Product and Service Revenue Grew 7.4%Adjusted
EBITDA Loss NarrowedContinuing Cost ReductionEnters into $4.4
Million Secured Convertible NotesExtends Maturity of Existing Debt
to December 31, 2019
XpresSpa Group, Inc. (Nasdaq:XSPA), a health and wellness holding
company, today announced financial results for the first quarter
ended March 31, 2018. Following the sale of Group Mobile on
March 22, 2018, the Company determined that it only had one
operating segment, and first quarter 2018 and 2017 results are
presented accordingly.
Ed Jankowski, XpresSpa Group CEO, said, “In the
first quarter of 2018, XpresSpa’s revenue increased 7.4% from first
quarter last year as new stores contributed to our top-line growth,
even as we absorbed the effects of 69 days of weather related
incidents, including 17 airport closures, as well as a strong first
quarter 2017 comparison. During the quarter, as part of our
evolution to a pure play health and wellness services company, we
further streamlined our operations to reduce costs and
redundancies, which helped narrow our Adjusted EBITDA loss from
last year.”
“As the leading on-the-go spa provider, XpresSpa
enjoys a phenomenal growth opportunity as airports seek to capture
travelers’ waiting time and the increasing portion of their
discretionary spending that is being devoted to health and
wellness. In addition to spas opened in first quarter, we have
opened new locations in Houston’s Terminal A and a smaller store in
LaGuardia’s Terminal B. We have refined our capex schedule to
concentrate on high-priority new company-owned spa openings this
year, including Atlanta (two locations), Austin (two locations),
and third locations in Las Vegas and Philadelphia. We are also
evaluating certain of these locations as potential opportunities
for our franchising model, for which we have seen a high level of
interest, and are in conversations with airports and franchisees
for additional locations. Recently, we won an RFP for SFO Terminal
2 and are currently competing in 17 RFPs for locations in existing
as well as future airport spaces. Last, we continue to work with
leading health and wellness brands to develop strategic
partnerships to offer additional services and products at XpresSpa
that should support gross margin expansion.”
“Our immediate focus is on corporate expense
reduction and store-level performance improvement to strengthen our
foundation and accelerate 2018 growth. On the cost line, we
eliminated over $7 million of overhead expenses and construction
costs in 2017 compared to 2016, and expect to further reduce our
expenses as we right size our corporate structure. We also expect
to generate further efficiencies from our new point-of-sale
system’s ability to provide greater depth of view and real-time
information, which greatly enhances many aspects of our operational
control. On the top line, we are working to drive same store sales
through: training to support add-on sales of our enhanced,
higher-margin retail product; increasing our focus on our loyalty
program to incentivize repeat client visits; and refining our
staffing through our new scheduling tool to increase revenue
generation as well as optimize labor cost. Our objective is to
deliver improved profitability throughout the year.”
First Quarter 2018 Consolidated Results
Highlights
- Total revenue from continuing operations increased 13.7% to
$12.6 million in first quarter 2018 compared to $11.1 million in
first quarter 2017.
- Product and service revenue increased 7.4% to $11.8 million in
first quarter 2018 compared to $11.0 million in first quarter 2017-
Same store sales decreased 1.6% as XpresSpa’s comparisons reflected
strong growth in first quarter 2017 and as 69 days in first quarter
2018 were impacted by inclement weather, including 17 instances
where airports in which XpresSpa operates were closed- Opened 3 new
locations and closed 2 stores during first quarter 2018. New store
openings included XpresSpa’s first off-airport location in the
Westfield World Trade Center, a second location at Raleigh-Durham
International Airport which replaced an existing location, and a
second location at Pittsburgh International Airport.
- Product and service gross profit was $2.1 million, or 17.7%
margin, in first quarter 2018 compared to $2.1 million, or 19.6%
margin, in first quarter 2017- Cost of sales increased year over
year primarily due to the cost of labor and occupancy associated
with new store openings.- Gross margin compression resulted from
higher than normal labor costs, partially associated with new store
openings, weather-related store closings, and from the temporary
decline in product sales associated with an adjustment period as
sourcing was fully transitioned to XpresSpa’s strategic partner;
this was normalized by the end of the quarter.
- General and administrative expenses decreased 8.0% due
primarily to the Company’s streamlining of processes at the
corporate level, as well as a reduction in stock-based compensation
of $0.2 million from $0.5 million as of March 31, 2017 to $0.3
million as of March 31, 2018.
- Other operating revenue increased to $0.8 million in first
quarter 2018 from $0.1 million in first quarter 2017 as the Company
sold certain patents in January 2018 for net proceeds of $0.3
million and shares of common stock in Marathon Patent Group, Inc.
that were valued at $0.5 million. Other operating revenues are
generally nonrecurring and carry minimal operating expense.
