Q4 2021 XpresSpa Group Inc Earnings Call
Greetings and welcome to express spar group's fourth quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn this conference over to James Berry Chief Financial Officer. Thank you Sir you may begin.
Good afternoon. Thank you for joining us today and for your interest in express bag group before a new CEO Scott Milford offers his prepared remarks, and I review fourth quarter and full year 2021 financial results I first need to advise you of the following.
Comments made on today's call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These forward looking statements are based on current assumptions and opinions that involve a variety of known and unknown risks and uncertainties.
Actual results may differ materially from those contained in or suggested by such forward looking statements.
Factors that might cause such differences include those set forth from time to time in our S. E C filings, including our report on Form 10-K for the year ended December 31st 2021, which will be filed by the end of the month as well as our earnings release issued this afternoon, along with other current and periodic reports that we file with the S. E C.
Please note that the financials mentioned on this call are preliminary and final financial results and other disclosures will be reported in our annual report on Form 10-K for the year ended December 31st 2021, and May differ from the results and disclosures in the documents due to among other things the completion of final review procedures the occurrences.
Subsequent event with the discovery of additional information.
I'd now like to turn the call over to Scott.
Yeah.
Thank you James and Hello, everyone.
We appreciate you taking the time to join US this afternoon.
Since taking over as CEO in January I had been working with my leadership team to develop a set of strategic imperatives that we believe will accelerate our evolution as a leading health and wellness provider for people on the go.
I'm incorporating my prior experience with express spa as well as my experience leading teams to help us realize the many opportunities. We believe are achievable at this company as we pursue generating $500 million in revenue by 2025.
And I'll share the strategic imperatives that I believe will get us there in just a moment.
I share the collective disappointment in our stock price.
One of our shareholders to know that we are doing everything we can to strengthen the foundation of our business to improve our stock value and return to our investors.
Be assured that the interest of the board and management team are firmly aligned with your desire and that the efforts. We engage into accomplish are designed to have both short and long term positive impacts.
In the near term, we will continue to be active in repurchasing shares under our prior authorization.
We are doing this because we believe there is a disconnect between the stock's current price and our view of its value.
Adding further to this during most of the first quarter of this year, we were subject to blackout periods that restrained our ability to do so even as the share price has declined.
However.
Because we were able to accelerate the delivery of our fourth quarter reporting two weeks compared to when we would have reported it in previous years we.
We have a wider window to repurchase shares before the onset of our next blackout period, and we intend to do so.
Briefly on the quarter.
We generated our highest quarterly topline effort with consolidated revenue, surpassing $29 million and achieved our second ever full quarter of profitability as measured by both net income and adjusted EBITDA.
Net income came in at $3 $3 million and adjusted EBITDA reached four and a half million dollars.
These are all incredible achievements.
Our liquidity position also remains strong.
Our cash balance has grown to 105 and a half million dollars.
And we had positive working capital of $89 2 million with no long term debt.
And with a healthy balance sheet as a foundation.
We'd like to share how we intend to leverage our past accomplishments to grow our future.
As we all know the pandemic has proven to be the great equalizer.
And we believe that now more than ever consumers are focused on their wellbeing safety in house.
And even as restrictions begin to lift.
We are confident that the safety and wellness infrastructure, we've built.
With our airport footprint I was just start will serve our long term growth.
To ensure we're able to deliver on that expectation. Our first strategic objective has to be to create and leverage our fully integrated set of products and services that are both profitable and scalable across our portfolio of brands.
Being able to identify and execute a unified set of services supported by a relevant retail offerings.
And the technology platform to optimize efficiency in delivery across all three of our brands is critical to driving more customer traffic and more revenue.
This will include efforts to invigorate post Covid diagnostic health services, and incorporating them into our express check and even certain express par locations.
We will also incorporate wellness services, such as hydration and vitamin D therapies, all higher margin services into our express check in express Spa locations.
Additionally, we have already begun to expand our retail strategy not only adding more products for sale.
But aligning those products more efficiently to our service offerings.
For example.
Adding fortified water and hydration packets.
The delivery of an onsite hydration Rd.
We're adding muscle relaxation, Pat patches to a neck or back massage.
<unk> treatment, even after delivery of the surface.
We have also begun to work on a set of health and wellness kits the customers will be able to purchase at our locations and online.
