XpresSpa Group, Inc. (Nasdaq: XSPA), a health and wellness company,
today provided a business update and announced that it has filed
financial results on Form 10-K for the full year ending December
31, 2020.
Doug Satzman, XpresSpa Group CEO, stated, “Over
the past few weeks, we have been encouraged by rising patient
testing volumes and increased average revenue per patient at our
XpresCheck™ Wellness Centers. We attribute this traction
primarily to the rollout of COVID-19 Rapid Testing which has become
the preferred testing option of over 73% of all patients. Although
overall airport traffic remains significantly below 2019 levels, we
are seeing increasing passenger flow, benefiting from an increase
in airport traffic as people resume personal and leisure travel in
a safe manner, which, in our opinion, will lead to a strong
recovery during the second half of 2021. Although we were unable to
recognize revenue, for accounting purposes, during the fourth
quarter of 2020, we expect that we will be able to do so in the
first half of 2021 due to a reassessment of our management services
agreements.”
Mr. Satzman continued, “Notably, XpresCheck’s
estimated gross profit margin for recent periods is higher than
even XpresSpa’s peak business performance during the pre-pandemic
era. From a cash flow standpoint, this is important not only as it
relates to existing XpresCheck operations, but also because of the
ongoing investments we are making in our new travel health and
wellness brand to meet the emerging needs of travelers in a
post-COVID-19 environment. Furthermore, the cost of building each
of the first three XpresCheck Wellness Centers averaged $540,000
while the subsequent eight centers averaged $158,000 as we
optimized the layout and the construction methodology.”
Mr. Satzman concluded, “Utilizing both our
historic travel wellness experience and new-found healthcare
expertise, we are positioning the Company to be an early leader in
the emerging travel health and wellness category by developing a
brand that can transform the way people access travel healthcare
through technology and personalized services. We anticipate this
new brand will have the ability to reach travelers at all phases of
travel, including planning, and is designed to provide access to
travel care and medical documentation throughout their journey. We
look forward to bringing this concept to market and introducing
many of the digital assets that will be integral to this brand in
summer 2021 through a new website and social media platforms, and
will then follow up with the opening of our first two integrated
health and wellness airport locations in late summer / early fall
2021.”
Business Update
XpresSpa ServicesOn March 24, 2020, XpresSpa
temporarily closed all of its global spa locations in response to
COVID-19. The Company reopened its two spas in Dubai International
Airport, UAE in July 2020 for select spa services, and its single
franchised location in Austin reopened during September 2020 but
did not reopen any domestic company-owned spa locations during the
fourth quarter 2020.
However, given limited airport traffic and
changes in consumer behavior due to the pandemic, these reopened
locations have underperformed. The Company therefore does not
anticipate reopening other spas for traditional services in the
near-term, but will re-evaluate possible re-openings of select spas
in the future on a location-by-location basis, based on the
economic viability of each such location.
XpresCheck Wellness Center Services The Company
launched the XpresCheck™ brand under its XpresTest Inc.
subsidiary to address the urgent needs caused by COVID-19 that has
added risk and uncertainty related to domestic and international
air travel as well as to the frontline airport workforce.
XpresCheck’s medical team of state licensed physicians and nurse
practitioners, who operate under management services agreements,
currently administer COVID-19 testing options including a rapid
molecular COVID-19 test, a Polymerase Chain Reaction (PCR) test, a
blood antibody test, a rapid antigen test, and a rapid PCR test.
Developments since the onset of the fourth quarter 2020
include:
- In October 2020, XpresCheck
expanded its testing services beyond COVID-19 testing in select
locations to include additional rapid testing services for other
communicable diseases that include influenza, mononucleosis and
group A streptococcus, as well as administration of seasonal flu
vaccinations.
- As of November 13, 2020, XpresCheck
was 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 has partnered with The
CommonTrust Network’s CommonPass platform which links COVID-19 test
results from partnered labs such as XpresCheck directly into the
CommonPass app. Passengers are then able to show their test results
through this app to airlines and destinations so as to ensure a
hassle-free entry and to avoid quarantines, where applicable.
- Effective March 8, 2021, XpresCheck
transitioned to a full “fee for service” model for all tests. Under
this model, patients pay XpresCheck directly at the time of service
and then are able submit their testing fees for insurance
reimbursement. Prior to March 8, 2021 only the rapid test had been
on a fee for service model.
- XpresCheck is currently awaiting
approval on a state-by-state basis to administer COVID-19 vaccines
approved for use by the FDA at all Wellness Centers. Upon
state-by-state approval and the receipt of the necessary COVID-19
vaccines, the Company may launch a vaccination program primarily
focused on airline employees and airport staff initially, although
passengers could be eligible for vaccinations over time, subject to
supply availability and other state eligibility requirements.
