XpresSpa Announces Strategic Partnership and Third Quarter 2018 Financial Results
November 14 2018 - 4:05PM
Launches Strategic Partnership with Calm, the
Leading Sleep, Meditation and Relaxation App with 35 Million
Downloads
XpresSpa Group, Inc. (Nasdaq: XSPA), a health and wellness holding
company, today announced financial results for the third quarter
ended September 30, 2018. In addition, XpresSpa announced that
Calm, the leading app for sleep, meditation and relaxation, made a
strategic investment in XpresSpa of up to $3 million in preferred
equity, convertible at $0.62 per share. This is a significant
premium to the market price and demonstrates Calm’s belief in the
Company’s industry leading platform. Calm funded $2 million of the
$3 million of preferred stock on November 13, 2018 and will fund
the remaining $1 million by December 31, 2018, subject to
satisfaction of certain conditions. The convertible preferred
equity has a 7-year maturity and is convertible at $0.62 per share.
The funds will be deployed in an effort to enhance XpresSpa
customers’ experience in a number of different ways, including
raising the brand’s profile across new and existing markets,
elevating the assortment of retail products, and upgrading
facilities. Calm was named Apple’s 2017 iPhone App of the Year and
boasts more than 35 million downloads to date, averaging 75,000 new
users daily. The new strategic partnership will allow both
companies to leverage off of one another’s subscribers, users, and
loyalty base and integrate Calm’s meditation app into a broad array
of services. In addition, Calm will offer its flagship products --
Digital App Subscriptions, Sleep Mist and the Calm Book -- at 52
XpresSpa domestic locations.
XpresSpa also made significant progress during
its third quarter ended September 30, 2018. Ed Jankowski, XpresSpa
Group CEO, stated, “Our third quarter 2018 performance reflects our
continued traction in driving operational excellence into our spas
through a refined labor model and greater contribution of retail
sales to our revenue mix, while reducing store-level and corporate
overhead costs. Despite only a modest increase in our top-line, we
achieved our highest store margin so far this year at 22.9% and
lowered our general and administrative expenses by 5.7% compared to
the year-ago period. We have now narrowed our consolidated
operating and adjusted EBITDA losses for three consecutive quarters
and the same three-month period last year.”
Mr. Jankowski added, “During the third-quarter
2018, we opened in Concourse D at Hartsfield-Jackson Atlanta
International Airport, our third XpresSpa location in the world’s
busiest airport. Our ability to further penetrate existing airports
speaks to the value airport partners see in our luxury spa
experience, which is complementary with their strategy of enhancing
retail and service offerings. This year, we have opened a total of
seven spas, including our first off-airport spa in the Westfield
World Trade Center in NYC. We remain active in competing for RFP’s
and have several high-priority new store openings planned for next
year that all meet our strict criteria for capital allocation and
are also finalizing the implementation of our franchising
model.”
Mr. Jankowski concluded, “Our intention for the
balance of the year and beyond is to build on what we have already
accomplished by continuing to streamline costs and position
ourselves to achieve positive adjusted EBITDA. Lastly, we are very
excited by our new strategic partnership with Calm and welcoming
their 35 million users into our spas during the busy holiday travel
season. With this investment from Calm, we will be using these
funds to raise our brand profile in new and existing markets while
enhancing our customers’ experience.”
Third Quarter 2018
Highlights
- Total revenue increased 0.5% to $12.9 million. Contributions
from six additional XpresSpa locations opened year-over-year were
mostly offset by a decrease in comparable store sales.
• Comparable-store sales decreased 3.0% as
XpresSpa was impacted by changes in airline assignments within key
LaGuardia, John F. Kennedy, and Los Angeles terminals which had a
direct impact on traffic and ultimately revenues.
• Retail sales comprised 20% of revenue in third
quarter 2018, compared to 17% in second quarter 2018.
- Opened a location in Atlanta’s Hartsfield-Jackson Atlanta
International Airport.
- Completed renovation in Washington Reagan National
Airport.