Are specifically designed to address issues affecting travelers <unk>.
Including sinus and respiratory issues traveling xiety sleep and wellbeing.
All supported by an e-commerce platform that allows for purchase long after the customer leaves our location.
Yeah.
This integration of products and services strategy.
Also allows us to further advance our work to unify under a single brand name.
We have already begun this effort and will report on our progress at a later date.
Our second strategic imperative will be to build our capability for delivering health and wellness services outside the airport.
We believe operating outside of the airport complements our offering.
And allows us to scale grows faster without many of the requirements imposed by airports and concessionaires to locate in an airport.
We also believe we can accomplish this as a natural expansion of our treat brand.
We think there are opportunities in other travel venues like the cruise business as well.
And we see businesses, who are starting to return to the office as an opportunity to sell treat health and wellness services as well.
We have already begun work towards the strategic priority and we will be announcing our first off airport partnership soon.
Yeah.
Aligned with our growth strategy outside of the airport. We are also looking to further expand internationally.
And while international travel has not picked back up to pre pandemic levels.
We want to be opportunistic in our approach.
Taking advantage of the current market to grow in preparation for a full return of travel.
We already have strong relationships with our partners operating express pause in Dubai, Amsterdam, and soon in Istanbul, and expect to leverage those relationships further.
We also intend to leverage our strong cash position to grow through acquisition.
And as those opportunities arise.
We will report our progress in subsequent calls.
We believe our strategy for international expansion further advances our bio surveillance efforts as well, especially as it relates to the work. We are currently doing with the CDC.
Despite the progress being made to manage the pandemic.
<unk> an ongoing threat.
Whether it's another variant for a new virus altogether.
And having boots on the ground internationally will help to further efforts to protect our country when the next threat emerges.
And finally.
A strong growth platform like we are building.
Has to be supported by an infrastructure that enables scalable and efficient growth.
Our fourth strategic imperative.
He is focused on building an organization that can not only facilitate growth.
As the size and scale that optimize cost and allows us to dedicate more of our available cash to drive shareholder value.
And long term viability.
Our efforts to date include investments we are in the process of making.
To build an efficient supply chain that serves our brands collectively.
Hiring key leaders with experience in brand and sales building.
And further investments in technology to streamline and infrastructure that was largely manual and cost effective.
My team and I are committed to delivering on these strategic imperatives and I expect to report on our progress as milestones are reached and during our regular earnings calls.
I am very fortunate to work with such a dedicated group of leaders in the pursuit of growth.
And I want to thank the hard work and dedication of our support and field teams, who each and every day deliver on our vision to transform care for people on the go.
And now let me.
Sure our business update.
Beginning with express check.
Testing volumes were strong during the fourth quarter as James will address.
<unk> and second quarter revenue and record profitability.
This was driven by increases in leisure travel during a rebounding holiday season, and continued improvement in business travel, although at a slower pace.
The rise of the Omicron, Barry and certainly drove more testing and.
And because of the relationships, we fostered with test kit providers.
We didnt suffer as much as many of the other testing centers when lines increased at the end of the year.
In the first quarter of this year.
Just seasonally a weaker quarter for airport traffic than the fourth quarter following the holidays we.
We have seen a slight reduction in testing volumes.
This is not surprising to us.
And perhaps compounded by hesitancy to embark on European travel in particular, given what's going on with Russia and Ukraine.
But even as vaccinations are now more widely available.
And the Omicron variant has waned in the U S.
We have not seen the same reduction in overseas trap and overseas and are seeing only a modest relaxation and testing requirements.
This demonstrates the continued need and importance for reliable and convenience bio surveillance testing within an airport setting.
Bill.
We recognize the importance of evolving express check into something that goes beyond COVID-19 testing.
Which is why we are integrating our health and wellness services across our brands, including express check.
Having already established the footprint with Covid testing.
Now have a platform to augment our services for the traveling public.
Supplementing COVID-19 testing with other higher margin medical and wellness services.
As vitamin Ids boosters.
Well from the treat model.
Importantly, these services are sustainable by their very nature, and will have a longer shelf life and COVID-19 testing.
Express check which is now led by Ezra Ernst who also heads our recent hyper point acquisition. Currently consists of 15 locations across 12 airports.
It is the largest COVID-19 testing company in U S airports.
