XpresSpa Group Reports First Quarter 2018 Results
Product and Service Revenue Grew 7.4%
Adjusted EBITDA Loss Narrowed
Continuing Cost Reduction
Enters into
Extends Maturity of Existing Debt to
“As the leading on-the-go spa provider,
“Our immediate focus is on corporate expense reduction and store-level performance improvement to strengthen our foundation and accelerate 2018 growth. On the cost line, we eliminated over
First Quarter 2018 Consolidated Results Highlights
- Total revenue from continuing operations increased 13.7% to
$12.6 million in first quarter 2018 compared to$11.1 million in first quarter 2017.
- Product and service revenue increased 7.4% to
$11.8 million in first quarter 2018 compared to$11.0 million in first quarter 2017
- Same store sales decreased 1.6% as XpresSpa’s comparisons reflected strong growth in first quarter 2017 and as 69 days in first quarter 2018 were impacted by inclement weather, including 17 instances where airports in whichXpresSpa operates were closed
- Opened 3 new locations and closed 2 stores during first quarter 2018. New store openings included XpresSpa’s first off-airport location in theWestfield World Trade Center , a second location atRaleigh-Durham International Airport which replaced an existing location, and a second location atPittsburgh International Airport .
- Product and service gross profit was
$2.1 million , or 17.7% margin, in first quarter 2018 compared to$2.1 million , or 19.6% margin, in first quarter 2017
- Cost of sales increased year over year primarily due to the cost of labor and occupancy associated with new store openings.
- Gross margin compression resulted from higher than normal labor costs, partially associated with new store openings, weather-related store closings, and from the temporary decline in product sales associated with an adjustment period as sourcing was fully transitioned to XpresSpa’s strategic partner; this was normalized by the end of the quarter.
- General and administrative expenses decreased 8.0% due primarily to the Company’s streamlining of processes at the corporate level, as well as a reduction in stock-based compensation of
$0.2 million from$0.5 million as ofMarch 31, 2017 to$0.3 million as ofMarch 31, 2018 .
- Other operating revenue increased to
$0.8 million in first quarter 2018 from$0.1 million in first quarter 2017 as the Company sold certain patents inJanuary 2018 for net proceeds of$0.3 million and shares of common stock inMarathon Patent Group, Inc. that were valued at$0.5 million . Other operating revenues are generally nonrecurring and carry minimal operating expense.
- Net operating loss increased to
$23.1 million from$4.6 million in the first quarter of 2017
- Included in first quarter 2018 net loss is a$19.6 million goodwill impairment charge. The impairment to goodwill was a result of the structural changes to the Company, including completion of transition from a holding company to a pure play health and wellness company and change in CEO.
- Excluding this charge, the net loss of$3.5 million for first quarter 2018 decreased$1.1 million from first quarter 2017 due to incremental revenue attributable to new store openings and continued reductions in general and administrative costs.
- EBITDA* loss of
$1.5 million for first quarter 2018 improved$0.3 million from$1.8 million in first quarter 2017 through reduced store-level product and general and administrative expenses.
- Comprehensive loss, after discontinued operations, was
$23.9 million in first quarter 2018 compared to$6.4 million in first quarter 2017.
*EBITDA and Adjusted EBITDA are a non-GAAP financial measures; see "Use of Non-GAAP Financial Measures" below. See tables below for abbreviated financial
Balance Sheet & Cash Flows
As of March 31, 2018, the Company had:
- Current assets of
$6.3 million
- Cash of
$3.6 million
- Assets held for disposal of
$0.7 million
- Long-term debt of
$6.5 million with a related party.
Subsequent Event
On
On
“XpresSpa is close to generating sufficient cash to fund operations through the combination of operating the spas and our cost reduction initiatives particularly as we approach the seasonally stronger second and third quarters of the year,” said Mr. Jankowski. “While we consider our operating and growth needs to be fully funded through the end of 2019, as we move forward, we will continue to review our capital structure and our options to increase our financial flexibility, including the refinancing of our existing debt, and the reduction of our cost of capital.”
