Q3 2024 XWELL Inc Earnings Call

Operator: Good day and welcome to the Xwell, Inc. third quarter 2024 results conference call. All participants will be in a listen-only mode.

Good day and welcome to the <unk>, Inc. Third quarter 2024 results conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Suzanne Scrabis: I would now like to turn the conference over to Suzanne Scrabis, Chief Financial Officer. Please go ahead, ma'am.

Speaker Change: I would now like to turn the conference over to Suzanne scrap as Chief Financial Officer. Please go ahead ma'am.

Suzanne Scrabis: Good day, everyone. Welcome to Xwell's conference call to review our third quarter 2024 financial results. Joining me on today's call is Ezra Ernst, Xwell's Chief Executive Officer. We have posted our fiscal year earnings release on the investor relations section of our website located at www.xwell.com. A link to the webcast of today's conference call can also be found on our site.

Suzanne Scrap: Good day, everyone welcome to excellent conference call to review, our third quarter 2024 financial results.

Suzanne Scrap: Joining me on today's call is as you earn extra Chief Executive Officer.

Suzanne Scrap: We have posted our fiscal year earnings release on the Investor Relations section of our website located at Www Dot <unk> Dot com.

Suzanne Scrap: Link to the webcast of today's conference call can also be found on our site.

Suzanne Scrabis: Before turning the call over to Ezra for his prepared remarks, we 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, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on current assumptions as of the date of this earnings conference call and webcast, 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.

Suzanne Scrap: Before turning the call over to Andrew for his prepared remarks, we need to advise you of the following.

Suzanne Scrap: Comments made on today's call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 section 27, a of the Securities Act of $19 33, and section 21 E of the Securities Exchange Act of 1930 for these.

Suzanne Scrap: These forward looking statements are based on current assumptions as of the date of this earnings conference call and webcast and can use that involved a variety of known and unknown risks and uncertainties.

Suzanne Scrap: Actual results may differ materially from those contained in or suggested by such forward looking statements.

Suzanne Scrabis: Important factors that might cause such differences includes those set forth from time to time in our SEC filings, including our annual report on Form 10-K for the year ended December 31st, 2023, as well as our other current and periodic reports that we file with the SEC.

Speaker Change: Factors that might cause such differences include those set forth from time to time in our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2023, as well as our other current and periodic reports that we file with the SEC with that said I'd now like to turn the call over to us.

Ezra Ernst: With that said, I'd now like to turn the call over to Ezra. Thank you so much, Suzanne. I want to thank everyone who's joining us on the call today and also express our appreciation for your continued interest in Xwell.

Speaker Change: Thank you so much Suzanne.

I want to thank everyone who's joining us on our call today and also express our appreciation for your continued interest in X laws. As this is my first earnings call as the company's CEO I'd like to give you a brief overview of my 25 plus year career.

Ezra Ernst: As this is my first earnings call as the company's CEO, I'd like to give you a brief overview of my 25-plus year career. For those of you who may not know me, I've been with Xwell for several years, having first served as CEO of our HyperPoint brand beginning in March of 2020 and CEO of ExpressCheck brand since January of 2022. Operationally, during this time, I led the collaboration with the Center for Disease Control and Prevention, under which we helped establish the CDC's Traveler-Based Genomic Surveillance Program. Initially, it was a small pilot. It was built on Express Check's advanced COVID-19 testing capabilities and HyperPoint's marketing expertise.

Speaker Change: For those of you who may not know me I've been with the X well for several years, having first served as CEO of our hyper point brands beginning in March of 2020, and CEO of express check brand since January of 2022.

Speaker Change: Operationally during this time I loved the collaboration with the center for disease control and prevention under which we hope to establish the Cdc's traveler based genomic surveillance program.

Speaker Change: Initially it was a small pilot it was built on express chucks advanced COVID-19 testing capabilities and hyper points marketing expertise over time, we've evolved the program into a key component of United States buyer of security infrastructure and we continue to be very proud of the important work, we're doing with our partners and the C V C.

Ezra Ernst: Over time, we evolved the program into a key component of the United States biosecurity infrastructure, and we continue to be very proud of the important work we are doing with our partners and the CDC. Prior to joining Xwell, I held multiple senior management positions, including CEO of Physicians Weekly, Chief Commercial Officer of Tredo, General Manager at WebMD, and President at Optum Health Education, a United Healthcare company, as well as a few others.

