business Updates
- As of November 13, 2020, XpresCheck
has been designated as a State of Hawaii Trusted Testing Partner.
All travelers ages five and over are required to take a Nucleic
Acid Amplification Test (NAAT) from a certified Clinical Laboratory
Improvement Amendment (CLIA) lab in order to bypass the State of
Hawaii’s 14-day mandatory quarantine. The State of Hawaii accepts
test results only from Trusted Testing and Travel Partners and
tests must be taken no more than 72 hours before flight departure
time.
- The Company is continuing to work
with major airlines to support creation of other potential air
bridges between U.S. cities and international destinations,
including, but not limited to, New York to London.
- The Company is engaged in
discussions with multiple emerging Health Passport Apps such as The
CommonPass that would link COVID-19 test results from its partnered
labs directly into these apps. Passengers would then be able to
show their test results through these apps to airlines and
destinations so as to ensure a hassle-free entry and avoid
quarantines, where applicable. These emerging technologies will be
deployed to current and future XpresCheck Wellness Centers as soon
as reasonably possible.
- The Company is lobbying elected
officials and consulting with government agencies as its advocates
specifically for COVID-19 testing funding at U.S. airports as part
of the next stimulus bill.
Liquidity and Financial
ConditionAs of September 30, 2020, the Company had cash
and cash equivalents, excluding restricted cash, of $61.9 million,
total current assets of $63.9 million, total current liabilities of
$14.3 million and positive working capital of $49.6 million
compared to a working capital deficiency of $12.3 million as of
December 31, 2019.
During the nine months ended September 30, 2020,
to address the Company’s historical working capital deficiencies,
and its outstanding debt, the Company raised $74.1 million in a
series of registered direct equity offerings, net of approximately
$9.2 million in broker commissions, legal fees and other related
offering expenses.
The Company does not have any plans to raise
capital at this time. It believes the continued improvement in
quarterly cash burn rate, continued focus on managing expenses, and
a healthy cash position should provide the Company sufficeint
ability to execute its current business plan for at least the next
12 months.
Summary of Third Quarter 2020 Financial
ResultsReported revenue during the three months ended
September 30, 2020 was $201,000 compared to $12.5 million in the
corresponding period in 2019. The decrease in revenue was primarily
due to the negative adverse impact of COVID-19 and of the Company
therefore temporarily closing substantially all global spa
locations due to the categorization of the spa locations by local
jurisdictions as “non-essential services”. The decrease was offset
by revenue generated through sales and marketing agreements with
strategic spa partners of $61,000 and $138,000, respectively, of
product and services in the recently re-opened spas.
Explanation of Management Service AgreementThe
Company entered into a management services agreement with a
professional medical services company that provides health care
services to patients in connection with the launch of the
XpresCheck brand. The medical services company will pay XpresCheck
a monthly fee to operate in the XpresCheck Wellness Centers over
the term of the agreement. As a result of the uncertainties around
the cash flow of the XpresCheck business, the Company concludes
that the collectability criteria to qualify as a contract under
U.S. GAAP is not met, and therefore no revenue associated with the
monthly management fee will be recognized at this point from the
management services agreement. As of September 30, 2020 management
fees owed to the Company, but not recognized as revenue was $1.2
million. However, the Company will recognize the management fee as
revenue in accordance with US GAAP, if a subsequent reassessment
results in the management services agreement meeting the
collectability criteria.
Average Daily Patient VolumeAlthough the Company
does not generate revenue directly from patient testing volume, as
detailed above, in the interest of providing investors with greater
transparency regarding the business model, the Company has opted to
disclose recent and current average daily patient testing
volumes.
During the third quarter 2020, average daily
patient testing volume per XpresCheck Wellness Center was
approximately 30-50 people. This lower than anticipated volume was
the result of extremely limited airline industry traffic due to
increases of COVID-19 cases in most states and subsequent mandatory
quarantines put in place by many states and maintained in most
international destinations.
However, since the implementation of Rapid
Testing for COVID-19 in early October and the subsequent expansion
of other health and wellness services in late October, average
patient testing volume has increased dramatically to approximately
50-100 per day.
Cost of SalesCost of sales decreased to $1.4
million from $9.7 million in the prior year third quarter. The
decrease was due to the reduction in variable costs associated with
the decline in XpresSpa spa revenues and decreases in occupancy
costs as a result of rent concessions received from airports. These
were offset somewhat by cost of sales provided pursuant to the
XpresCheck management services agreement of $528,000.
Impairment/Disposal of AssetsImpairment/disposal
of assets expense increased to $2.2 million from $106,000 in the
prior year third quarter. The expense was primarily related to the
impairment of leasehold improvements made to certain XpresSpa
locations and operating lease right of use assets where management
determined that the locations’ discounted future cash flows were
not sufficient to support the carrying value of these assets over
the remaining lease term.
General and Administrative ExpensesGeneral and
administrative expenses increased to $4.4 million compared to $3.1
million in the prior year third quarter. The increase of
approximately 31.3% was primarily due to start-up costs associated
with the XpresCheck brand and additional legal fees related to the
resolution of certain litigation matters, offset by reduced
variable costs related to the temporarily closed XpresSpa locations
and the realized benefits of cost cutting and control initiatives
instituted throughout 2019, primarily in salaries, occupancy and
professional fees.
Loss from OperationsOperating loss from
operations increased to $9.2 million compared to $1.8 million in
the prior year third quarter.
Net Loss Attributable to Common ShareholdersNet
loss attributable to common shareholders was $6.1 million compared
to net loss attributable to common shareholders of $4.6 million in
the prior year third quarter.
Please refer to the Quarterly Report on Form on
10-Q filed on November 16, 2020 for more financial information
related to the third quarter ending September 30, 2020. It can be
accessed at https://investors.xpresspa.com/sec-filings or at
https://www.sec.gov/
Webcast and Conference Call
TodayThe Company will host a webcast and conference call
at 5:00 p.m. Eastern Time today.
The Company encourages investors and interested
parties to listen via webcast as there is a limited capacity to
access the conference call by dialing 1-201-689-8263.
The live and later archived webcast can be
accessed from the 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 leading
global health and wellness holding company. XpresSpa Group’s core
asset, XpresSpa, is a leading airport retailer of spa services and
related health and wellness products, with 50 locations in 25
airports globally. Through its XpresTest, Inc. subsidiary, the
Company also provides COVID-19 screening and testing, rapid testing
services for other communicable diseases that include influenza,
mononucleosis and group A streptococcus, and flu vaccination
services under its XpresCheck™ brand. Current XpresCheck Wellness
Centers include JFK International Airport, Newark Liberty
International Airport, and Logan International Airport. To learn
more about XpresSpa Group, visit: www.XpresSpaGroup.com. To learn
more about XpresSpa, visit www.XpresSpa.com. To learn more about
XpresCheck, visit www.XpresCheck.com.
Forward-Looking StatementsThis
press release may contain "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 Securities
and Exchange Commission 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
Grossir@xpresspagroup.com(203) 682-8253
MediaJulie FergusonJulie@jfprmedia.com(312)
385-0098
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