- Product and service store margin of $3.0 million, or 22.9%
margin, grew 28.5% from third quarter 2017 store margin of $2.3
million, or 18.2% margin, and $2.7 million, or 20.5% margin, in
second quarter 2018. • Labor costs
decreased through greater efficiency in staffing and
scheduling. • Product and operating costs
decreased as product sourcing fully transitioned to the Company’s
strategic partner and careful cost control.
- General and administrative expenses decreased 5.7% or $0.2
million to $3.9 million in third quarter 2018 from $4.2 million in
third quarter 2017. Third quarter 2018 general and administrative
included one-time professional costs of $0.3 million, and one-time
project costs of $0.1 million related to the buildout and
implementation of a business analytics tool, as well as a $0.5
million reduction in stock compensation expense to $0.2 million
compared to $0.7 million in third quarter 2017.
- Operating loss from continuing operations improved to $2.9
million from $3.5 million in third quarter 2017.
- Consolidated net loss attributable to the Company improved to
$3.2 million from $4.7 million in third quarter 2017 primarily due
to improvements in store margin and reductions in general and
administrative expenses relative to last year.
- Adjusted EBITDA* loss of $0.4 million improved from $0.6
million in third quarter 2017 through improved store margin and
reduced general and administrative expenses.
*Adjusted EBITDA is a non-GAAP financial
measures; see "Use of Non-GAAP Financial Measures" below. See
tables below for abbreviated financial XpresSpa segment results for
the third quarters and first nine months of 2018 and 2017.
Balance Sheet & Cash
Flows
As of September 30, 2018, the Company had:
- Cash and cash equivalents of $2.5 million
- Current assets of $4.0 million
- Total liabilities of $16.9 million, of which $6.5 million is
long-term debt held by a related party.
Management believes that the current cash
balance, up to $3 million of investment from Calm, cash to be
provided by future operating activities, and cash proceeds from the
anticipated liquidation of certain investments, will be sufficient
to fund planned operations and pay liabilities as they become due.
In addition, the Company has access to additional sources of
financing and may attempt to renegotiate terms of various
contracts.
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 (631) 576-4098. A replay will be available
after the call and can be accessed by dialing (412) 317-6671; the
passcode is 10005890. The replay will be available until December
5, 2018.
The 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 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, including 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,
Holland, 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
Investor Relations:ICRRaphael
Gross / Jeff Sonnek(203) 682-8253 / (646) 277-1263
|
XpresSpa Group, Inc. |
Condensed Consolidated Balance
Sheets |
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2018 |
|
|
|
2017 |
|
|
(Unaudited) |
|
|
Current
assets |
|
|
|
Cash and cash
equivalents |
$ |
2,525 |
|
|
$ |
6,368 |
|
Inventory |
|
802 |