About
Forward-Looking Statements
This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These include statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "estimates," "projects," "intends," "should," "seeks," "future," "continue," or the negative of such terms, or other comparable terminology. Forward-looking statements relating to expectations about future results or events are based upon information available to
Investor Contacts
LHA
212.838.3777
xspa@lhai.com
| XpresSpa Group, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| ($ in thousands) | ||||||||
| March 31, 2018 (Unaudited) |
December 31, 2017 |
|||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 3,554 | $ | 6,368 | ||||
| Inventory | 1,050 | 1,159 | ||||||
| Other current assets | 1,000 | 2,120 | ||||||
| Assets held for disposal | 717 | 6,446 | ||||||
| Total current assets | 6,321 | 16,093 | ||||||
| Restricted cash | 487 | 487 | ||||||
| Property and equipment, net | 15,928 | 15,797 | ||||||
| Intangible assets, net | 11,007 | 11,547 | ||||||
| Goodwill | — | 19,630 | ||||||
| Other assets | 3,765 | 1,686 | ||||||
| Total assets | $ | 37,508 | $ | 65,240 | ||||
| Current liabilities | ||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 8,560 | $ | 8,736 | ||||
| Liabilities held for disposal | — | 3,761 | ||||||
| Total current liabilities | 8,560 | 12,497 | ||||||
| Debt | 6,500 | 6,500 | ||||||
| Other liabilities | 433 | 404 | ||||||
| Total liabilities | 15,493 | 19,401 | ||||||
| Commitments and contingencies (see Note 12) | ||||||||
| 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 as of March 31, 2018 and December 31, 2017 | 4 | 4 | ||||||
| Common stock, $0.01 par value per share; 150,000,000 shares authorized; 26,634,475 and 26,545,690 issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 266 | 265 | ||||||
| Additional paid-in capital | 290,707 | 290,396 | ||||||
| Accumulated deficit | (273,641 | ) | (249,708 | ) | ||||
| Accumulated other comprehensive loss | (140 | ) | (74 | ) | ||||
| Total stockholders’ equity attributable to the Company | 17,196 | 40,883 | ||||||
| Noncontrolling interests | 4,819 | 4,956 | ||||||
| Total stockholders’ equity | 22,015 | 45,839 | ||||||
| Total liabilities and stockholders’ equity | $ | 37,508 | $ | 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 March 31, |
||||||||
| 2018 | 2017 | |||||||
| Revenue | ||||||||
| Products and services | $ | 11,800 | $ | 10,984 | ||||
| Other | 800 | 100 | ||||||
| Total revenue | 12,600 | 11,084 | ||||||
| Cost of sales | ||||||||
| Labor | 6,210 | 5,309 | ||||||
| Occupancy | 2,060 | 1,771 | ||||||
| Products and other operating costs | 1,507 | 1,854 | ||||||
| Total cost of sales | 9,777 | 8,934 | ||||||
| Depreciation and amortization | 1,653 | 1,726 | ||||||
| Goodwill impairment | 19,630 | — | ||||||
| General and administrative* | 4,596 | 4,993 | ||||||
| Total operating expenses | 35,656 | 15,653 | ||||||
| Operating loss from continuing operations | (23,056 | ) | (4,569 | ) | ||||
| Interest expense | (183 | ) | (189 | ) | ||||
| Other non-operating income (expense), net | (90 | ) | 114 | |||||
| Loss from continuing operations before income taxes | (23,329 | ) | (4,644 | ) | ||||
| Income tax benefit (expense) | 84 | (227 | ) | |||||
| Consolidated net loss from continuing operations | (23,245 | ) | (4,871 | ) | ||||
| Loss from discontinued operations before income taxes* | (605 | ) | (1,478 | ) | ||||
| Income tax benefit (expense) | — | — | ||||||
| Consolidated net loss from discontinued operations | (605 | ) | (1,478 | ) | ||||