Most recently, we opened in Hartsfield Jackson Atlanta Airport in October where we converted a legacy express spa location located in concourse E.
And then Denver International Airport.
In the Great Hall pre security early this year in February .
We have one express check that will open shortly in Orlando pre.
Pre security in the South walk area of the main terminal.
Under previous leadership, we had shared the potential to open two to four additional express check locations. This year.
However, given our shift in thinking our intention now is not to proceed with additional openings at this time, but well look at how we leverage existing locations across all our brands.
Integrate and support our bio surveillance efforts.
Yeah.
Notably.
The overwhelming majority of patients are choosing the rapid PCR test.
Which is at a substantially higher price point of 200 to $275.
Versus the $75 standard PCR test.
This has dramatically elevate at the margin profile of the business and supported us generating $9 $7 million in operating cash flow for the year.
We also administered 1100 16 rapid PCR tests per day during the fourth quarter.
Up from 789 rapid PCR tests per day during the third quarter and 402 tests per day during the second quarter.
As a percentage of all Covid tests rapid PCR test accounted for 98% of those during the fourth quarter and 67% during the third quarter.
Also driving express check success is our ability to form working relationships with major airlines and government agencies.
Our initial contract for bio surveillance with the C. D C. At our four major airports was for $2 million.
But has since been extended and expanded for an additional $3 6 million totaling $5 $6 million.
This expansion included additional pool testing beyond the initial India pilot.
Adding the U K, France, Germany, and South Africa, among other at risk countries.
Our bio surveillance platform now has the ability to pivot rapidly to monitor additional countries.
The threat of a new variant or virus changes.
Most of the initial $2 million in revenue was recognized in the fourth quarter last year, but.
But the remainder of the contract revenue will be recognized during the first half of this year.
We believe the program demonstrates the confidence that they have placed in us and are hopeful that it will lead to further expansion.
We will be releasing data in the coming weeks, which will demonstrate the efficacy and value of the robust.
Oh surveillance platform, we have built with our network of partners.
Importantly, the program can similarly be implemented for any incoming port beyond airports upon cdc's direction.
If this program eventually expands further.
We could see this as a potentially significant business line extension for express check with.
With the foundation of this government contract already in place.
Now turning to our airport Spa business.
We currently have 16 spas operating domestically.
And have four to five additional locations slated to open.
Performance continues to improve as we are still running modified operating hours.
But we took a price increase in October which is helping us as well.
Our domestic express spa locations are operating approximately eight hours per day during the busiest hours.
A pair to up to 16 hours per day pre pandemic and.
Sales volumes are about 50% of pre pandemic levels, but sales per hour are tracking at about 90% of pre pandemic levels.
We are seeing renewed interest in wellness services among travelers along with a willingness to spend additional dollars on products and services that will improve their well being while they travel.
And as we roll out new services that are more on trend with today's travel consumer we expect to see improvement in service sales and related retail revenue.
Further.
We expect to drive revenue through the delivery of integrated services, where we're able to which will dramatically improve the size of our surface footprint.
To bring this integrated strategy further to life. In response, we are currently looking at our ability to deliver minor health services, such as cold and flu diagnostics or hydration therapy, and a spa environment.
And we will look at other services, we can add to the business to further drive a unified offering across all brands.
Internationally, there are six express spa locations operating.
These consist of three in Dubai and <unk>.
Three operating out of Schipol Amsterdam Airport.
We are preparing for further expansion to other major global hubs, including our newest location in Istanbul, Turkey.
Where we have signed to build up to five locations at that airport and expect to open the first stores. This summer.
And now let's discuss tree.
Our newest brand is designed for people on the go looking for a one stop travel health and wellness solution.
Suite of integrated services.
Health and wellness services for travelers include diagnostic testing for virus cold flu and other illnesses as well as IV drip and hydration infusion therapy.
Travelers can also purchase interactive wellness services like self guided yoga meditation and low impact weighed exercises.
All in a relaxing environment, where they can unplug from the hectic pace at the airport Andrew.
And renew themselves before or after their trip.
Through our analysis, we believe airport passengers typically have the dwell time of around 70 minutes once they clear security and board their flights.
And with much more focused today on health and improving individual well being.
We see a clear opportunity to address these needs to treat and the delivery of a more integrated product strategy and our other brands.