|
|
|
1,159 |
|
Other current
assets |
|
591 |
|
|
|
2,120 |
|
Assets held for
disposal |
|
109 |
|
|
|
6,446 |
|
Total current
assets |
|
4,027 |
|
|
|
16,093 |
|
|
|
|
|
Restricted cash |
|
487 |
|
|
|
487 |
|
Property and equipment,
net |
|
15,005 |
|
|
|
15,797 |
|
Intangible assets,
net |
|
9,789 |
|
|
|
11,547 |
|
Goodwill |
|
- |
|
|
|
19,630 |
|
Other assets |
|
3,356 |
|
|
|
1,686 |
|
Total
assets |
$ |
32,664 |
|
|
$ |
65,240 |
|
|
|
|
|
Current
liabilities |
|
|
|
Accounts payable,
accrued expenses and other current liabilities |
$ |
7,641 |
|
|
$ |
8,736 |
|
Convertible notes,
net |
|
1,610 |
|
|
|
- |
|
Liabilities held for
disposal |
|
40 |
|
|
|
3,761 |
|
Total current
liabilities |
|
9,291 |
|
|
|
12,497 |
|
|
|
|
|
Debt |
|
6,500 |
|
|
|
6,500 |
|
Convertible notes,
net |
|
398 |
|
|
|
- |
|
Derivative warrant
liabilities |
|
455 |
|
|
|
34 |
|
Other liabilities |
|
265 |
|
|
|
370 |
|
Total
liabilities |
|
16,909 |
|
|
|
19,401 |
|
Commitments and
contingencies (see Note 13) |
|
|
|
|
|
|
|
Stockholders’
equity |
|
|
|
Series A Convertible
Preferred stock, $0.01 par value per share; 6,968 shares
authorized; 6,968 issued and none outstanding |
|
- |
|
|
|
- |
|
Series B Convertible
Preferred stock, $0.01 par value per share; 1,609,167 shares
authorized; 1,609,167 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 |
|
4 |
|
|
|
4 |
|
Common stock, $0.01 par
value per share; 150,000,000 shares authorized; 31,919,511 and
26,545,690 issued and outstanding as of September 30, 2018 and
December 31, 2017, respectively |
|
319 |
|
|
|
265 |
|
Additional paid-in
capital |
|
291,989 |
|
|
|
290,396 |
|
Accumulated
deficit |
|
(280,351 |
) |
|
|
(249,708 |
) |
Accumulated other
comprehensive loss |
|
(279 |
) |
|
|
(74 |
) |
Total
stockholders’ equity attributable to the Company |
|
11,682 |
|
|
|
40,883 |
|
Noncontrolling
interests |
|
4,073 |
|
|
|
4,956 |
|
Total stockholders’
equity |
|
15,755 |
|
|
|
45,839 |
|
Total
liabilities and stockholders’ equity |
$ |
32,664 |
|
|
$ |
65,240 |
|
|
|
|
|
|
XpresSpa Group, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS |
(Unaudited) |
(In thousands, except share and per share
data) |
|
|
|
|
|
|
|
|
|
|
|
Three months endedSeptember 30, |
|
Nine months endedSeptember 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Revenue |
|
|
|
|
|
|
|
|
Products
and services |
|
$ |
12,922 |
|
|
$ |
12,652 |
|
|
$ |
37,760 |
|
|
$ |
36,563 |
|
Other |
|
|
- |
|
|
|
200 |
|
|
|
800.00 |
|
|
|
300 |
|
Total
revenue |
|
|
12,922 |
|
|
|
12,852 |
|
|
|
38,560 |
|
|
|
36,863 |
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
|
|
|
|
|
|
Labor |
|
|
5,997 |
|
|
|
7,086 |
|
|
|
18,697 |
|
|
|
18,178 |
|
Occupancy |
|
|
1,996 |
|
|
|
1,950 |
|
|
|
6,216 |
|
|
|
5,704 |
|
Products
and other operating costs |
|
|
1,992 |
|
|
|
1,437 |
|
|
|
5,208 |
|
|
|
6,044 |
|
Total cost of
sales |
|
|
9,985 |
|
|
|
10,473 |
|
|
|
30,121 |
|
|
|
29,926 |
|
Depreciation and amortization |
|
|
1,879 |
|
|
|
1,722 |
|
|
|
5,375 |
|
|
|
6,379 |
|
Goodwill
impairment |
|
|
- |
|
|
|
- |
|
|
|
19,630.00 |
|
|
|
- |
|
General
and administrative* |
|
|
3,943 |
|
|
|
4,180 |
|
|
|
12,443 |
|
