XpresSpa Announces First Quarter 2019 Financial Results
Mr. Satzman continued, “We are also making headway reducing both spa-level and corporate costs as demonstrated by the increase in store margin, decrease in general and administrative expenses, and reduction in our Adjusted EBITDA loss during the first quarter. There is certainly considerably more to be done during this transitional year to grow sales and optimize costs, but we are pleased to be seeing ‘green shoots’ as we move forward.”
Mr. Satzman added, “We will be leveraging our extensive brand recognition and existing real estate footprint by adding three additional company-operated spas in airports where we currently operate high-performing spas in other terminals, while in
Mr. Satzman concluded, “As previously communicated, we have identified and prioritized our areas of focus in the near-term along with what we expect to accomplish over the longer-term in taking our brand and culture to the next level. Our underlying objective is to build a sustainable and enduring business that can capitalize on the growing demand from highly desirable customer demographics for spa services and related wellness products.”
Nearer-term priorities:
Staffing up through recruiting, training, and retention while managing labor costs more effectively;
-- We are reinforcing our culture by building an "XpresSpa team" mindset;
-- The retooled field leadership team put into position last fall is gaining traction;
-- We are launching a new online training tool that incorporates “gaming methodology” focusing on our concierge population first.- Building transactions through scheduling, loyalty, and launching an XpresSpa App;
-- The first phase of a new App is being launched this month within the spa and is geared towards enhancing scheduling, gathering more customer data, and reducing the number of walkaways;
-- The second phase of the App will be customer-facing and launched during the summer which will enable us to expand our customer loyalty and increase the frequency of our best, highest spend customers; - Increasing the average ticket by fixing retail supply chain issues and upselling services;
-- Our retail supply chain issues were largely addressed by the midpoint of the first quarter 2019, providing our customers with a full assortment of the products that they seek; - Selectively opening high performing new spas through a strategic approach to development;
-- We will be opening high-visibility new company-operated spas in Hartsfield–Jackson Atlanta International Airport (terminal E),Austin-Bergstrom International Airport (main terminal, section B),Philadelphia International Airport (terminal B), andMcCarran International Airport (terminal B) during the third quarter 2019;
-- Our first franchise spa will similarly open inAustin-Bergstrom International Airport (main terminal, section J) during the third quarter 2019; - Selectively renovating spas to elevate brand perceptions;
-- We will renovate five to seven spas this year, of which we have already renovated three spas; and - Managing G&A expenditures;
-- We will continue to streamline processes and reduce costs at the corporate level.
Longer-term opportunities:
- Elevating the customer experience;
- Developing a people first culture;
- Activating new partnerships; and
- Bringing health and wellness innovation to the spas through new products, services, and technology.
First Quarter 2019 Highlights
- Total revenue decreased to
$12.2 million from$12.6 million in the prior year. The revenue decline was due to loss of revenue associated with locations that were temporarily closed during the quarter due to renovations and the net loss of two spas versus the prior year, coupled with a 1.3% decrease in comparable store sales. - Store margin increased 10.9% to
$3.1 million , or 25.6% of total revenue, from store margin of$2.8 million , or 22.4% of total revenue, for first quarter 2018.
-- Labor costs and product and operating costs decreased due to the closure of underperforming stores during 2018 coupled with cost saving initiatives taken by management to streamline processes and reduce store level costs. - General and administrative expenses decreased 21.7% to
$3.6 million compared to$4.6 million in first quarter 2018. The decrease is a result of our efforts to reduce administrative costs through streamlined processes at the corporate level, along with a reduction in stock-based compensation versus the prior year. - Operating loss from continuing operations decreased to
$2.8 million compared to$23.3 million in first quarter 2018. When adjusting for the one-time goodwill impairment charge of$19.6 million in first quarter 2018, pro-forma operating loss decreased by 24%. - Adjusted EBITDA* loss of
$0.4 million decreased$1.1 million compared to Adjusted EBITDA loss of$1.5 million in first quarter 2018.
*Adjusted EBITDA is a non-GAAP financial measure; see "Use of Non-GAAP Financial Measures" below. See tables below for abbreviated financial results for the first quarters 2019 and 2018.
Balance Sheet and Cash Flows
As of
- Cash and cash equivalents of
$2.9 million ; - Current assets of
$5.0 million ; and - Total current liabilities of
$17.0 million including $ accounts payable, accrued liabilities, and other current liabilities,$6.5 million payable on the Company’s senior debt, and$1.7 million in short-term convertible notes.