- Net operating loss increased to $23.1 million from $4.6 million
in the first quarter of 2017- Included in first quarter 2018 net
loss is a $19.6 million goodwill impairment charge. The impairment
to goodwill was a result of the structural changes to the Company,
including completion of transition from a holding company to a pure
play health and wellness company and change in CEO.- Excluding this
charge, the net loss of $3.5 million for first quarter 2018
decreased $1.1 million from first quarter 2017 due to incremental
revenue attributable to new store openings and continued reductions
in general and administrative costs.
- EBITDA* loss of $1.5 million for first quarter 2018 improved
$0.3 million from $1.8 million in first quarter 2017 through
reduced store-level product and general and administrative
expenses.
- Comprehensive loss, after discontinued operations, was $23.9
million in first quarter 2018 compared to $6.4 million in first
quarter 2017.
*EBITDA and Adjusted EBITDA are a non-GAAP financial measures;
see "Use of Non-GAAP Financial Measures" below. See tables below
for abbreviated financial XpresSpa segment results for the first
quarters of 2018 and 2017.
Balance Sheet & Cash
Flows
As of March 31, 2018, the Company had:
- Current assets of $6.3 million
- Assets held for disposal of $0.7 million
- Long-term debt of $6.5 million with a related party.
Subsequent Event
On May 15, 2018, the Company entered into a
securities purchase agreement (the “Agreement”) with certain
institutional investors (the “Investors”), pursuant to which the
Company agreed to sell up to (i) an aggregate principal amount of
approximately $4.4 million in 5% Secured Convertible Notes (the
“Convertible Notes”), which includes approximately $0.1 million to
be issues to Palladium Capital as Placement Agent in the offering,
convertible into shares of common stock of the Company, par value
$0.01 per share (“Common Stock”) at a conversion price of $0.62 per
share, (ii) Class A Warrants (the “Class A Warrants”) to purchase
approximately 7.2 million shares of Common Stock at an exercise
price of $0.62 per share and (iii) Class B Warrants (the “Class B
Warrants,” and together with the Class A Warrants, the “Warrants”)
to purchase approximately 3.6 million shares of Common Stock at an
exercise price of $0.62 per share. The Convertible Notes bear
interest at a rate of 5% per annum. The Convertible Notes are
senior secured obligations of the Company and are secured by
certain of its personal property. Unless earlier converted or
redeemed, the Convertible Notes will mature in November 2019. The
Company intends to use the proceeds of this financing primarily for
working capital and new store openings. The Company expects to
close the transaction as soon as possible following the filing of
the first quarter 2018 results.
On May 14, 2018, we extended maturity of the
debt from May 1, 2019 to December 31, 2019.
“XpresSpa is close to generating sufficient cash
to fund operations through the combination of operating the spas
and our cost reduction initiatives particularly as we approach the
seasonally stronger second and third quarters of the year,” said
Mr. Jankowski. “While we consider our operating and growth needs to
be fully funded through the end of 2019, as we move forward, we
will continue to review our capital structure and our options to
increase our financial flexibility, including the refinancing of
our existing debt, and the reduction of our cost of capital.”
About XpresSpa Group, Inc.
XpresSpa Group, Inc. (Nasdaq:XSPA) is a health
and wellness holding company. XpresSpa Group’s core asset,
XpresSpa, is the world’s largest airport spa company, with 57
locations in 23 airports globally (as of March 31, 2018), and one
off-airport spa at Westfield World Trade Center in New York City.
