FORM Holdings Reports Second Quarter 2017 Results and Provides Business Update
Substantial Cost Rationalization and Continued Growth in Q2
Company Outlines Accelerated Unit Opening Strategy and Reiterates Plan to Transform into Health & Wellness Pure-play
“Our second quarter performance demonstrates that we are delivering on our commitments to achieve expense synergies while continuing to deliver strong growth for our Wellness segment. We will continue to leverage XpresSpa’s leadership as we continue our transformation into a health and wellness pure-play, which we expect to complete before the end of the first quarter of 2018," said
Second Quarter 2017 Highlights
- Consolidated revenues were
$16.4 million in the second quarter of fiscal 2017 - Revenues in the Wellness segment, which consists of XpresSpa, were
$12.9 million for the second quarter of 2017, representing a 17% increase from first quarter 2017 revenues of$11.0 million
○ Wellness segment operating loss was$2.0 million as compared to$2.4 million in the first quarter
○ Wellness segment Adjusted EBITDA* was$1.1 million , up from a loss of$0.2 million in the first quarter, driven by aggressive cost reductions and increase in gross profit
○ Wellness segment general & administrative expenses were reduced by$1.2 million , or 43%, from the first quarter of 2017, of which$0.7 million relates to ongoing operations
○ XpresSpa year-over-year revenue grew 16% (compared to the pre-acquisition second quarter 2016)
○ Approximately 20% segment-level gross profit margin
○ Ended the quarter with 52 locations in 23 airports
○ For the balance of fiscal 2017, the Company currently has nine new unit openings scheduled, and an additional nine units under negotiation, some of which may open in 2017 - Revenues in the Technology segment, which consists of Group Mobile, were approximately flat at
$3.5 million for the second quarter of 2017 compared to the first quarter of 2017
○ Group Mobile revenue grew 40.8% on a year-over-year basis compared to second quarter 2016
○ Technology segment doubled gross margins to 22% in the second quarter 2017 from 11% in the same period last year – we anticipate annual margins in the range of 15% to 20%
○ FLI Charge is now reflected as assets and liabilities held for disposal and discontinued operations in the Company’s financials as a result of an offer from a third party to finance its ongoing operations - Subsequent to
June 30, 2017 , the Company completed a public offering of 6,900,000 shares of common stock, at$1.10 per share, for net proceeds of approximately$6.7 million - Consolidated operating loss from continued operations was
$5.1 million and Adjusted EBITDA loss* was$1.0 million for the second quarter of fiscal 2017
*Adjusted EBITDA is a non-GAAP financial measure; see "Use of Non-GAAP Financial Measures" below.
Mr. Perlman continued, “I’m proud of our team’s efforts to leverage our resources to realize the synergies that drove the marked improvement in our business compared to our first quarter, particularly within our Wellness segment. We expect to demonstrate further expense leverage in the third quarter, when we benefit from a full quarter of our cost savings actions that were implemented in the second quarter.
“We have increased our XpresSpa unit growth plans for the balance of 2017, from two units to nine units. In addition, we are in varying degrees of negotiations for another nine locations, some of which may fall in 2017 as well. We continue to strengthen our capital structure, including our recent equity offering, which added approximately
“Revenue results in our Technology segment were flat as compared to first quarter of 2017, primarily due to the timing of certain contracts that shifted into the third quarter. However, the execution of several contracts early in the third quarter gives us confidence in our outlook for 2017 and beyond. We are committed to focusing on the growing health and wellness industry and parting with non-core assets, which begins with a potential sale of FLI Charge. These efforts are ongoing, but our intention is to take the necessary steps to create a pure-play health and wellness services company, led by our core XpresSpa asset, and we are planning to complete this process by the end of the first quarter of fiscal 2018.”
2017 Outlook
The Company is reaffirming its previously issued guidance for 2017 of over
Mr. Perlman concluded, “As we look at the balance of fiscal 2017, we remain confident in our outlook and ability to build upon our leadership position in the fast growing health and wellness industry. We will continue to pursue growth through our highly productive XpresSpa store model, while also seeking out new avenues of growth that are complementary to our core competencies. In the near-term, our focus remains on delivering a best-in-class customer experience, while maintaining careful control of our expenses in order to leverage our cost structure and fund incremental investments. Accordingly, we expect our sales and margins will continue to grow throughout the remainder of 2017, which in turn will drive improving cash flow for the benefit of our business and shareholders.”