- On March 29, 2020, XpresCheck
announced the addition of a rapid PCR test at select airports and
plans to add another rapid antigen test to its suite of COVID-19
testing services shortly.
XpresCheck Wellness Center Locations The Company
currently has eleven locations operating in nine airports: Boston
Logan International Airport (2), Denver International Airport,
Dulles International Airport, Houston George Bush Intercontinental
Airport, JFK International Airport, Newark Liberty International
Airport (2), Phoenix Sky Harbor International Airport, Ronald
Reagan National Airport, and Salt Lake City International
Airport.
There are currently two additional “popup”
XpresCheck Wellness Centers that are expected to open in
Seattle-Tacoma International Airport and San Francisco
International Airport over the next several weeks. Although the
Company believes that COVID-19 testing will remain an important and
necessary service for airline employees, airport staff, and
passengers for the foreseeable future, the Company is reassessing
future development of any additional XpresCheck Wellness Centers
beyond these locations based upon its evaluation of the economic
viability of the remaining major hub airports and developing
international travel requirements. This decision was made so that
the Company can dedicate its efforts and resources to bringing to
market a new and more comprehensive travel health and wellness
brand that focuses on an emerging new category of health-focused
travel and personal wellness services that would still include
COVID-19 testing and other related services.
New Travel Health and Wellness Brand VisionThe
Company is developing a travel health and wellness brand that is
positioned for a post-pandemic world and that leverages its
historic travel wellness experience and newly acquired healthcare
expertise. The Company is preparing a launch of a Travel Health and
Wellness company delivering on-demand access to integrated
healthcare through technology and personalized services.
The strategic brand pillars are Travel Health
and Wellness, which places the Company’s experience and assets
directly in the intersection of these three categories. Travel
Wellness was a skyrocketing trend category prior to COVID-19, and
adding Health to that combination will enable it to rise again. In
the Health pillar, the new brand will be differentiated because it
is travel-focused and in airports, while in Wellness, it is
differentiated because it is a travel industry retailer and expert.
In Travel, the new brand is differentiated because it has health
and wellness experience and will provide access to integrated care
and travel health documentation, all in one app.
The Company sees this concept evolution as a
significant opportunity to be a category innovator in a new niche
industry where it can leverage technology in addition to its
existing real estate and airport experience in providing travelers
with peace of mind and access to integrated care. The brand name of
this concept will be announced at a later date.
While COVID-19 testing will be available under
this new brand, the broader suite of services may include:
pre-travel health and wellness planning, on-site medical services
such as metabolic panel testing, anxiety care, and convenient
travel care; virtual chat care and video care through a partnership
with an established telemedicine company; and access to virtual
wellness care such as guided meditations and yoga.
The first two integrated Travel Health and
Wellness locations are expected to open in late summer / early fall
2021. Over time, the Company intends to evolve some of its legacy
XpresSpa footprint into this new Travel Health and Wellness brand,
where feasible, as well as open additional locations in other
suitable terminals and airport venues.
However, over the long-term, the Company
envisions that its digital channels will provide more significant
growth opportunities for revenue and profit than its airport
locations. The success of this revenue stream will be achieved
through both subscription-based services that provide care and
tools supporting travel health and wellness. Furthermore, the
Company will offering upstream content that can be monetized
through affiliate revenue as well as curated retail through
ecommerce. The Company is currently laying the groundwork to have
its initial digital assets launched in the summer timeframe ahead
of the first two brick-and-mortar location openings as travel
begins its recovery this fall and into 2022.
Given its strong liquidity position and poise
for growth, the Company would also consider accretive acquisitions
and other investments to further broaden its service and retail
offerings and would invest in new opportunities beyond this new
evolving concept.
Liquidity and Financial
ConditionAs of December 31, 2020, the Company had cash and
cash equivalents, excluding restricted cash, of $89.8 million,
total current assets of $91.8 million and total current liabilities
of $13.5 million.
During the twelve months ended December 31,
2020, the Company raised net proceeds of over $110.0 million in a
series of registered direct equity offerings.
Summary of Fourth Quarter 2020 Financial
ResultsReported revenue during the three months ended
December 31, 2020 was $0.3 million compared to $10.9 million in the
corresponding period in 2019. The decrease in revenue was 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 $246,000 and $68,000, respectively, of
services and products in the recently re-opened spas in Dubai, and
$9,000 for other.