XpresSpa offers services that are tailored specifically to the busy
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. XpresSpa
Group’s non-core assets include InfoMedia and intellectual property
assets. 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 Contacts
LHA Jody Burfening/Carolyn Capaccio
212.838.3777 xspa@lhai.com
|
|
XpresSpa Group, Inc. |
|
Condensed Consolidated Balance
Sheets |
|
($ in thousands) |
|
|
|
|
|
March 31,2018
(Unaudited) |
|
|
December 31, 2017 |
|
Current
assets |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
3,554 |
|
|
$ |
6,368 |
|
Inventory |
|
|
1,050 |
|
|
|
1,159 |
|
Other current
assets |
|
|
1,000 |
|
|
|
2,120 |
|
Assets held for
disposal |
|
|
717 |
|
|
|
6,446 |
|
Total current
assets |
|
|
6,321 |
|
|
|
16,093 |
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
487 |
|
|
|
487 |
|
Property and equipment,
net |
|
|
15,928 |
|
|
|
15,797 |
|
Intangible assets,
net |
|
|
11,007 |
|
|
|
11,547 |
|
Goodwill |
|
|
— |
|
|
|
19,630 |
|
Other assets |
|
|
3,765 |
|
|
|
1,686 |
|
Total
assets |
|
$ |
37,508 |
|
|
$ |
65,240 |
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
Accounts payable,
accrued expenses and other current liabilities |
|
$ |
8,560 |
|
|
$ |
8,736 |
|
Liabilities held for
disposal |
|
|
— |
|
|
|
3,761 |
|
Total current
liabilities |
|
|
8,560 |
|
|
|
12,497 |
|
|
|
|
|
|
|
|
|
|
Debt |
|
|
6,500 |
|
|
|
6,500 |
|
Other liabilities |
|
|
433 |
|
|
|
404 |
|
Total
liabilities |
|
|
15,493 |
|
|
|
19,401 |
|
Commitments and
contingencies (see Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity |
|
|
|
|
|
|
|
|
Series A Convertible
Preferred stock, $0.01 par value per share; 500,000 shares
authorized; 6,968 issued and none outstanding |
|
|
— |
|
|
|
— |
|
Series B Convertible
Preferred stock, $0.01 par value per share; 5,000,000 shares
authorized; 1,666,667 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; 475,208 shares issued and 420,541 shares outstanding
with a liquidation value of $20,186 as of March 31, 2018 and
December 31, 2017 |
|
|
4 |
|
|
|
4 |
|
Common stock, $0.01 par
value per share; 150,000,000 shares authorized; 26,634,475 and
26,545,690 issued and outstanding as of March 31, 2018 and December
31, 2017, respectively |
|
|
266 |
|
|
|
265 |
|
Additional paid-in
capital |
|
|
290,707 |
|
|
|
290,396 |
|
Accumulated
deficit |
|
|
(273,641 |
) |
|
|
(249,708 |
) |
Accumulated other
comprehensive loss |
|
|
(140 |
) |
|
|
(74 |
) |
Total
stockholders’ equity attributable to the Company |
|
|
17,196 |
|
|
|
40,883 |
|
Noncontrolling
interests |
|
|
4,819 |
|
|
|
4,956 |
|
Total stockholders’
equity |
|
|
22,015 |
|
|
|
45,839 |
|
Total
liabilities and stockholders’ equity |
|
$ |
37,508 |
|
|
$ |
65,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XpresSpa Group, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS |
(Unaudited) |
(In thousands, except share and per share
data) |
|
|
|
Three months ended
March 31, |
|
|
|
2018 |
|
|
2017 |
|
Revenue |
|
|
|
|
|
|
Products
and services |
|
$ |
11,800 |
|
|
$ |
10,984 |
|
Other |
|
|
800 |
|
|
|
100 |
|
Total
revenue |
|
|
12,600 |
|
|
|
11,084 |
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
|
|
|
|
|
|
Labor |
|
|
6,210 |
|
|
|
5,309 |
|
Occupancy |
|
|
2,060 |
|
|
|
1,771 |
|
Products
and other operating costs |
|
|
1,507 |
|
|
|
1,854 |
|
Total cost of
sales |
|
|
9,777 |
|
|
|
8,934 |
|
Depreciation and amortization |
|
|
1,653 |
|
|
|
1,726 |
|
Goodwill
impairment |
|
|
19,630 |
|
|
|
— |
|
General
and administrative* |
|
|
4,596 |
|
|
|
4,993 |
|
Total operating
expenses |
|
|
35,656 |
|
|
|
15,653 |
|
Operating loss
from continuing operations |
|
|
(23,056 |
) |
|
|
(4,569 |
) |
Interest
expense |
|
|
(183 |
) |
|
|
(189 |
) |
Other
non-operating income (expense), net |
|
|
(90 |
) |
|
|
114 |
|
Loss from
continuing operations before income taxes |
|
|
(23,329 |
) |
|
|
(4,644 |
) |
Income
tax benefit (expense) |
|
|
84 |
|
|
|
(227 |
) |
Consolidated
net loss from continuing operations |
|
|
(23,245 |
) |
|
|
(4,871 |
) |
Loss from
discontinued operations before income taxes* |
|
|
(605 |
) |
|
|
(1,478 |
) |
Income
tax benefit (expense) |
|
|
— |
|
|
|
— |
|
Consolidated