As we have previously disclosed, we will need additional working capital to support our growth and operations. We are also working on right sizing our capital structure through restructuring our outstanding debt to address our going concern status although there is nothing to announce at this time.
Conference Call
The conference call can be accessed live over the phone by dialing (201) 689-8263. A replay will be available after the call and can be accessed by dialing (412) 317-6671; the passcode is 13690712. The replay will be available until
The webcast can be accessed from Investor Relations section of the Company’s website at http://xpresspagroup.com. Visitors to the website should select the “Investors” tab and navigate to the “Events” link to access the webcast.
Piper Jaffray Conference Participation
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 Relations:
ICR
(203) 682-8253
CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 31, 2019 (Unaudited) |
December 31, 2018 |
|||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 2,884 | $ | 3,403 | ||||
| Inventory | 881 | 782 | ||||||
| Other current assets | 1,122 | 1,465 | ||||||
| Assets held for disposal | 109 | 109 | ||||||
| Total current assets | 4,996 | 5,759 | ||||||
| Restricted cash | 428 | 487 | ||||||
| Property and equipment, net | 11,289 | 11,795 | ||||||
| Intangible assets, net | 8,599 | 9,167 | ||||||
| Operating lease right-of-use assets, net | 9,565 | — | ||||||
| Other assets | 3,383 | 3,376 | ||||||
| Total assets | $ | 38,260 | $ | 30,584 | ||||
| Current liabilities | ||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 8,795 | $ | 8,132 | ||||
| Debt | 6,500 | 6,500 | ||||||
| Convertible notes, net | 1,695 | 1,986 | ||||||
| Liabilities held for disposal | 40 | 40 | ||||||
| Total current liabilities | 17,030 | 16,658 | ||||||
| Derivative warrant liabilities | 324 | 476 | ||||||
| Operating lease liabilities | 9,565 | — | ||||||
| Other liabilities | 316 | 315 | ||||||
| Total liabilities | 27,235 | 17,449 | ||||||
| Commitments and contingencies (see Note 19) | ||||||||
| Stockholders’ equity | ||||||||
| Series A Convertible Preferred stock, $0.01 par value per share; 6,968 shares authorized; 348 issued and none outstanding | — | — | ||||||
| Series B Convertible Preferred stock, $0.01 par value per share; 1,609,167 shares authorized; 80,458 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; 23,760 shares issued and 21,027 shares outstanding with a liquidation value of $20,186 | 4 | 4 | ||||||
| Series E Convertible Preferred Stock, $0.01 par value per share, 1,473,300 shares authorized; 48,387 shares issued and outstanding with a liquidation value of $3,023 | 10 | 10 | ||||||
| Common stock, $0.01 par value per share; 150,000,000 shares authorized; 1,941,341 and 1,761,802 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 354 | 352 | ||||||
| Additional paid-in capital | 296,823 | 295,904 | ||||||
| Accumulated deficit | (289,886 | ) | (286,913 | ) | ||||
| Accumulated other comprehensive loss | (272 | ) | (251 | ) | ||||
| Total stockholders’ equity attributable to the Company | 7,033 | 9,106 | ||||||
| Noncontrolling interests | 3,992 | 4,029 | ||||||
| Total stockholders’ equity | 11,025 | 13,135 | ||||||
| Total liabilities and stockholders’ equity | $ | 38,260 | $ | 30,584 | ||||
*Adjusted to reflect the impact of the 1:20 reverse stock split that became effective on
The accompanying notes form an integral part of these condensed consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
| Three months ended March 31, |
||||||||
| 2019 | 2018 | |||||||
| Revenue | ||||||||
| Products and services | $ | 11,046 | $ | 11,800 | ||||
| Other | 1,184 | 800 | ||||||
| Total revenue | 12,230 | 12,600 | ||||||
| Cost of sales | ||||||||
| Labor | 5,778 | 6,210 | ||||||
| Occupancy | 1,865 | 2,060 | ||||||
| Products and other operating costs | 1,455 | 1,507 | ||||||
| Total cost of sales | 9,098 | 9,777 | ||||||
| Depreciation and amortization | 1,649 | 1,653 | ||||||
| Goodwill impairment | — | 19,630 | ||||||
| General and administrative* | 3,600 | 4,596 | ||||||
| Total operating expenses | 14,347 | 35,656 | ||||||
