XpresSpa Group Reports Second Quarter 2018 Results
Continued
Products and Services Revenue Grew Slightly in Q2, Up 3.9% in First Half
Net Loss and Adjusted EBITDA Loss Narrowed Quarter-over-Quarter and Year-over-Year
Gross Margins Improved from 18% to 21% in Second Quarter
Increased Retail as a Percentage of Sales
“During the second quarter, we made refinements to our store remodel and new buildout process, and opened 2 spa locations, one in Houston’s
Mr. Jankowski concluded, “Looking into the second half of the year, we will rigorously continue our cost reduction initiatives and further streamline our corporate processes and related costs. We continue to compete in RFPs, but have implemented a thoughtful and regimented capital allocation framework which is focused on high-priority new store openings to ensure we are maximizing return on investment. We have three new store openings planned for the second half of 2018 and are also making progress on the implementation of our franchising model and expect to finalize some of these plans later in the year. Additionally, due to the high store-level contribution margins achieved in our international locations, we are looking at opportunities to expand our international footprint including additional locations in
Second Quarter 2018 Highlights
- Total products and services revenue from continuing operations, increased 0.9% to
$13.0 million in second quarter 2018 compared to$12.9 million in second quarter 2017 and increased 10.5% from$11.8 million in first quarter 2018.
- Same store sales decreased 3.5% as
XpresSpa was impacted by changes in airline assignments within key LaGuardia,John F. Kennedy , andLos Angeles terminals, and to a lesser extent management changes in other locations. Same store sales inPittsburgh and Charlotte were affected by new store openings, though overall revenue and profitability improved in those airports.- Closed 2 locations in the second quarter: Philadelphia Terminal D and the original Raleigh-Durham location, which was replaced by a larger, better located spa that opened in the first quarter.
- Opened 2 locations in the second quarter, including a location in Houston’s
George Bush Intercontinental Airport , and a smaller location inLaGuardia Airport .- Revenue was also affected by temporary closures related to spa remodels at
John F Kennedy Terminal 1 , which was closed for 15 days, andAmsterdam Lounge 3, which was closed for 51 days.- Retail sales comprised 17% of revenue in second quarter 2018, compared to 19% in second quarter 2017 and 14% in first quarter 2018.
- Product and service gross profit of
$2.7 million , or 20.5% margin, grew 12.5% from second quarter 2017 gross profit of$2.4 million , or 18.6% margin, and$2.1 million , or 17.7% margin, in first quarter 2018.
- Labor costs decreased through greater efficiency in staffing and scheduling.
- Product and operating costs decreased due to cost control and the complete transition of product sourcing to the Company’s strategic partner.
- General and administrative expenses of
$3.9 million were flat compared to$3.9 million in second quarter 2017 and decreased 15.2% from$4.6 million in first quarter 2018. Second quarter 2018 general and administrative included$0.4 million of severance expense associated with XpresSpa’s rightsizing of its corporate structure. Excluding severance, expenses decreased through the elimination of costs and overhead and the streamlining of processes, as well as lower stock compensation expense of$0.3 million in second quarter 2018 compared to$0.5 million in second quarter 2017. - Operating loss from continuing operations decreased to
$2.8 million from$4.6 million in second quarter 2017. - Net loss of
$3.5 million improved from a loss of$7.0 million in second quarter 2017. Net loss decreased through increasing revenue and improvements in gross margin and reductions in general and administrative costs excluding severance as well as lower depreciation compared to last year. - Adjusted EBITDA* loss of
$0.4 million improved from$0.6 million in second quarter 2017 and$1.5 million in first quarter 2018 through improved gross margin and reduced general and administrative expenses.