Explanation of Management Service AgreementsThe
Company entered into management services agreements (MSAs) with
professional medical services companies that provide health care
services to patients in connection with the XpresCheck. The medical
services companies pay XpresCheck a monthly fee to operate in the
XpresCheck Wellness Centers over the term of the agreement. Under
the terms of the MSAs, the Company provides office space,
equipment, supplies, non-licensed staff, and management services to
be used for the purpose of COVID-19 and other medical diagnostic
testing in return for a management fee.
As a result of the uncertainties around the cash
flow of the XpresCheck business, the Company has concluded that the
collectability criteria to qualify as a contract under ASC 606
(U.S. GAAP) was not met during the fourth quarter 2020, and
therefore no revenue associated with the monthly management fees
was recognized from the MSAs. The Company will instead recognize
management fees paid as a deposit contract liability until the
subsequent reassessment of the contract results in the MSAs meeting
the collectability criteria or termination of the contracts.
However, as of March 31, 2020, the Company has
reassessed its agreements and has made modifications that better
reflect the actual patient volumes that it is seeing at its
XpresCheck Wellness Centers. Therefore, the Company anticipates
being able to recognize revenue in 2021.
Cost of SalesCost of sales decreased to $2.4
million from $9.2 million in the prior year fourth 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 partially offset by cost of sales of $1.2 million incurred
pursuant to the XpresCheck management services agreement.
Impairment/Disposal of AssetsImpairment/disposal
of assets expense increased to $9.0 million from $5.2 million in
the prior year fourth quarter. The expense was related to the
impairment of our XpresSpa trade name due to changing of the
business climate due to the COVID-19 pandemic, and 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 was $5.0 million for each of the comparable
periods.
Loss from OperationsOperating loss from
operations increased to $17.5 million compared to $10.1 million in
the prior year fourth quarter, primarily due to lower revenue and
impairment of certain assets.
Net Loss Attributable to Common ShareholdersNet
loss attributable to common shareholders was $15.7 million compared
to net loss attributable to common shareholders of $7.1 million in
the prior year fourth quarter, primarily due to lower revenue and
impairment of certain assets.
Please refer to the Annual Report on Form on
10-K filed on March 31, 2021 for more financial information related
to the fourth quarter and full year ending December 31, 2020. It
can be accessed at https://investors.xpresspa.com/sec-filings or at
https://www.sec.gov/
XpresCheck Non-GAAP Financial
Metrics Although the Company does not generate revenue
directly from patient testing volume, as detailed above, in the
interest of providing investors with greater transparency regarding
XpresCheck’s performance, the Company has opted to disclose recent
and current average daily patient testing volumes along with other
relevant non-GAAP financial metrics.
During the fourth quarter 2020, average daily
patient testing volume per XpresCheck Wellness Center was
approximately 70 to 100 people with higher volumes during the
November and December holiday travel period. This reflects a
significant increase from average daily patient testing volume
generated in the third quarter 2020 of 30 to 50 people and was due
largely to the rollout of COVID-19 rapid testing along with an
increase in airline industry traffic over the three-month period.
Notably, the number of higher revenue / higher margin COVID-19
rapid tests as a percentage of total tests averaged 55% during the
fourth quarter 2020 and 67% in December 2020. COVID-19 rapid tests
did not become readily available at XpresCheck Wellness Centers
until early October 2020.
During the first 12 weeks of the first quarter
2021, the average revenue per patient was $150 while higher revenue
/ higher margin COVID-19 rapid tests as a percentage of total tests
averaged 73%.
Total XpresCheck pro forma Patient Services
Revenue for the three months ended January 31, 2021 was $3.3
million while pro forma XpresCheck gross profit was $1.2 million,
representing a 36.5% margin. Total patient volume was 22,344
including 14,998 rapid test volume. The improvement in the
“four-wall” performance of XpresCheck has slowed the Company’s
monthly cash burn and exceeds the pre-pandemic gross profit margin
of the legacy XpresSpa spa locations.
Webcast and Conference Call
TodayThe Company will host a webcast and conference call
at 4:30 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. To submit a
question, please email ir@xpresspagroup.com.
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 45
locations in 23 airports globally. Through its XpresTest,
Inc. subsidiary, the Company provides COVID-19 screening and
testing under the XpresCheck™ brand at eleven locations in nine
airports: Boston Logan International
Airport (2), Denver International Airport, Dulles
International Airport, Houston George Bush Intercontinental
Airport, JFK International Airport, Newark Liberty
International Airport (2), Phoenix Sky Harbor
International Airport, Reagan National Airport, and Salt Lake
City International Airport. To learn more about XpresSpa
Group, visit: www.XpresSpaGroup.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 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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