Speaker Change: Prior to joining us well I held multiple senior management positions, including CEO of Physicians weekly Chief Commercial Officer Credo General manager at Webmd and President at Optum Health Education are United Health Care company as well as a few others.

Ezra Ernst: With that color, in mid-September, I was excited to take on the expanded role as sole Chief Executive Officer for Xwell. The transition from Scott has been very smooth, and I'm pleased with Xwell's continued momentum. From my perspective, by consolidating our dual CEO operating structure, we successfully realigned resources while creating a leaner, more agile decision making structure. This streamlined approach also aligns with our broader cost reduction strategy and supports our efforts to return the company to profit. At the same time, it advances the Board of Directors' mandate to drive growth, innovation, and expansion.

Speaker Change: With that color in mid September I was excited to take on an expanded role as sole chief Executive officer for <unk>.

Speaker Change: The transition from Scott, it's been very smooth and I'm pleased with <unk> continued momentum.

Speaker Change: For my perspective by consolidating our dual CEO operating structure, we successfully realigned resources, while creating a leaner more agile decision making structure.

Speaker Change: This streamlined approach also aligns with our broader cost reduction strategy and supports our efforts to return the company to profitability.

Speaker Change: At the same time it advances the board of Directors' mandate to drive growth innovation and expansion.

Ezra Ernst: In short, we have a talented, engaged team at Xwell, and we have many compelling opportunities in front of us.

Speaker Change: In short we have a talented and engaged team of EXPAREL and we have many compelling opportunities in front of us.

Ezra Ernst: Towards that end, I'd like to now spend a few minutes discussing several company initiatives we're actively pursuing. We will continue to prioritize our out of airport brand strategy, which we believe to be a major contributor to top-line growth over the long term. We're planning to expand into several attractive markets in Florida, and by mid-2025, we expect to be in a position to operate up to 10 Xwell properties. In fact, we're opening our first Naples wax location in November and look forward to building on this momentum. Our team is also exploring opportunities to align additional Xwell properties with our existing in-airport market.

Speaker Change: Towards that end I'd like to now spend a few minutes discussing several company initiatives we're actively pursuing.

Speaker Change: We will continue to prioritize our auto airport brand strategy, which we believe to be a major contributor to top line growth over the long term.

Speaker Change: We're planning to expand into several attractive markets in Florida and by mid 2025, we expect to be in a position to operate up to 10 X wall properties. In fact, we're opening our first Naples wax location in November and look forward to building on this momentum.

Our team is also exploring opportunities to align additional ex wall properties with our existing and airport markets.

Ezra Ernst: We believe that syncing our current geographic markets with additional Xwell properties will allow us to enhance our competitive positioning from a brand awareness, marketing, and operating efficiency standpoint. Turning to our in-airport growth, foot traffic and customer traction at our recently opened Express Spa at Philadelphia International Airport has been solid. It's a great location. It's our first airport spa that fully leverages our tech-forward concept, and I'm pleased with the initial customer demand and overall feedback. Our autonomous massage chairs and robotic mail systems are showing promising performance indicators.

Speaker Change: We believe that thinking our current geographic markets with additional actual properties will allow us to enhance our competitive positioning from a brand awareness marketing and operating efficiency standpoint.

Speaker Change: Turning to our in airport growth foot traffic and customer traction at our recently opened express Spa at Philadelphia International Airport has been solid it's a great location. Its our first airport spa that fully leverages, our tech forward construct and I'm pleased with the initial customer demand and overall feedback our auto.

Speaker Change: Elemis massage chairs and robotic meal systems are showing promising performance indicators.

Ezra Ernst: As part of our strategic growth in other transit hubs, the company plans to open its Penn Station Express Spa next year. This location, as previously discussed, will showcase a tech-forward, labor-lite spa designed to cater to commuters, local residents, and tourists alike. It will offer wellness-focused retail, autonomous massage, and nail care services.

Speaker Change: As part of our strategic growth and other transit hubs. The company plans to open at Penn station expressed spot next year.

This location as previously discussed we will showcase a tech forward labor light spa designed to cater to commuters local residents and tourists alike. It will offer wellness focused retail autonomous massage in the health care services.

Ezra Ernst: I expect we'll have more to share regarding this as well as other Xwell growth initiatives in 2025. Furthermore, as we strategically build out our new locations, we also remain committed to driving higher sales in March. For example, customers are taking advantage of our new partnership with Priority Pass, which we believe has enhanced brand awareness, broadened our reach, and allowed us to engage with new customers. We're pleased with the resulting increase in foot traffic to our locations, as well as the positive revenue implications. We're also committed to making sure that every guest enjoys an exceptional experience when they visit our store.