*EBITDA and Adjusted EBITDA are non-GAAP financial measures; see "Use of Non-GAAP Financial Measures" below. See tables below for abbreviated financial results for the three and six months ended
Balance Sheet & Cash Flows
As of
- Current assets of
$6.2 million - Cash and cash equivalents of
$4.5 million - Other assets of
$3.7 million - Current liabilities of
$8.1 million , excluding current portion of convertible notes - Convertible notes payable of
$2.3 million ($4.4 million face value) - Long term debt of
$6.5 million , to a related party
Included in total current liabilities is approximately
About
Forward-Looking Statements
This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These include statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "estimates," "projects," "intends," "should," "seeks," "future," "continue," or the negative of such terms, or other comparable terminology. Forward-looking statements relating to expectations about future results or events are based upon information available to
Investor Contacts
LHA
212.838.3777
xspa@lhai.com
Condensed Consolidated Balance Sheets
($ in thousands)
| June 30, 2018 (Unaudited) |
December 31, 2017 | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 4,458 | $ | 6,368 | ||||
| Inventory | 1,087 | 1,159 | ||||||
| Other current assets | 581 | 2,120 | ||||||
| Assets held for disposal | 109 | 6,446 | ||||||
| Total current assets | 6,235 | 16,093 | ||||||
| Restricted cash | 487 | 487 | ||||||
| Property and equipment, net | 15,576 | 15,797 | ||||||
| Intangible assets, net | 10,407 | 11,547 | ||||||
| Goodwill | — | 19,630 | ||||||
| Other assets | 3,658 | 1,686 | ||||||
| Total assets | $ | 36,363 | $ | 65,240 | ||||
| Current liabilities | ||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 8,079 | $ | 8,736 | ||||
| Convertible notes, net | 1,754 | — | ||||||
| Liabilities held for disposal | 40 | 3,761 | ||||||
| Total current liabilities | 9,873 | 12,497 | ||||||
| Debt | 6,500 | 6,500 | ||||||
| Convertible notes, net | 520 | — | ||||||
| Derivative warrant liabilities | 1,098 | 34 | ||||||
| Other liabilities | 360 | 370 | ||||||
| Total liabilities | 18,351 | 19,401 | ||||||
| Commitments and contingencies (see Note 13) | ||||||||
| Stockholders’ equity | ||||||||
| Series A Convertible Preferred stock, $0.01 par value per share; 500,000 shares authorized; 6,968 issued and none outstanding | — | — | ||||||
| Series B Convertible Preferred stock, $0.01 par value per share; 5,000,000 shares authorized; 1,666,667 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; 27,114,662 and 26,545,690 issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 271 | 265 | ||||||
| Additional paid-in capital | 291,025 | 290,396 | ||||||
| Accumulated deficit | (277,164 | ) | (249,708 | ) | ||||
| Accumulated other comprehensive loss | (276 | ) | (74 | ) | ||||
| Total stockholders’ equity attributable to the Company | 13,860 | 40,883 | ||||||
| Noncontrolling interests | 4,152 | 4,956 | ||||||
| Total stockholders’ equity | 18,012 | 45,839 | ||||||
| Total liabilities and stockholders’ equity | $ | 36,363 | $ | 65,240 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except share and per share data)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenue | ||||||||||||||||
| Products and services | $ | 13,038 | $ | 12,927 | $ | 24,838 | $ | 23,911 | ||||||||
| Other | — | — | 800 | 100 | ||||||||||||
| Total revenue | 13,038 | 12,927 | 25,638 | 24,011 | ||||||||||||
| Cost of sales | ||||||||||||||||
| Labor | 6,490 | 5,783 | 12,700 | 11,092 | ||||||||||||
| Occupancy | 2,160 | 1,983 | 4,220 | 3,754 | ||||||||||||
| Products and other operating costs | 1,709 | 2,753 | 3,216 | 4,607 | ||||||||||||
| Total cost of sales | 10,359 | 10,519 | 20,136 | 19,453 | ||||||||||||
| Depreciation and amortization | 1,843 | 2,931 | 3,496 | 4,657 | ||||||||||||
| Goodwill impairment | — | — | 19,630 | — | ||||||||||||
| General and administrative* | 3,904 | 3,864 | 8,500 | 8,857 | ||||||||||||
| Total operating expenses | 16,106 | 17,314 | 51,762 | 32,967 | ||||||||||||
| Operating loss from continuing operations | (3,068 | ) | (4,387 | ) | (26,124 | ) | (8,956 | ) | ||||||||
| Interest expense | (405 | ) | (177 | ) | (588 | ) | (366 | ) | ||||||||
| Other non-operating income (expense), net | 589 | (49 | ) | 499 | 65 | |||||||||||
| Loss from continuing operations before income taxes | (2,884 | ) | (4,613 | ) | (26,213 | ) | (9,257 | ) | ||||||||
| Income tax benefit (expense) | 48 | — | 132 | (227 | ) | |||||||||||
| Consolidated net loss from continuing operations | (2,836 | ) | (4,613 | ) | (26,081 | ) | (9,484 | ) | ||||||||
| Loss from discontinued operations before income taxes* | (510 | ) | (2,297 | ) | (1,115 | ) | (3,775 | ) | ||||||||
| Income tax benefit (expense) | — | — | — | — | ||||||||||||