We are currently open at JFK and will be opening soon in Phoenix Sky Harbor, and Salt Lake City.
While we originally anticipated a more limited demographic centered on an affluent organizer and manager of family travel.
We believe there is an opportunity to attract a wider variety of discerning consumers to the treat brand with a more varied array of products and services.
Phoenix, Unlike JFK will be our first pre security location when.
We expect to learn a great deal as it relates to differences in customer buying patterns pre versus post security.
Our third treat.
At Lake City will be our first location value engineer from our original JFK and Phoenix design.
It is a post security location in a former express spa.
It is also the first treat to provide a more open floor plan and use hybrid rooms that can offer both health and wellness services in the same room.
Providing a greater opportunity to meet travel demand.
It will also offer more retail products.
We think the open floor plan.
With a cost efficient design at about half that of JFK.
We'll be our default design going forward.
Creating a more inviting experience to passers-by, because they will be able to see more retail and more activity to catch one XI.
We intend to rollout additional treat locations across other major U S airports this year and next.
Our growth strategy will include both Greenfield builds.
Well as leveraging existing spot an express check locations.
To convert to this brand.
<unk> also offers a website at www dot treat dot com.
And the mobile app to complement the offering with relevant health and wellness content designed to help people on the go with information that could impact their travel.
The platform provides travelers access to a comprehensive online marketplace of services, including global illness tracker tools, such as the Covid requirements map.
On demand chat care by a licensed provider.
Our health wallet to store personal and family Medical Records.
And the schedule or to arrange for direct care at one of our onsite locations.
We will see a modest revenue contribution from treat this year.
But do you have the brand as a mid term play with long term value creation.
This is because it extends our health and wellness leadership position in travel.
Offering multiple revenue channels outside of just operating in the airports.
Treat will be the brand re leverage and are out of airports strategy.
Finally.
We recall that in January we acquired hyper point, a leading digital health care and data analytics relationship marketing agency.
Servicing the global health care and pharmaceutical industry.
Hyper point has significant experience and patient and health care professional marketing and deep technological experience with customer experience management and data analytics.
We have been working with hyper point for nearly two years.
And their teams and suite of services and technology, we used to develop and deploy the technological infrastructure for express check.
Hyper point is now operating as a standalone entity led by its CEO as Ernst who is also now serving as CEO of express check in reporting to me.
Yeah.
In this capacity he is spearheading efforts to integrate express checks COVID-19 testing business with hyper points customer experience management technology and data management know how.
This has the potential to further product and service offerings to additional airports other travel centers and other business customers within the health care and pharmaceutical verticals.
We look forward to sharing further details in upcoming quarters.
And so we.
We now have a portfolio of health and wellness brands with a vision of expanding our services and products, both inside and outside of the airports pursuing accretive acquisitions and other strategic transactions, where appropriate to further broaden our service and retail offerings.
The outstanding results, we are generating today are only the beginning.
They lay the foundation for the long term success of this developing global Omni channel company and increasing value for it shake out.
Stakeholders.
With that I'll turn it over to James.
Thank you Scott.
I will now detail, we generated incredibly strong financial results during the fourth quarter last year, marking a fantastic end to what was a great year for our business.
<unk> rose to $29 $4 million compared to $3 million in the fourth quarter of the prior year. The increase was primarily due to the recognition of and consolidation of revenue from the 14 Express check locations plus the CDC contract totaling $26 $9 million.
We also generated revenue from services and products of $2 1 million related to cope reopened express locations.
Cost of sales increased to $15 8 million from 2.4 in the prior year fourth quarter. The increase was primarily due to the cost of sales incurred an express check offset by a decrease in the variable cost associated with the decline in the express spa revenues and decreases in occupancy cost as a result of rent concessions received from the <unk>.
Airports during COVID-19 .
General and administrative expenses were $9 8 million as compared to approximately $5 million for the year ago comparable period. This increase was related primarily due to costs associated with express check the development of treat and staffing to support the record revenues somewhat offset by reduced variable costs related to the closed express.
Locations.
We are proud to report we realized an operating profit in the quarter, a $2 3 million as compared to an operating loss of $17 4 million in the prior year fourth quarter.
