FORM Holdings Reports Third Quarter 2017 Results
Continued Progress Towards Transformation into Health & Wellness Pure-play
Accelerated XpresSpa Opening Schedule on Track for Remainder of 2017 and into 2018
Third Quarter 2017 Highlights
- Consolidated revenues were
$17.7 million in the third quarter of fiscal 2017 - Revenues in the Wellness segment, which consists of XpresSpa, were
$12.7 million for the third quarter of 2017, an increase of$0.8 million as compared to$11.9 million for the third quarter of 2016, which was prior to the XpresSpa acquisition
o XpresSpa year-over-year revenue grew approximately 6% (compared to the pre-acquisition third quarter 2016)
o Estimated 3%,$0.4 million , negative impact to revenue due to the impact of hurricanes Harvey and Irma
o 18.2% segment-level gross profit margin, or$2.3 million
o Excluding the additional$0.2 million of additional labor and other direct costs associated with the hurricanes and integration costs related to the acquisition, segment-level gross profit margin would have been 19.7%, or$2.5 million
o Wellness segment operating loss was$1.6 million , an improvement of$0.4 million from second quarter 2017
o Wellness segment Adjusted EBITDA* was$0.6 million
o Completed renovations to 4 locations
o Ended the quarter with 51 locations in 23 airports and opened three units subsequent to third quarter end
o Expects to end 2017 with 60 units in operation
o Implemented a new point-of-sale system with robust data analytics that is expected to result in improved operational efficiencies - Revenues in the Technology segment, which consists of Group Mobile, were
$4.9 million for the third quarter of 2017, an increase of$3.1 million as compared to$1.8 million for the third quarter of 2016
o Technology segment gross margins were 20.0% in the third quarter 2017, up from 11.1% in the same period last year - Subsequent to third quarter end, FLI Charge was sold to a group of private investors and FLI Charge management
- Consolidated operating loss from continuing operations was
$4.0 million and Adjusted EBITDA loss* was$0.6 million for the third quarter of fiscal 2017
*Adjusted EBITDA is a non-GAAP financial measure; see "Use of Non-GAAP Financial Measures" below.
FORM Holdings’ Chief Executive Officer,
“During the third quarter, we re-opened our flagship location in JFK’s terminal 4 after an extensive remodel and remodeled a number of our locations in
“We are proud of the partnerships we’ve put in place. Our agreement with Capelli New York to co-produce and sell XpresSpa’s line of branded travel and spa products and accessories is a great example of how we are working toward improving our customer experience while providing the Company with additional revenue opportunities. Our partnership with Nordic Cryotherapy shows our ability to innovate and demonstrates the higher margin services which we intend to launch in the future. We look forward to sharing several other developments in the near future which build upon our strategy of expanding our addressable market and raising XpresSpa’s profile in the industry.
“Within our Technology segment, our recent realignment is helping better position the organization to drive high margin sales and ensure we maximize value during this divestment process. We are committed to focusing on the growing health and wellness industry and parting with non-core assets, which began with the sale of FLI Charge following the close of the third quarter.”
2017 Outlook
Mr. Perlman concluded, “We will continue to build upon our leadership position in the rapidly expanding health and wellness industry by leveraging our existing XpresSpa platform through additional unit expansion, product and service enhancements and targeting new complementary channels of growth. In addition to the six units already opened this year and six we anticipate opening before year end, we already have nine units in the pipeline for 2018. The 2018 pipeline consists of units sourced through RFPs and direct negotiations with airport concession operators. We intend to continue to grow our brand through a variety of initiatives, including changing our company name to better align with our mission, as well as exploring franchising opportunities. We have been encouraged by the preliminary indications of demand to franchise XpresSpa, both in
Operating Results
For the third quarter of fiscal 2017, the Company reported consolidated revenue of
Consolidated 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 indicator 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.
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 September 30, 2017 | ||||||||||||||||||||
| Wellness | Technology | Intellectual Property |
Corporate | Total | ||||||||||||||||
| Total revenue | $ | 12,652,000 | $ | 4,879,000 | $ | 200,000 | $ | — | $ | 17,731,000 | ||||||||||
| Cost of sales | ||||||||||||||||||||
| Products | 1,005,000 | 3,902,000 | — | — | 4,907,000 | |||||||||||||||
| Labor | 6,458,000 | — | — | — | 6,458,000 | |||||||||||||||
| Occupancy | 1,950,000 | — | — | — | 1,950,000 | |||||||||||||||
| Other operating costs | 934,000 | — | 126,000 | — | 1,060,000 | |||||||||||||||
| Total cost of sales | 10,347,000 | 3,902,000 | 126,000 | — | 14,375,000 | |||||||||||||||
| Gross profit | 2,305,000 | 977,000 | 74,000 | — | 3,356,000 | |||||||||||||||
| Gross profit as a % of total revenue | 18.2 | % | 20.0 | % | 37.0 | % | — | 18.9 | % | |||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Depreciation | 1,110,000 | 24,000 | — | 7,000 | 1,141,000 | |||||||||||||||
| Amortization | 597,000 | 150,000 | 6,000 | — | 753,000 | |||||||||||||||
| Total depreciation and amortization | 1,707,000 | 174,000 | 6,000 | 7,000 | 1,894,000 | |||||||||||||||
| General and administrative | ||||||||||||||||||||
| Stock-based compensation | — | — | — | 706,000 | 706,000 | |||||||||||||||
| Other general and administrative | 2,237,000 | 1,293,000 | (149,000 | ) | 1,386,000 | 4,767,000 | ||||||||||||||
| Total general and administrative | 2,237,000 | 1,293,000 | (149,000 | ) | 2,092,000 | 5,473,000 | ||||||||||||||
| Operating income (loss) from continuing operations | $ | (1,639,000 | ) | $ | (490,000 | ) | $ | 217,000 | $ | (2,099,000 | ) | $ | (4,011,000 | ) | ||||||
| Plus: | ||||||||||||||||||||
| Depreciation and amortization | 1,707,000 | 174,000 | 6,000 | 7,000 | 1,894,000 | |||||||||||||||
| Stock-based compensation | — | — | — | 706,000 | 706,000 | |||||||||||||||
| Merger and acquisition, integration and one-time costs | 529,000 | 290,000 | — | — | 819,000 | |||||||||||||||
| Adjusted EBITDA income (loss) | $ | 597,000 | $ | (26,000 | ) | $ | 223,000 | $ | (1,386,000 | ) | $ | (592,000 | ) | |||||||
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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
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Jeff.Sonnek@icrinc.com