|
|
13,037 |
|
Total operating
expenses |
|
|
15,807 |
|
|
|
16,375 |
|
|
|
67,569 |
|
|
|
49,342 |
|
Operating loss
from continuing operations |
|
|
(2,885 |
) |
|
|
(3,523 |
) |
|
|
(29,009 |
) |
|
|
(12,479 |
) |
Interest
expense |
|
|
(624 |
) |
|
|
(183 |
) |
|
|
(1,212 |
) |
|
|
(549 |
) |
Other
non-operating income -expense), net |
|
|
378 |
|
|
|
(82 |
) |
|
|
877 |
|
|
|
(17 |
) |
Loss from
continuing operations before income taxes |
|
|
(3,131 |
) |
|
|
(3,788 |
) |
|
|
(29,344 |
) |
|
|
(13,045 |
) |
Income
tax benefit -expense) |
|
|
66 |
|
|
|
(57 |
) |
|
|
198 |
|
|
|
(284 |
) |
Consolidated
net loss from continuing operations |
|
|
(3,065 |
) |
|
|
(3,845 |
) |
|
|
(29,146 |
) |
|
|
(13,329 |
) |
Loss from
discontinued operations before income taxes* |
|
|
- |
|
|
|
(699 |
) |
|
|
(1,115 |
) |
|
|
(4,474 |
) |
Income
tax benefit -expense) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Consolidated
net loss from discontinued operations |
|
|
- |
|
|
|
(699 |
) |
|
|
(1,115 |
) |
|
|
(4,474 |
) |
Consolidated
net loss |
|
|
(3,065 |
) |
|
|
(4,544 |
) |
|
|
(30,261 |
) |
|
|
(17,803 |
) |
Net
income attributable to noncontrolling interests |
|
|
(122 |
) |
|
|
(153 |
) |
|
|
(382 |
) |
|
|
(329 |
) |
Net loss
attributable to the Company |
|
$ |
(3,187 |
) |
|
$ |
(4,697 |
) |
$ |
$ |
(30,643 |
) |
|
$ |
(18,132 |
) |
|
|
|
|
|
|
|
|
|
Consolidated
net loss from continuing operations |
|
|
(3,065 |
) |
|
|
(3,845 |
) |
$ |
|
(29,146 |
) |
|
|
(13,329 |
) |
Other
comprehensive income -loss) from continuing operations |
|
|
(3 |
) |
|
|
31 |
|
|
|
(205 |
) |
|
|
(120 |
) |
Comprehensive
loss from continuing operations |
|
|
(3,068 |
) |
|
|
(3,814 |
) |
|
|
(29,351 |
) |
|
|
(13,449 |
) |
Consolidated
net loss from discontinued operations |
|
|
- |
|
|
|
(699 |
) |
|
|
(1,115 |
) |
|
|
(4,474 |
) |
Other
comprehensive loss from discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Comprehensive
loss from discontinued operations |
|
|
- |
|
|
|
(699 |
) |
|
|
(1,115 |
) |
|
|
(4,474 |
) |
Comprehensive
loss |
|
|
(3,068 |
) |
|
|
(4,513 |
) |
$ |
|
(30,466 |
) |
|
|
(17,923 |
) |
|
|
|
|
|
|
|
|
|
Loss per
share |
|
|
|
|
|
|
|
|
Loss per
share from continuing operations |
|
$ |
(0.11 |
) |
|
$ |
(0.16 |
) |
|
$ |
(1.08 |
) |
|
$ |
(0.65 |
) |
Loss per
share from discontinued operations |
|
|
- |
|
|
$ |
(0.04 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.22 |
) |
Total basic and diluted net loss per share |
|
$ |
(0.11 |
) |
|
$ |
(0.20 |
) |
$ |
$ |
(1.12 |
) |
|
$ |
(0.87 |
) |
Weighted-average number of shares outstanding during the
period: |
|
|
|
|
|
|
|
|
Basic |
|
|
28,352,284 |
|
|
|
24,144,002 |
|
|
|
27,268,792 |
|
|
|
20,852,034 |
|
Diluted |
|
|
28,352,284 |
|
|
|
24,144,002 |
|
|
|
27,268,792 |
|
|
|
20,852,034 |
|
|
|
|
|
|
|
|
|
|
*Includes
stock-based compensation expense, as follows: |
|
|
|
|
|
|
|
|
General
and administrative |
|
$ |
194 |
|
|
$ |
662 |
|
|
$ |
765 |
|
|
$ |
1,752 |
|
Discontinued operations |
|
|
- |
|
|
|
44 |
|
|
|
- |
|
|
|
427 |
|
Total
stock-based compensation expense |
|
$ |
194 |
|
|
$ |
706 |
|
|
$ |
765 |
|
|
$ |
2,179 |
|
|
|
|
|
|
|
|
|
|
|