Primarily due to higher revenue and recognize and a recognized loss on revaluation of warrants and conversion options in the prior year in 2020, we generated net income attributable to common share holders for the quarter of $3 $3 million compared to a net loss attributable to common shares.
Holders of $15 $7 million in the prior year fourth quarter.
Finally, with respect to our GAAP financials, our liquidity remains strong with cash and cash equivalents totaling $105 $5 million as of December 31, 2021, we generated operating cash flow of $9 $7 million from them, which we deployed $7 3 million for share repurchase.
Yes.
During the fourth quarter, we repurchased four and a half million shares outside of the blackout period as of the end of the year at $10 3 million shares remained available under the 15 million share repurchase program announced last August 31st 2021.
In 2021 in total we repurchased four 7 million shares but had been severely restricted due to blackout periods.
Of course, if we had been able to do so we would have repurchased Furthermore, and given the current share price, which we view is vastly undervalued, we intent to be more active repurchasing our stock within the limits of their blackout periods, because it presents such a good investment opportunity.
On a non-GAAP basis, adjusted EBITDA was $4 $5 million compared to the adjusted EBITDA loss of $6 7 million in the prior year fourth quarter. This represents an improvement of $11 $2 million and it's indicative of express checks profitability.
We define adjusted EBITDA as earnings before interest taxes, depreciation and amortization expense and adjusted for stock based compensation and impairment and disposal of assets.
We do consider it adjusted EBITDA being important indicator for the performance of our operating business Express check in particular, we believe it's useful for analysts and investors to understand that adjusted EBITDA excludes certain transactions not related to our core cash operating activities, which are primarily related to our express check wellness center.
We believe that excluding these transactions allow investors to meaningfully analyze the performance of our core cash operations.
We also furnished in the earnings released some interesting metrics with respect to the growth in patients that we have tested over the past four water along with the percentages that are opting for rapid and rapid PCR test. Please review these at your convenience, but we think the takeaway here is that we are serving more patients and more of those patients.
Using the lucrative rapid Pcr option.
Finally, we are reiterating our revenue guidance for 2022, we project over $100 million in revenue by 2025, we continue to project $500 million in revenue.
Thank you for your time. This afternoon, we would now be happy to take your questions. We will begin by taking questions from our covering analysts and then turn the call over to Investor relations to ask questions from our retail shareholders, who were invited to submit questions ahead of today's call.
At this time, we'll be conducting a question and answer session.
To ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue for participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star keys, one moment, while we poll for questions.
Our first question comes from the line.
Theory rollout with water power research you May proceed with your question.
Okay.
Thank you good afternoon, Scott good afternoon James.
I'm going to have to take care of and maybe see if we can start with the <unk>.
CDC relationship you've had basically I talk contract with the CDC.
But do you think they're looking to develop.
To procure it.
More permanent.
Permanent capability to.
To deal with potential new viruses and so on.
I'm happy to answer that.
I think the CDC has been very happy with.
With the work that we've done.
In partnership with them.
I think the our ability to pivot quickly in the airports that we were initially.
Initially conducting a pilot and then expanded services.
Were demonstrated.
By that.
We were the first week.
We were the first.
Service pooling service to identify the B, a two virus and to be a three virus when it hit our shores.
And I think because of that we were able to deliver a sample to the CDC and they were able to process that sample.
Within seven days.
As a result of that I think the C. D. C. Again is very pleased with the progress of the work that's being done.
And we look forward to continuing the partnership.
Great.
Moving to the to the Kobe test.
Asian countries had been very yeah, I've had many restrictions on travel and I would imagine at some point in time does my it was my Clifton and enable more passenger volumes do you have any update in terms of primarily China, and maybe India. The two largest destination whether.
We are seeing any signs of that.
Making travel EU.
And changing the changing their requirements.
I have not heard of any changing requirements for a travel out of Asia I think.
They're they're still requiring tests.
Out of India. There was a report I read recently about them.
Relaxing some of their requirements towards the end of this month.
But I think if you're if you read the if you read the news.
Both in Europe and in Asia. The Omicron variant is starting to grow again and so.
<unk>.
Right.
I'm I'm unsure what what additional relaxation will happen over time.
Yeah.
Okay, well maybe.
Yeah, there's been some quarantine requirements I think he's still get.
Get relaxed and Mike can I suppose similar type of volume.
Yes.