| Operating loss from continuing operations | (2,117 | ) | (23,056 | ) | ||||
| Interest expense | (611 | ) | (183 | ) | ||||
| Other non-operating income (expense), net | (105 | ) | (90 | ) | ||||
| Loss from continuing operations before income taxes | (2,833 | ) | (23,329 | ) | ||||
| Income tax benefit (expense) | (11 | ) | 84 | |||||
| Consolidated net loss from continuing operations | (2,844 | ) | (23,245 | ) | ||||
| Loss from discontinued operations before income taxes | (605 | ) | ||||||
| Income tax benefit (expense) | — | — | ||||||
| Consolidated net loss from discontinued operations | — | (605 | ) | |||||
| Consolidated net loss | (2,844 | ) | (23,850 | ) | ||||
| Net income attributable to noncontrolling interests | (129 | ) | (83 | ) | ||||
| Net loss attributable to the Company | $ | (2,973 | ) | $ | (23,933 | ) | ||
| Consolidated net loss from continuing operations | $ | (2,844 | ) | $ | (23,245 | ) | ||
| Other comprehensive loss from continuing operations | (21 | ) | (66 | ) | ||||
| Comprehensive loss from continuing operations | (2,865 | ) | (23,311 | ) | ||||
| Consolidated net loss from discontinued operations | — | (605 | ) | |||||
| Other comprehensive loss from discontinued operations | — | — | ||||||
| Comprehensive loss from discontinued operations | — | (605 | ) | |||||
| Comprehensive loss | $ | (2,865 | ) | $ | (23,916 | ) | ||
| Loss per share** | ||||||||
| Loss per share from continuing operations | $ | (1.61 | ) | $ | (17.54 | ) | ||
| Loss per share from discontinued operations | — | (0.46 | ) | |||||
| Total basic and diluted net loss per share | $ | (1.61 | ) | $ | (18.00 | ) | ||
| Weighted-average number of shares outstanding during the period:** | ||||||||
| Basic | 1,852,072 | 1,279,639 | ||||||
| Diluted | 1,852,072 | 1,279,639 | ||||||
| *Includes stock-based compensation expense, as follows: | ||||||||
| General and administrative | $ | 104 | $ | 312 | ||||
**Adjusted to reflect the impact of the 1:20 reverse stock split that became effective on
The accompanying notes form an integral part of these condensed consolidated financial statements.
Reconciliation of Operating Loss From Continuing Operations
to Adjusted EBITDA Income (Loss)
($ in thousands)
| Three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Products and services revenue | $ | 11,046,000 | $ | 11,800,000 | ||||
| Cost of sales | ||||||||
| Labor | (5,778,000 | ) | (6,210,000 | ) | ||||
| Occupancy | (1,865,000 | ) | (2,060,000 | ) | ||||
| Products and other operating costs | (1,438,000 | ) | (1,443,000 | ) | ||||
| Total cost of sales | (9,081,000 | ) | (9,713,000 | ) | ||||
| Gross profit | 1,965,000 | 2,087,000 | ||||||
| Gross profit as a % of total revenue | 17.8 | % | 17.7 | % | ||||
| Depreciation, amortization and impairment | ||||||||
| Depreciation | (1,081,000 | ) | (1,047,000 | ) | ||||
| Amortization | (568,000 | ) | (606,000 | ) | ||||
| Goodwill impairment | — | (19,630,000 | ) | |||||
| Total depreciation, amortization and impairment | (1,649,000 | ) | (21,283,000 | ) | ||||
| Total general and administrative expense | (3,600,000 | ) | (4,596,000 | ) | ||||
| Other operating revenue and expense | ||||||||
| Other operating revenue | 1,184,000 | 800,000 | ||||||
| Other operating expense | (17,000 | ) | (64,000 | ) | ||||
| Total other operating revenue, net | 1,167,000 | 736,000 | ||||||
| Operating loss from continuing operations | (2,117,000 | ) | (23,056,000 | ) | ||||
| Add: | ||||||||
| Depreciation and amortization | 1,649,000 | 1,653,000 | ||||||
| Goodwill impairment | — | 19,630,000 | ||||||
| Stock-based compensation expense | 104,000 | 312,000 | ||||||
| Adjusted EBITDA loss | $ | (364,000 | ) | $ | (1,461,000 | ) | ||
Same Store Sales Growth
($ in thousands)
| Three Months Ended March 31, 2019 | Three Months Ended March, 31 2018 | % | ||||||||||||||||||||||||||
| Comp Store |
Non-Comp Store |
Total | Comp Store | Non-Comp Store |
Total | |||||||||||||||||||||||
| Revenue | $10,634,000 | $412,000 | $11,046,000 | $10,772,000 | $1,028,000 | $11,800,000 | (1.3)% | |||||||||||||||||||||
Comp Store Sales decreased 1.3% during the three months ended