Operating Results
For the second quarter of fiscal 2017, the Company reported total revenue of
Operating loss from continuing operations was
Balance Sheet & Cash Flows
As of
On
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Use of Non-GAAP Financial Measures
Adjusted EBITDA has been presented in this Quarterly Report on Form 10-Q and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We consider Adjusted EBITDA to be an important indicator for the performance of our business, but not a measure of performance or liquidity calculated in accordance with U.S. GAAP. We have included this non-GAAP financial measure because management utilizes this information for assessing our performance and liquidity, and as an indicator of our ability to make capital expenditures and finance working capital requirements. We believe that Adjusted EBITDA is a measurement that is commonly used by analysts and some investors in evaluating the performance and liquidity of companies such as us. In particular, we believe that it is useful for analysts and investors to understand this relationship because it excludes transactions not related to our core cash operating activities. We believe that excluding these transactions allows investors to meaningfully analyze the performance of our core cash operations. Adjusted EBITDA should not be considered in isolation or as an alternative to cash flow from operating activities or as an alternative to operating income or as an indicator of operating performance or any other measure of performance derived in accordance with GAAP. In evaluating our performance as measured by Adjusted EBITDA, we recognize and consider the limitations of this measurement. Adjusted EBITDA does not reflect our obligations for the payment of income taxes, interest expense, or other obligations such as capital expenditures. Accordingly, Adjusted EBITDA is only one of the measurements that management utilizes.
A reconciliation to the nearest US GAAP measure is noted below.
| Wellness | Three months ended (unaudited) | |||||||
| ‘$000 | Q1'2017 | Q2'2017 | ||||||
| Total revenue | $ | 10,984 | $ | 12,927 | ||||
| Cost of sales | ||||||||
| Products | 912 | 1,124 | ||||||
| Labor | 5,309 | 5,783 | ||||||
| Occupancy | 1,771 | 1,983 | ||||||
| Other operating costs | 843 | 1,511 | ||||||
| Total cost of sales | 8,835 | 10,401 | ||||||
| Gross profit | 2,149 | 2,526 | ||||||
| Gross profit as a % of total revenue | 19.6 | % | 19.6 | % | ||||
| Depreciation and amortization | ||||||||
| Depreciation | 1,129 | 2,327 | ||||||
| Amortization | 586 | 592 | ||||||
| Total depreciation and amortization | 1,715 | 2,919 | ||||||
| Merger and acquisition and integration costs | 484 | 200 | ||||||
| General and administrative | 2,321 | 1,399 | ||||||
| Total general and administrative | 2,805 | 1,599 | ||||||
| Operating loss | $ | (2,371 | ) | $ | (1,992 | ) | ||
| Plus: | ||||||||
| Depreciation and amortization | 1,715 | 2,919 | ||||||
| Merger and acquisition, integration and one-time costs | 484 | 200 | ||||||
| Adjusted EBITDA income (loss) | (172 | ) | 1,127 | |||||
The following table provides a reconciliation of operating loss for its three operating segments and corporate to Adjusted EBITDA income (loss) for the three months ended
| Three Months Ended June 30, 2017 | ||||||||||||||||||||
| ‘$000 | Wellness | Technology | Intellectual Property |
Corporate | Total | |||||||||||||||
| Operating loss | $ | (1,992 | ) | $ | (742 | ) | $ | (126 | ) | $ | (2,270 | ) | $ | (5,130 | ) | |||||
| Plus: | ||||||||||||||||||||
| Depreciation and amortization | 2,919 | 162 | 6 | 7 | 3,094 | |||||||||||||||
| Stock-based compensation | — | — | — | 732 | 732 | |||||||||||||||
| Merger and acquisition, integration and one-time costs | 200 | — | — | 110 | 310 | |||||||||||||||
| Adjusted EBITDA income (loss) | $ | 1,127 | $ | (580 | ) | $ | (120 | ) | $ | (1,421 | ) | $ | (994 | ) | ||||||
About
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
ContactsFORM Holdings Jeff Sonnek ICR 646-277-1263 Jeff.Sonnek@icrinc.com