Okay, maybe just just one more question. So extra check has been focused on COVID-19 tests with obviously a lot of success in 2021.
You mentioned in the in your remark that you are considering maybe add.
Adding to the menu there based on what you're seeing is in high demand with our with the treat.
Location, and maybe with the Sky location can you give us a bit more color. There how quickly could you add to the to the menu of services that express check.
Yes.
Thank you for asking that.
We are.
Because of our express check locations, having medical personnel on the premises and the provider on the premises. We're in a unique we have a unique opportunity to be able to deploy some of those treat services.
Much at a much faster pace.
Things like vitamin IV is hydration therapy.
Vitamin C and B 12 injections to start and then over time, introducing additional health services cold flu.
Testing as well as other diagnostic services that we have rolled out and treat and can easily bring into the express check environment.
Great.
Full color congratulation on the quarter and thank you for your pleasure discussion.
Thank you Teri, Thank you very much.
Our next question comes from the line of Scott Buck with H C. Wainwright you May proceed with your question.
Hi, Good afternoon, guys congratulations on all the progress.
Thank you.
No.
My first question Scott given some of the I guess tweaks in the strategy do you feel like the business on the corporate side you have everything you need or is there a requirement of additional investment whether it's head count or.
Some other type of cost infrastructure to help you.
So the business like you'd like to.
Yeah. So so as we start to lay out these strategic imperatives, I think theres a couple of things that we're gonna be looking to make investments in them.
We had already begun the process for looking for a new mark.
Looking for a marketing leader.
We think.
That has been a part of the business that has not had a lot of attention paid to it in the past.
And even though we have a a a group of eyes that walk around the airport.
Or that are somewhat.
That are somewhat contained.
We still think that there is an opportunity to help customers identify need and then let them see that we are the provider of that need for them.
So that's one of the one of the areas that we're making some investments in I think the other.
It is investments in our.
Our supply chain capability and building a more robust fulfillment capability, if we intend and we fully intend to improve and increase our retail offering we need that infrastructure built so that we can.
Optimized delivery.
And which will help save us on margin.
But it will also increase the quality of the products and the timing of when the products are delivered to consumers. So those are two of the areas that were.
Specifically looking to make investments in and will continue to make.
Investments in building up and showing up our digital infrastructure.
And instead of it supporting.
Three distinct brands treat express check in and express Spa, we will look to integrate that more holistically. So that we can we can leverage things like our patient schedule or et cetera.
In a much more efficient way.
Alright, that's great that's really helpful color.
I know, it's early on untreated and Oh, you mentioned, we should think of it as a providing some incremental revenue this year, but not a near term play well, but what has been kind of the initial feedback on that first store at JFK and then what's been the initial feedback on the online online store.
So the feedback on the on the physical location has been has been positive we've seen.
We've seen customers.
Very engaged.
As they come in.
Where we're actually and this is what's informed some of our discussion around the type of customer that we're.
That we're appealing to.
We had we had initially and are outset focused our attention on.
A generally a female skewing demographic.
That was largely affluent and and the organizer and manager of travel.
But but anecdotally we're seeing.
We're seeing.
More men come into our location.
Seeing the use of our rooms for four just breaks instead of using them for wellness services there, they're using the time blocks that they're paying for just to go in and chill out in.
In the room and then.
Leverage other services like our shower.
For example, and mind you, we only opened a location in December . So so we're still we're still looking at very early returns on the feedback we're seeing.
Interest in our vitamin Ivs are b 12, and see injections as well those kinds of services are starting to bear fruit for us.
As well as the ubiquitous COVID-19 testing.
<unk>, which is available.
Think.
That coupled with some interest in in our retail and again theres opportunity for us to do.
To do more work too.
Two to get the word out around our retail offering and expanding our retail offering.
Both on the treat side and on and on the express checking and express Baas side and.
And so the the.
We have a fantastic offering.
On online, but I think there's opportunity for us to continue to look at that and refine it further.
So that we can add more more users down the road.
And I think.
As we look at our product as we look at the treat product and make treats more available to consumers in other airports.
That's very helpful and then on M&A.
Clearly you had.
Quite the bridge to go from.
Go to $500 million in revenue by 2025, when you think about M&A. What specifically are you looking for or is it something is it a retail outlet that already has a footprint or is there a piece of tech or you know.