| Consolidated net loss from discontinued operations | (510 | ) | (2,297 | ) | (1,115 | ) | (3,775 | ) | ||||||||
| Consolidated net loss | (3,346 | ) | (6,910 | ) | (27,196 | ) | (13,259 | ) | ||||||||
| Net income attributable to noncontrolling interests | (177 | ) | (100 | ) | (260 | ) | (176 | ) | ||||||||
| Net loss attributable to the Company | $ | (3,523 | ) | $ | (7,010 | ) | $ | (27,456 | ) | $ | (13,435 | ) | ||||
| Consolidated net loss from continuing operations | $ | (2,836 | ) | $ | (4,613 | ) | $ | (26,081 | ) | $ | (9,484 | ) | ||||
| Other comprehensive loss from continuing operations | (136 | ) | (107 | ) | (202 | ) | (151 | ) | ||||||||
| Comprehensive loss from continuing operations | (2,972 | ) | (4,720 | ) | (26,283 | ) | (9,635 | ) | ||||||||
| Consolidated net loss from discontinued operations | (510 | ) | (2,297 | ) | (1,115 | ) | (3,775 | ) | ||||||||
| Other comprehensive loss from discontinued operations | — | — | — | — | ||||||||||||
| Comprehensive loss from discontinued operations | (510 | ) | (2,297 | ) | (1,115 | ) | (3,775 | ) | ||||||||
| Comprehensive loss | $ | (3,482 | ) | $ | (7,017 | ) | $ | (27,398 | ) | $ | (13,410 | ) | ||||
| Loss per share | ||||||||||||||||
| Loss per share from continuing operations | $ | (0.11 | ) | $ | (0.24 | ) | $ | (0.99 | ) | $ | (0.50 | ) | ||||
| Loss per share from discontinued operations | (0.02 | ) | (0.12 | ) | (0.04 | ) | (0.20 | ) | ||||||||
| Total basic and diluted net loss per share | $ | (0.13 | ) | $ | (0.36 | ) | $ | (1.03 | ) | $ | (0.70 | ) | ||||
| Weighted-average number of shares outstanding during the period: | ||||||||||||||||
| Basic | 26,841,975 | 19,310,994 | 26,718,066 | 19,178,769 | ||||||||||||
| Diluted | 26,841,975 | 19,310,994 | 26,718,066 | 19,178,769 | ||||||||||||
| *Includes stock-based compensation expense, as follows: | ||||||||||||||||
| General and administrative | $ | 259 | $ | 543 | $ | 571 | $ | 1,090 | ||||||||
| Discontinued operations | — | 189 | — | 383 | ||||||||||||
| Total stock-based compensation expense | $ | 259 | $ | 732 | $ | 571 | $ | 1,473 | ||||||||
Use of Non-GAAP Financial Measures
(In thousands)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Products and services revenue | $ | 13,038,000 | $ | 12,927,000 | $ | 24,838,000 | $ | 23,911,000 | ||||||||
| Cost of sales | ||||||||||||||||
| Labor | (6,490,000 | ) | (5,783,000 | ) | (12,700,000 | ) | (11,092,000 | ) | ||||||||
| Occupancy | (2,160,000 | ) | (1,983,000 | ) | (4,220,000 | ) | (3,754,000 | ) | ||||||||
| Products and other operating costs | (1,709,000 | ) | (2,635,000 | ) | (3,216,000 | ) | (4,390,000 | ) | ||||||||
| Total cost of sales | (10,359,000 | ) | (10,401,000 | ) | (20,136,000 | ) | (19,236,000 | ) | ||||||||
| Gross profit | 2,679,000 | 2,526,000 | 4,702,000 | 4,675,000 | ||||||||||||
| Gross profit as a % of total revenue | 20.5 | % | 19.5 | % | 18.9 | % | 19.6 | % | ||||||||
| Depreciation, amortization and impairment | ||||||||||||||||
| Depreciation | (1,232,000 | ) | (2,334,000 | ) | (2,279,000 | ) | (3,468,000 | ) | ||||||||
| Amortization | (611,000 | ) | (597,000 | ) | (1,217,000 | ) | (1,189,000 | ) | ||||||||
| Goodwill impairment | — | — | (19,630,000 | ) | — | |||||||||||
| Total depreciation, amortization and impairment | (1,843,000 | ) | (2,931,000 | ) | (23,126,000 | ) | (4,657,000 | ) | ||||||||
| Total general and administrative expense | (3,904,000 | ) | (3,864,000 | ) | (8,500,000 | ) | (8,857,000 | ) | ||||||||
| Other operating revenue and expense | ||||||||||||||||
| Other operating revenue | — | — | 800,000 | 100,000 | ||||||||||||
| Other operating expense | — | (118,000 | ) | (64,000 | ) | (217,000 | ) | |||||||||
| Total other operating revenue, net | — | (118,000 | ) | 736,000 | (117,000 | ) | ||||||||||
| Operating loss from continuing operations | (3,068,000 | ) | (4,387,000 | ) | (26,188,000 | ) | (8,956,000 | ) | ||||||||
| Add: | ||||||||||||||||
| Depreciation and amortization | 1,843,000 | 2,931,000 | 3,496,000 | 4,657,000 | ||||||||||||
| Goodwill impairment | — | — | 19,630,000 | — | ||||||||||||
| Merger and acquisition, integration, and one-time costs | 605,000 | 310,000 | 605,000 | 836,000 | ||||||||||||
| Stock-based compensation expense | 259,000 | 543,000 | 571,000 | 1,090,000 | ||||||||||||
| Adjusted EBITDA loss | $ | (361,000 | ) | $ | (603,000 | ) | $ | (1,886,000 | ) | $ | (2,373,000 | ) | ||||
XpresSpa Group Inc.
Wellness Segment Same Store Sales Growth for Second Quarter 2018
($ in thousands)
Quarter Ended
| June 30, 2018 | June 30, 2017 | % | ||||||||||||||||||||||||||
| Comp Store | Non-Comp Store |
Total | Comp Store | Non-Comp Store |
Total | |||||||||||||||||||||||
| Revenue | $ | 10,933 | $ | 2,105 | $ | 13,038 | $ | 11,332 | $ | 1,595 | $ | 12,927 | (3.5 | %) | ||||||||||||||