XpresSpa Group, Inc. (Nasdaq: XSPA), a health and wellness company, today provided a business update and announced that it has filed financial results on Form 10-K for the full year ending December 31, 2020.
Doug Satzman, XpresSpa Group CEO, stated, “Over the past few weeks, we have been encouraged by rising patient testing volumes and increased average revenue per patient at our XpresCheck(TM) Wellness Centers. We attribute this traction primarily to the rollout of COVID-19 Rapid Testing which has become the preferred testing option of over 73% of all patients. Although overall airport traffic remains significantly below 2019 levels, we are seeing increasing passenger flow, benefiting from an increase in airport traffic as people resume personal and leisure travel in a safe manner, which, in our opinion, will lead to a strong recovery during the second half of 2021. Although we were unable to recognize revenue, for accounting purposes, during the fourth quarter of 2020, we expect that we will be able to do so in the first half of 2021 due to a reassessment of our management services agreements.”
Mr. Satzman continued, “Notably, XpresCheck’s estimated gross profit margin for recent periods is higher than even XpresSpa’s peak business performance during the pre-pandemic era. From a cash flow standpoint, this is important not only as it relates to existing XpresCheck operations, but also because of the ongoing investments we are making in our new travel health and wellness brand to meet the emerging needs of travelers in a post-COVID-19 environment. Furthermore, the cost of building each of the first three XpresCheck Wellness Centers averaged $540,000 while the subsequent eight centers averaged $158,000 as we optimized the layout and the construction methodology.”
Mr. Satzman concluded, “Utilizing both our historic travel wellness experience and new-found healthcare expertise, we are positioning the Company to be an early leader in the emerging travel health and wellness category by developing a brand that can transform the way people access travel healthcare through technology and personalized services. We anticipate this new brand will have the ability to reach travelers at all phases of travel, including planning, and is designed to provide access to travel care and medical documentation throughout their journey. We look forward to bringing this concept to market and introducing many of the digital assets that will be integral to this brand in summer 2021 through a new website and social media platforms, and will then follow up with the opening of our first two integrated health and wellness airport locations in late summer / early fall 2021.”
On March 24, 2020, XpresSpa temporarily closed all of its global spa locations in response to COVID-19. The Company reopened its two spas in Dubai International Airport, UAE in July 2020 for select spa services, and its single franchised location in Austin reopened during September 2020 but did not reopen any domestic company-owned spa locations during the fourth quarter 2020.
However, given limited airport traffic and changes in consumer behavior due to the pandemic, these reopened locations have underperformed. The Company therefore does not anticipate reopening other spas for traditional services in the near-term, but will re-evaluate possible re-openings of select spas in the future on a location-by-location basis, based on the economic viability of each such location.
XpresCheck Wellness Center Services
The Company launched the XpresCheck(TM) brand under its XpresTest Inc. subsidiary to address the urgent needs caused by COVID-19 that has added risk and uncertainty related to domestic and international air travel as well as to the frontline airport workforce. XpresCheck’s medical team of state licensed physicians and nurse practitioners, who operate under management services agreements, currently administer COVID-19 testing options including a rapid molecular COVID-19 test, a Polymerase Chain Reaction (PCR) test, a blood antibody test, a rapid antigen test, and a rapid PCR test. Developments since the onset of the fourth quarter 2020 include:
-- In October 2020, XpresCheck expanded its testing services beyond COVID-19 testing in select locations to include additional rapid testing services for other communicable diseases that include influenza, mononucleosis and group A streptococcus, as well as administration of seasonal flu vaccinations. -- As of November 13, 2020, XpresCheck was designated as a State of Hawaii Trusted Testing Partner. All travelers ages five and over are required to take a Nucleic Acid Amplification Test (NAAT) from a certified Clinical Laboratory Improvement Amendment (CLIA) lab in order to bypass the State of Hawaii's 14-day mandatory quarantine. The State of Hawaii accepts test results only from Trusted Testing and Travel Partners and tests must be taken no more than 72 hours before flight departure time. -- The Company has partnered with The CommonTrust Network's CommonPass platform which links COVID-19 test results from partnered labs such as XpresCheck directly into the CommonPass app. Passengers are then able to show their test results through this app to airlines and destinations so as to ensure a hassle-free entry and to avoid quarantines, where applicable. -- Effective March 8, 2021, XpresCheck transitioned to a full "fee for service" model for all tests. Under this model, patients pay XpresCheck directly at the time of service and then are able submit their testing fees for insurance reimbursement. Prior to March 8, 2021 only the rapid test had been on a fee for service model. -- XpresCheck is currently awaiting approval on a state-by-state basis to administer COVID-19 vaccines approved for use by the FDA at all Wellness Centers. Upon state-by-state approval and the receipt of the necessary COVID-19 vaccines, the Company may launch a vaccination program primarily focused on airline employees and airport staff initially, although passengers could be eligible for vaccinations over time, subject to supply availability and other state eligibility requirements. -- On March 29, 2020, XpresCheck announced the addition of a rapid PCR test at select airports and plans to add another rapid antigen test to its suite of COVID-19 testing services shortly.