| Consolidated net loss | (23,850 | ) | (6,349 | ) | ||||
| Net income attributable to noncontrolling interests | (83 | ) | (76 | ) | ||||
| Net loss attributable to the Company | $ | (23,933 | ) | $ | (6,425 | ) | ||
| Consolidated net loss from continuing operations | $ | (23,245 | ) | $ | (4,871 | ) | ||
| Other comprehensive loss from continuing operations | (66 | ) | (44 | ) | ||||
| Comprehensive loss from continuing operations | (23,311 | ) | (4,915 | ) | ||||
| Consolidated net loss from discontinued operations | (605 | ) | (1,478 | ) | ||||
| Other comprehensive loss from discontinued operations | — | — | ||||||
| Comprehensive loss from continuing operations | (605 | ) | (1,478 | ) | ||||
| Comprehensive loss | $ | (23,916 | ) | $ | (6,393 | ) | ||
| Loss per share | ||||||||
| Loss per share from continuing operations | $ | (0.88 | ) | $ | (0.26 | ) | ||
| Loss per share from discontinued operations | (0.02 | ) | (0.08 | ) | ||||
| Total basic and diluted net loss per share | $ | (0.90 | ) | $ | (0.34 | ) | ||
| Weighted-average number of shares outstanding during the period | ||||||||
| Basic | 26,592,781 | 18,862,715 | ||||||
| Diluted | 26,592,781 | 18,862,715 | ||||||
| *Includes stock-based compensation expense, as follows: | ||||||||
| General and administrative | $ | 312 | $ | 547 | ||||
| Discontinued operations | — | 194 | ||||||
| Total stock-based compensation expense | $ | 312 | $ | 741 | ||||
| XpresSpa Group, Inc. | ||||||||
| Use of Non-GAAP Financial Measures | ||||||||
| (In thousands) | ||||||||
| Three months ended | Three months ended | |||||||
| March 31, 2018 | March 31, 2017 | |||||||
| Products and services revenue | $ | 11,800,000 | $ | 10,984,000 | ||||
| Cost of sales | ||||||||
| Labor | (6,210,000 | ) | (5,309,000 | ) | ||||
| Occupancy | (2,060,000 | ) | (1,771,000 | ) | ||||
| Products and other operating costs | (1,443,000 | ) | (1,755,000 | ) | ||||
| Total cost of sales | (9,713,000 | ) | (8,835,000 | ) | ||||
| Gross profit | 2,087,000 | 2,149,000 | ||||||
| Gross profit as a % of total revenue | 17.7 | % | 19.6 | % | ||||
| Depreciation, amortization and impairment | ||||||||
| Depreciation | (1,047,000 | ) | (1,134,000 | ) | ||||
| Amortization | (606,000 | ) | (592,000 | ) | ||||
| Goodwill impairment | (19,630,000 | ) | — | |||||
| Total depreciation, amortization and impairment | (21,283,000 | ) | (1,726,000 | ) | ||||
| Total general and administrative expense | (4,596,000 | ) | (4,993,000 | ) | ||||
| Other operating revenue and expense | ||||||||
| Other operating revenue | 800,000 | 100,000 | ||||||
| Other operating expense | (64,000 | ) | (99,000 | ) | ||||
| Total other operating revenue, net | 736,000 | 1,000 | ||||||
| Operating loss from continuing operations | (23,056,000 | ) | (4,569,000 | ) | ||||
| Add: | ||||||||
| Depreciation and amortization | 1,653,000 | 1,726,000 | ||||||
| Goodwill impairment | 19,630,000 | — | ||||||
| Merger and acquisition, integration, and one-time costs | — | 526,000 | ||||||
| Stock-based compensation expense | 312,000 | 547,000 | ||||||
| Adjusted EBITDA loss | $ | (1,461,000 | ) | $ | (1,770,000 | ) | ||
| XpresSpa Group Inc. | |||||||||||||||||||||||||||||
| Wellness Segment Same Store Sales Growth for First Quarter 2018 | |||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||||||||
| March 31, 2018 | March 31, 2017 | % | |||||||||||||||||||||||||||
| Comp Store | Non-Comp Store |
Total | Comp Store | Non-Comp Store |
Total | ||||||||||||||||||||||||
| Revenue | $ | 9,780 | $ | 2,020 | $ | 11,800 | $ | 9,940 | $ | 1,044 | $ | 10,984 | (1.6 | %) | |||||||||||||||