Bay Street News

XpresSpa Announces Strategic Partnership and Third Quarter 2018 Financial Results

Launches Strategic Partnership with Calm, the Leading Sleep, Meditation and Relaxation App with 35 Million Downloads

XpresSpa to Issue Up to $3 Million in Convertible Preferred Equity at a 400% Premium to Market at $0.62 per Share

Store Margins Continue to Improve

Continued Progress on Cost Reduction Initiatives

NEW YORK, Nov. 14, 2018 (GLOBE NEWSWIRE) — 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

*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:

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:
ICR
Raphael 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 ended
September 30,
  Nine months ended
September 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 ended
September 30,
  Nine months ended
September 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 %)