Any kind of color you can provide us there would be a it would be great.
Yeah, I I think what we're gonna be looking.
We're gonna be looking for acquisitions that are obviously accretive to revenue.
And that complement our core business that that may be.
As you said a piece of technology that greatly enhances the offering we're able to give to our consumers.
But ideally what what we would likely be looking at is local regional players are in markets, where we can complement our existing health and wellness offerings.
For the consumers both inside and outside the airport.
Okay.
Alright, that's that's very helpful. I appreciate it all the time guys and congrats again on the quarter.
Thank you Scott.
Thanks, Scott I'd.
I'd like to turn it back over to Investor Relations.
Thank you I'm going to just read some of the questions that have come in to the email address <unk> first question is the following.
Why not change the name of the company and ticker to something more relevant to where you are headed.
Yeah, I can take that James.
As I referenced earlier in our first strategic imperative.
What we want to do is integrate a core set of products and services across all three brands. Once we start to do that then it paves the way for us to begin to transition from our family of brands to a single brand with a single name.
So it is absolutely our intention to do just that.
As it makes sense for us to do it and as consumers can relate more to the product offerings, we are giving them.
Okay.
Next question is glad to see youre going to be more active repurchasing shares wondering if your intention is to resource. This authorization and then get approval for another authorization.
James do you would you like to answer that.
Sure.
As we've stated.
Stated both of US as stated we firmly believe that our stock is undervalued the price of our stock is undervalued to the value that we pursue we see in our company and we will continue to do a buyback of shares as it makes sense for the business.
We do need to effectively balance you know any investments that we need for the growth of the business including acquisitions.
With the investments in the buyback each of which is as is done for.
For the improvement of shareholder value. So it will be an ongoing effort and our commitment to do both effectively.
We will be in place.
Right.
Question on your express check leases are any of them coming due over the next few months and will you renew them, even if they cannot be converted to treat locations.
You know some of our express tests leases are month to month, and while others are longer term leases.
And and I think it's worth mentioning that while we were at the recent acts and airport Concessionaires conference. Many of the airport partners expressed a desire to extend our leases and express test with the belief that we are a valuable partner in the airports longer term pandemic and virus.
Lance program.
We will continue to evaluate the integration of our product and service offerings across the three locations.
We want to make optimized decisions about which leases make more sense and should we extend them should we renew them and whether or not that that allows our other businesses the opportunity to grow.
How do you know that lower testing volume is seasonal or due to relaxation of restrictions or maybe because there's more testing availability outside of the airport.
How do you view the testing business now that case numbers are coming down and maybe you can comment on testing numbers. So far to date in the first quarter.
Yeah. Good question.
You know normal airport traffic is lower during the first three months of the year as travelers tend to recover from the holidays.
And what we have seen over the past two years as the Covid testing rates tend to rise and fall with seasonal changes and airport traffic.
As you mentioned.
Some of the countries in Western Europe have begun relaxing testing requirements, allowing for more time in advance of travel to secure a task in there.
This will undoubtedly have an impact on on testing levels as we move throughout the balance of the year.
It's been it's proven to be challenging to effectively plan ahead of this pandemic, we've already begun to evolve our testing business beyond managing just COVID-19 testing.
So more of a whole lot holistic bio surveillance brand, providing a broader array of health services and products.
While leveraging the infrastructure to initiate a biodefense component, giving us the opportunity to even work with the D O D.
You know I think express test is uniquely suited in our airports as that frontline defense against the next microscopic invasion that hits our shores.
Okay.
Question on <unk>, when do you think youre going to see meaningful revenue from tree and then also when do you think treat an express spa will be profitable as standalone businesses.
You know express baas already a profitable business and we expect that to continue to grow in the coming year based on the investments, we're making both in new products and service offerings.
And you know, we're we're really we're still learning about tree.
With only a single unit operating right now.
We're trying to implement change while we're learning about the business and our changing perspective on consumer tastes and preferences.
You know I think personally travelers now more than ever are focused on products that create.
Our reinforced their sense of wellbeing, especially when they travel.
And we think treat.
Can address that.
And we will continue to focus on that as we evolve with the expectation that it not only drives revenue.
But also eventually becomes a key enabler of our future growth.
Yeah.
Can you explain how the hyper point acquisition helps the overall business.
Yes.
So I think in two ways.