XpresSpa Group, Inc. |
Use of Non-GAAP Financial
Measures |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
Three months endedSeptember 30, |
|
Nine months endedSeptember 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Products and
services revenue |
|
$ |
12,922,000 |
|
|
$ |
12,652,000 |
|
|
$ |
37,760,000 |
|
|
$ |
36,563,000 |
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
|
|
|
|
|
|
Labor |
|
|
(5,997,000 |
) |
|
|
(7,086,000 |
) |
|
|
(18,697,000 |
) |
|
|
(18,178,000 |
) |
Occupancy |
|
|
(1,996,000 |
) |
|
|
(1,950,000 |
) |
|
|
(6,216,000 |
) |
|
|
(5,704,000 |
) |
Products
and other operating costs |
|
|
(1,966,000 |
) |
|
|
(1,311,000 |
) |
|
|
(5,092,000 |
) |
|
|
(5,701,000 |
) |
Total cost of
sales |
|
|
(9,959,000 |
) |
|
|
(10,347,000 |
) |
|
|
(30,005,000 |
) |
|
|
(29,583,000 |
) |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
2,963,000 |
|
|
|
2,305,000 |
|
|
|
7,755,000 |
|
|
|
6,980,000 |
|
Gross profit as
a % of total revenue |
|
|
22.9 |
% |
|
|
18.2 |
% |
|
|
20.5 |
% |
|
|
19.1 |
% |
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairment |
|
|
|
|
|
|
|
|
Depreciation |
|
|
(1,195,000 |
) |
|
|
(1,117,000 |
) |
|
|
(3,474,000 |
) |
|
|
(4,604,000 |
) |
Amortization |
|
|
(684,000 |
) |
|
|
(605,000 |
) |
|
|
(1,901,000 |
) |
|
|
(1,775,000 |
) |
Goodwill
impairment |
|
|
- |
|
|
|
- |
|
|
|
(19,630,000 |
) |
|
|
- |
|
Total
depreciation, amortization and impairment |
|
|
(1,879,000 |
) |
|
|
(1,722,000 |
) |
|
|
(25,005,000 |
) |
|
|
(6,379,000 |
) |
|
|
|
|
|
|
|
|
|
Total general
and administrative expense |
|
|
(3,943,000 |
) |
|
|
(4,180,000 |
) |
|
|
(12,443,000 |
) |
|
|
(13,037,000 |
) |
|
|
|
|
|
|
|
|
|
Other operating
revenue and expense |
|
|
|
|
|
|
|
|
Other
operating revenue |
|
|
- |
|
|
|
200,000 |
|
|
|
800,000 |
|
|
|
300,000 |
|
Other
operating expense |
|
|
(26,000 |
) |
|
|
(126,000 |
) |
|
|
(116,000 |
) |
|
|
(343,000 |
) |
Total other
operating revenue, net |
|
|
(26,000 |
) |
|
|
74,000 |
|
|
|
684,000 |
|
|
|
(43,000 |
) |
|
|
|
|
|
|
|
|
|
Operating loss
from continuing operations |
|
|
(2,885,000 |
) |
|
|
(3,523,000 |
) |
|
|
(29,009,000 |
) |
|
|
(12,479,000 |
) |
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,879,000 |
|
|
|
1,722,000 |
|
|
|
5,375,000 |
|
|
|
6,379,000 |
|
Goodwill
impairment |
|
|
- |
|
|
|
- |
|
|
|
19,630,000 |
|
|
|
- |
|
Merger
and acquisition, integration, and one-time costs |
|
|
452,000 |
|
|
|
529,000 |
|
|
|
1,057,000 |
|
|
|
1,365,000 |
|
Stock-based compensation expense |
|
|
194,000 |
|
|
|
662,000 |
|
|
|
765,000 |
|
|
|
1,752,000 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
loss |
|
|
(360,000 |
) |
|
|
(610,000 |
) |
|
|
(2,182,000 |
) |
|
|
(2,983,000 |
) |
|
|
|
|
|
|
|
|
|
XpresSpa Group Inc. |
Same Store Sales Growth for Third Quarter
2018 |
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
September 30, 2017 |
|
% |
|
|
Non-Comp |
|
|
|
Non-Comp |
|
|
|
Comp Store |
Store |
Total |
Comp Store |
Store |
Total |
Revenue |
$ |
11,375 |
$ |
1,547 |
$ |
12,922 |
|
$ |
11,732 |
$ |
920 |
$ |
12,652 |
|
(3.0 |
%) |
|
|
|
|
|
|
|
|
|
|
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