Speaker Change: I expect we'll have more to share regarding this as well as other external growth initiatives in 2025.

Speaker Change: Furthermore, as we strategically build out our new locations. We also remain committed to driving higher sales and margins.

Speaker Change: For example customers are taking advantage of our new partnership with priority pass, which we believe has enhanced brand awareness broadened our reach and allowed us to engage with new customers. We're pleased with the resulting increase in foot traffic to our locations as well as the positive revenue implications.

Speaker Change: We're also committed to making sure that every guest enjoys an exceptional experience when they visit our stores.

Ezra Ernst: To deepen engagement, we've been expanding our service menu while emphasizing our selection of fully autonomous and innovative wellness solutions. Additionally, we've added new skilled retail and store management professionals to help us maintain a customer first focus across all of our Our team has been focused on simplifying the way in which guests can reserve a spa appointment. Convenience is really the key, and we understand that pre-booking a service should be as seamless and as straightforward as possible. To help support this, our social media platforms have expanded in an effort to highlight how easy it is to interact with staff and our autonomous office.

Speaker Change: To deepen engagement, we've been expanding our service menu, while emphasizing our selection of fully autonomous and innovative wellness solutions.

Speaker Change: Additionally, we've added new skilled retail and store management professionals to help us maintain a customer first focus across all of our efforts.

Speaker Change: Our team has been focused on simplifying the way in which guests can reserve a spa appointment convenience is really the key and we understand that pre booking of service should be as seamless and as straightforward as possible to help support this our social media platforms have expanded in an effort to highlight how easy it is to interact with staff.

Speaker Change: And our autonomous offerings.

Ezra Ernst: By embracing technology and mobile platforms, our goal is to make the process more frictionless and convenient so our customers can just focus on relaxing and rejuvenating.

Speaker Change: Embracing technology and mobile platforms. Our goal is to make the process more frictionless and convenient so our customers can just focus on relaxing and rejuvenating.

Ezra Ernst: As we look ahead, we remain focused on driving sustainable top-line growth and believe we are taking the right steps to accomplish this goal.

As we look ahead, we remain focused on driving sustainable topline growth and believe we are taking the right steps to accomplish this goal.

Ezra Ernst: As we've discussed many times over the past year, we've been looking at every cost in an effort to improve efficiencies across all our brands and deliver a more profitable operating model. Towards this end, looking at our nine-month 2024 performance, we reduced total operating expenses by approximately 35% when compared with a similar 2023 nine-month period. We also reduced cost of sales by approximately 6% and our general and administrative expenses by an approximately 5% when compared to the comparable nine-month period in 2023. This commitment to optimizing our business structure and holding our labor costs constant while delivering more revenue should benefit our bottom line as we enter and work our way through 2025.

As we've discussed many times over the past year, we've been looking at every cost and effort to improve efficiencies across all our brands and deliver more profitable operating model.

Speaker Change: Towards this and looking at our nine month 2020 for performance, we reduced total operating expenses by approximately 35% when compared with a similar 2023 and nine month period. We also reduced cost of sales by approximately 6% and our general and administrative expenses by approximately 5%.

Speaker Change: When compared to the comparable nine month period in 2023.

Speaker Change: This commitment to optimizing our business structure and holding our labor cost constant while delivering more revenue should benefit our bottom line as we enter and work our way through 2025.

Ezra Ernst: In summary, a lot has been accomplished over the year to date. We're excited about our tremendous growth potential. We're committed to executing on all levels. I really want to thank the entire organization for their continued hard work, dedication, and commitment to our guests. I also want to assure our shareholders that we are making the right decisions consistent with the long-term health of the business and our brands. Thank you for your continued support.

Speaker Change: In summary, a lot has been accomplished over the year to date, we're excited about our tremendous growth potential we're committed to executing on all levels I really want to thank the entire organization for their continued hard work dedication and commitment to our guests I also want to assure our shareholders that we are making the right decisions consistent with the long term health of the <unk>.

Speaker Change: And our brands.

Speaker Change: For your continued support.

Suzanne Scrabis: At this point, Suzanne can give you some additional details on the third quarter, as well as our continued momentum reducing operating expenses and driving.