I think the first is is just the technical and organizational synergies created by the acquisition.
And we fully intend to exploit one of the key strengths of the hyper point business, which is so deep history and relationship with the health care industry.
Well I think that you realized to our expansion of our bio surveillance partnership with the CDC.
The development of strategies to further leverage.
Express test health data for example, with health partners like the pharmaceutical industry.
Hyper point will be directly involved in building new revenue channels for us.
Right.
Question on inflation.
Are you concerned about weaker demand for your services because of the high inflation, we're experiencing potentially rising airline prices price of gas and are you concerned that that's going to result in less travel.
Like like most other businesses that provide products and services to customers. We are we are acutely concerned with rising prices and all of the inflationary pressures, but I think we're doing two things to help.
Address that.
One of which is building our out of airports strategy, which.
Which we think can help blunt some of the impact of rising fuel costs and potential travel disruptions.
And then I think the second is developed.
Developing a smarter supply chain process.
Making sure that we're integrating products and services and aligning our business under a single consistent operating strategy.
All of those things in concert will help us refine and reduce.
Our cost, but also help us drive new revenue outside of the airport should the airport.
<unk> be adversely impacted by continued rise in inflationary pressures.
Yeah.
How many more express spas do you plan on reopening and what do you plan to do with the remaining leases that you have.
What are you seeing from these new touchless Spa services and could they be implemented across all of the express locations.
Right now we are planning to open four or five more spas.
Currently sit on our reopening plan.
That could expand as travel continues to rebound.
And our strategies begin to take effect.
There are some spots that we will not reopen.
And those will likely be the usual suspects sites that we don't believe will add to our integration strategy or or sites that.
That we know will not be successful with additional products and services.
And we will identify opportunities outside of the airport.
We'll allow it will allow us to apply more selective lens to our reopening strategy inside the airport.
So as we focus on outside it will allow us to fine our inside the airport.
Few of what we opened and what we don't in terms of the Touchless services.
We're just now starting to execute the rollout of these services some of the initial feedback we got from our teams has been positive.
And we translate once we translate that to customer feedback and sales.
We'll look at expanding those services across more spas and potentially even other brands.
Will you convert all your spas and to treat.
So.
The plan right now is to convert spa locations to treat locations, where it makes sense.
And and that our strategy is to have a uniform core product and services offering that can be tailored to local demand. So for example.
If nail kits are part of our core product offering and all of our locations across the U S.
We may offer a nail services in our Charlotte location to complement that retail offering.
But not offer it in our New York locations, where those services are less relevant.
But our consumers still find the product.
To be relevant.
Okay.
Final question.
As you increase your retail presence.
Outside sorry inside of airports, what is the margin profile look like.
James would you like to answer that.
Sure It is.
No.
As we look to expand the retail products. The most important thing is that we're going to be looking for the customer wants and as we do that of course, but we're going to be considering the American associated with it while maintaining and affordability to the traveler. So.
We will we're not looking for the.
The margin to meet reduced and in fact, we most likely will look for.
Those those products they can offer us a good marriage in on on the retail with the exception of a sometimes I as Scott mentioned, where they're going to be a tie in.
Where that type of thing, but we anticipate that the Americans will remain strong.
We have great real estate in which to offer their real estate instead of to offer the retail and and and so where we're anticipating maintaining strong or increasing margins.
Great.
Okay. So you have to add to that.
Like if I could I'm, sorry, just to just to add to James' just points. So I think it's worth.
Reinforcing it it's.
It's something that historically, we've never really taken advantage of the real estate that we have and the the great real estate that we have and we fully intend on doing that with a stronger retail.
Offering and that retail offering will be up at margins that will help sustain and grow the business.
Just wanted to make sure I shared that final thoughts.
Alright, those are all the questions that have come in so I'll turn it back to tour operator.
Thank you ladies and gentlemen.
Today's question and answer session I would like to turn this call back over to Mr. Scott <unk> for closing remarks.
Thank you everybody.
I I appreciate the opportunity to come and share the news of our fourth quarter and our year.
We certainly had a successful year and I'm looking forward as a new leader with a new leadership team.
To build on on that great success, I appreciate everyones time, and joining our call today and I look forward to sharing our progress on our four strategic imperatives. During our next call. Thank you very much.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your day.
Okay.
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