XpresCheck Wellness Center Locations
The Company currently has eleven locations operating in nine airports: Boston Logan International Airport (2), Denver International Airport, Dulles International Airport, Houston George Bush Intercontinental Airport, JFK International Airport, Newark Liberty International Airport (2), Phoenix Sky Harbor International Airport, Ronald Reagan National Airport, and Salt Lake City International Airport.
There are currently two additional “popup” XpresCheck Wellness Centers that are expected to open in Seattle-Tacoma International Airport and San Francisco International Airport over the next several weeks. Although the Company believes that COVID-19 testing will remain an important and necessary service for airline employees, airport staff, and passengers for the foreseeable future, the Company is reassessing future development of any additional XpresCheck Wellness Centers beyond these locations based upon its evaluation of the economic viability of the remaining major hub airports and developing international travel requirements. This decision was made so that the Company can dedicate its efforts and resources to bringing to market a new and more comprehensive travel health and wellness brand that focuses on an emerging new category of health-focused travel and personal wellness services that would still include COVID-19 testing and other related services.
New Travel Health and Wellness Brand Vision
The Company is developing a travel health and wellness brand that is positioned for a post-pandemic world and that leverages its historic travel wellness experience and newly acquired healthcare expertise. The Company is preparing a launch of a Travel Health and Wellness company delivering on-demand access to integrated healthcare through technology and personalized services.
The strategic brand pillars are Travel Health and Wellness, which places the Company’s experience and assets directly in the intersection of these three categories. Travel Wellness was a skyrocketing trend category prior to COVID-19, and adding Health to that combination will enable it to rise again. In the Health pillar, the new brand will be differentiated because it is travel-focused and in airports, while in Wellness, it is differentiated because it is a travel industry retailer and expert. In Travel, the new brand is differentiated because it has health and wellness experience and will provide access to integrated care and travel health documentation, all in one app.
The Company sees this concept evolution as a significant opportunity to be a category innovator in a new niche industry where it can leverage technology in addition to its existing real estate and airport experience in providing travelers with peace of mind and access to integrated care. The brand name of this concept will be announced at a later date.
2021-03-31 20:05:00 GMT XpresSpa Group Provides Business Update and -2-
While COVID-19 testing will be available under this new brand, the broader suite of services may include: pre-travel health and wellness planning, on-site medical services such as metabolic panel testing, anxiety care, and convenient travel care; virtual chat care and video care through a partnership with an established telemedicine company; and access to virtual wellness care such as guided meditations and yoga.
The first two integrated Travel Health and Wellness locations are expected to open in late summer / early fall 2021. Over time, the Company intends to evolve some of its legacy XpresSpa footprint into this new Travel Health and Wellness brand, where feasible, as well as open additional locations in other suitable terminals and airport venues.
However, over the long-term, the Company envisions that its digital channels will provide more significant growth opportunities for revenue and profit than its airport locations. The success of this revenue stream will be achieved through both subscription-based services that provide care and tools supporting travel health and wellness. Furthermore, the Company will offering upstream content that can be monetized through affiliate revenue as well as curated retail through ecommerce. The Company is currently laying the groundwork to have its initial digital assets launched in the summer timeframe ahead of the first two brick-and-mortar location openings as travel begins its recovery this fall and into 2022.
Given its strong liquidity position and poise for growth, the Company would also consider accretive acquisitions and other investments to further broaden its service and retail offerings and would invest in new opportunities beyond this new evolving concept.
Liquidity and Financial Condition
As of December 31, 2020, the Company had cash and cash equivalents, excluding restricted cash, of $89.8 million, total current assets of $91.8 million and total current liabilities of $13.5 million.
During the twelve months ended December 31, 2020, the Company raised net proceeds of over $110.0 million in a series of registered direct equity offerings.
Summary of Fourth Quarter 2020 Financial Results
Reported revenue during the three months ended December 31, 2020 was $0.3 million compared to $10.9 million in the corresponding period in 2019. The decrease in revenue was due to the negative adverse impact of COVID-19 and of the Company therefore temporarily closing substantially all global spa locations due to the categorization of the spa locations by local jurisdictions as “non-essential services.” The decrease was offset by revenue generated through sales and marketing agreements with strategic spa partners of $246,000 and $68,000, respectively, of services and products in the recently re-opened spas in Dubai, and $9,000 for other.