net loss from discontinued operations |
|
|
(605 |
) |
|
|
(1,478 |
) |
Consolidated
net loss |
|
|
(23,850 |
) |
|
|
(6,349 |
) |
Net
income attributable to noncontrolling interests |
|
|
(83 |
) |
|
|
(76 |
) |
Net loss
attributable to the Company |
|
$ |
(23,933 |
) |
|
$ |
(6,425 |
) |
|
|
|
|
|
|
|
|
|
Consolidated
net loss from continuing operations |
|
$ |
(23,245 |
) |
|
$ |
(4,871 |
) |
Other
comprehensive loss from continuing operations |
|
|
(66 |
) |
|
|
(44 |
) |
Comprehensive
loss from continuing operations |
|
|
(23,311 |
) |
|
|
(4,915 |
) |
Consolidated
net loss from discontinued operations |
|
|
(605 |
) |
|
|
(1,478 |
) |
Other
comprehensive loss from discontinued operations |
|
|
— |
|
|
|
— |
|
Comprehensive
loss from continuing operations |
|
|
(605 |
) |
|
|
(1,478 |
) |
Comprehensive
loss |
|
$ |
(23,916 |
) |
|
$ |
(6,393 |
) |
|
|
|
|
|
|
|
|
|
Loss per
share |
|
|
|
|
|
|
|
|
Loss per
share from continuing operations |
|
$ |
(0.88 |
) |
|
$ |
(0.26 |
) |
Loss per
share from discontinued operations |
|
|
(0.02 |
) |
|
|
(0.08 |
) |
Total basic and
diluted net loss per share |
|
$ |
(0.90 |
) |
|
$ |
(0.34 |
) |
Weighted-average number of shares outstanding during the
period |
|
|
|
|
|
|
|
|
Basic |
|
|
26,592,781 |
|
|
|
18,862,715 |
|
Diluted |
|
|
26,592,781 |
|
|
|
18,862,715 |
|
|
|
|
|
|
|
|
|
|
*Includes
stock-based compensation expense, as follows: |
|
|
|
|
|
|
|
|
General
and administrative |
|
$ |
312 |
|
|
$ |
547 |
|
Discontinued operations |
|
|
— |
|
|
|
194 |
|
Total
stock-based compensation expense |
|
$ |
312 |
|
|
$ |
741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XpresSpa Group, Inc. |
Use of Non-GAAP Financial
Measures |
(In thousands) |
|
|
|
Three months ended |
|
|
Three months ended |
|
|
|
March 31, 2018 |
|
|
March 31, 2017 |
|
Products and
services revenue |
|
$ |
11,800,000 |
|
|
$ |
10,984,000 |
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
|
|
|
|
|
|
Labor |
|
|
(6,210,000 |
) |
|
|
(5,309,000 |
) |
Occupancy |
|
|
(2,060,000 |
) |
|
|
(1,771,000 |
) |
Products
and other operating costs |
|
|
(1,443,000 |
) |
|
|
(1,755,000 |
) |
Total cost of
sales |
|
|
(9,713,000 |
) |
|
|
(8,835,000 |
) |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
2,087,000 |
|
|
|
2,149,000 |
|
Gross profit as
a % of total revenue |
|
|
17.7 |
% |
|
|
19.6 |
% |
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairment |
|
|
|
|
|
|
|
|
Depreciation |
|
|
(1,047,000 |
) |
|
|
(1,134,000 |
) |
Amortization |
|
|
(606,000 |
) |
|
|
(592,000 |
) |
Goodwill
impairment |
|
|
(19,630,000 |
) |
|
|
— |
|
Total
depreciation, amortization and impairment |
|
|
(21,283,000 |
) |
|
|
(1,726,000 |
) |
|
|
|
|
|
|
|
|
|
Total general
and administrative expense |
|
|
(4,596,000 |
) |
|
|
(4,993,000 |
) |
|
|
|
|
|
|
|
|
|
Other operating
revenue and expense |
|
|
|
|
|
|
|
|
Other
operating revenue |
|
|
800,000 |
|
|
|
100,000 |
|
Other
operating expense |
|
|
(64,000 |
) |
|
|
(99,000 |
) |
Total other
operating revenue, net |
|
|
736,000 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
Operating loss
from continuing operations |
|
|
(23,056,000 |
) |
|
|
(4,569,000 |
) |
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,653,000 |
|
|
|
1,726,000 |
|
Goodwill
impairment |
|
|
19,630,000 |
|
|
|
— |
|
Merger
and acquisition, integration, and one-time costs |
|
|
— |
|
|
|
526,000 |
|
Stock-based compensation expense |
|
|
312,000 |
|
|
|
547,000 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
loss |
|
$ |
(1,461,000 |
) |
|
$ |
(1,770,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XpresSpa Group Inc. |
Wellness Segment Same Store Sales Growth for
First Quarter 2018 |
($ in thousands) |
|
Quarter Ended |
|
|
March 31, 2018 |
|
|
March 31, 2017 |
|
|
% |
|
|
|
Comp Store |
|
|
Non-Comp Store |
|
|
Total |
|
|
Comp Store |
|
|
Non-Comp Store |
|
|
Total |
|
|
|
|
Revenue |
|
$ |
9,780 |
|
|
$ |
2,020 |
|
|
$ |
11,800 |
|
|
$ |
9,940 |
|
|
$ |
1,044 |
|
|
$ |
10,984 |
|
|
|
(1.6 |
%) |
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XpresSpa (NASDAQ:XSPA)
Historical Stock Chart
From Mar 2024 to Apr 2024
XpresSpa (NASDAQ:XSPA)
Historical Stock Chart
From Apr 2023 to Apr 2024