Speaker Change: At this point Suzanne can give you some additional details on the third quarter as well as our continued momentum reducing operating expenses and driving growth.

Suzanne Scrabis: Thank you, Ezra. I'm now going to provide a brief synopsis of our third quarter results.

Suzanne Scrap: Thank you Ashok I'm now going to provide a brief synopsis of our third quarter results. However for details. Please refer to the 10-Q filed with the SEC for.

Suzanne Scrabis: However, for details, please refer to the 10-Q filed with the SEC. For the quarter, total revenue was approximately $8.4 million compared to $7.5 million in the prior year period. Third quarter 2024 revenue primarily consisted of approximately $4.9 million from express bra locations and treat locations, approximately $3.1 million from express test, which includes Xwell's fire surveillance partnership and its hyperpoint business, and approximately $0.4 million from Naples Wax Center, which was acquired near the end of the 2023 third quarter. Turning to expenses, salaries and benefits were approximately $1.9 million in the third quarter of 2024 compared to $1.2 million in the same period in 2023.

Suzanne Scrap: For the quarter total revenue was approximately $8 4 million compared to seven 5 million in the prior year period.

Suzanne Scrap: Third quarter 2024 revenues, primarily consisted of approximately $4 9 million from express pad locations and treat locations.

Suzanne Scrap: Approximately $3 1 million from express test, which increased excellence surveillance partnership and its hyper Clinton and approximately $4 million from Naples, Latch Center, which was acquired near the end of the 2023 third quarter.

Suzanne Scrap: Turning to expenses salaries and benefits were approximately $1 $9 million in the third quarter of 2024 compared to $1 2 million in the same period. Each week 23, it's important to note that our 2023 third quarter included approximately $1 million from a nonrecurring employee retention credit or E. R C, which helped.

Suzanne Scrabis: It's important to note that our 2023 third quarter included approximately $1 million from a non-recurring employee retention credit, or ERC, which helped reduce salary and benefit costs last year. If you exclude the non-recurring ERC credit, our 2024 third quarter salaries and benefits would have decreased 4% year-over-year. Our general and administrative expenses were approximately $4.5 million, including over $2 million related to extraordinary legal expenses, compared to approximately $3 million for the 2023-30. Total operating expenses were approximately $6.8 million compared to approximately $13.2 million for the 2023 third quarter. We reported an operating loss for the third quarter of $4.8 million compared to an operating loss of $12.1 million in the prior year third quarter.

Suzanne Scrap: Reduced salary and benefit costs last year, if you exclude the nonrecurring EIC credit our 2024 third quarter salaries and benefits would have decreased 4% year over year.

Suzanne Scrap: Our general and administrative expenses were approximately $4 5 million, including over $2 million related to extraordinary legal expenses compared to the approximately three nine for the 2023 third quarter.

Suzanne Scrap: Total operating expenses were approximately $6 8 million compared to approximately $13 2 million for the 2023 third quarter.

We reported an operating loss for the third quarter of $4 8 million compared to an operating loss of 12 1 million in the prior year third quarter.

Suzanne Scrabis: Our net loss attributable to common shareholders was $4.8 million compared to $11.5 million in the prior year same period.

Suzanne Scrap: Our net loss attributable to common shareholders was $4 8 million compared to $11 5 million in the prior year same period.

Suzanne Scrabis: Turning to our balance sheet, our liquidity remains solid. Our cash and cash equivalents totaled $4.4 million, and we had $11.7 million in marketable. Our total current assets were approximately $19.5 million and we have no long-term debt. Looking ahead, we remain focused on continued improvements in execution, including prudent cost management and enhanced operational processes.

Suzanne Scrap: Turning to our balance sheet, our liquidity remains solid.

Suzanne Scrap: Cash and cash equivalents totaled $4 4 million and we had 11 7 million in marketable securities. Our total current assets were approximately $19 5 million and we have no long term debt.

Suzanne Scrap: Looking ahead, we remain focused on continued improvements in execution equally prudent cost management and enhanced operational processes.

Suzanne Scrabis: That concludes my remarks, and thanks again for joining our call today. Both Ezra and I look forward to speaking with you again in the months ahead.

Suzanne Scrap: That concludes my remarks, and thanks again for joining our call today, both Azure and I look forward to speaking with you again in the months ahead.

Operator: I'll now turn the call back to the operator. Thank you.

Speaker Change: I'll now turn the call back to the operator.

Suzanne Scrap: Okay.

Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

Speaker Change: [music].