Greetings, and welcome to the XpresSpa Group, Inc.'s Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode, and a question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now turn the call over to Doug Satzman, Chief Executive Officer. Please go ahead, sir.

Thank you. Good evening. Before I provide an update on our business, first I’d 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 and 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. Important factors that might cause such differences include those set forth from time-to-time in our SEC filings including our report on Form 10-K for the year ended December 31, 2018 and other current and periodic reports that we file with the SEC. During today's call, we will refer to certain non-GAAP financial measures which we believe can be useful in evaluating our performance. The presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these non-GAAP financial measures to GAAP measures and a discussion of why we consider these measures useful, please refer to today's earnings release. So first, I would like to thank our stockholders for approving the ballot proposals set forth by management for consideration at our Annual Meeting last month. As a reminder, the following key ballot items were approved. One, the transactions that were first announced on July 8, 2019 which provide us working capital for greater financial flexibility to operate the business; two, the conversion of Series D preferred stock to common stock, which ensures a better alignment of our objectives in the more straightforward equity structure. Three, extending the maturity of our senior secured debt by 17 months; four, the expansion of the existing employee stock plan to allow…

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Ryan Perkin [ph], a private investor. Please go ahead.

Hi, Doug. Regarding these new partnerships, do you expect that they will have a slotting fee for access to your real estate along with a revenue sharing agreement? And what types of products could we expect?

So, each of these strategic partners we’re talking about were required some type of participation outside of a normal exchange of buying products and reselling them in our environments or for their products for us to use in the services. One of our biggest assets is the real estate that we have, some of the best in the world and the most important airports with the most desirable consumers walking by every single day. And as I’ve been talking to these outside companies, some very innovative and creative companies, they understand the value and are very excited to partner with us. So whether it’s a slotting fee or a marketing fee or an investment in the company, there is a range of rebate – there’s a range of ways companies are offering to participate and have an opportunity to associate with our brand. And as far as our product and services, the two examples with Calm.com and Persona, these are both technology companies who have been disruptive in the industry and really don’t take a lot of space in our spa. But they are very interested in the customer profile that we both share. But some will be more traditional. They could be beauty products, they could be more traditional products and services that we offer and looking for industry and category leaders or emerging leaders is our first target. So more to come.

Great. Thanks.

Our next question is from Steven Mill [ph], a private investor. Please go ahead.

Hi, Doug. How are you? I realized that it is early but how is the new franchise location performing in Austin and are you in talk with other potential franchisee? Thank you.

Thanks for the questions, Steven. Our first franchise store has turned out to be very, very successful. It was an unusual situation where we opened the company owned and a franchise store in the same airport. Both stores are doing above expectations. We have a great partner franchisee who is very experienced in the industry and is helping us learn how to become a great franchiser. We are in early conversations with a lot of interested parties, but I’d rather walk before we run. This is a new vertical for this company. I have franchise and experience, but there’s not a lot of people here who do. So we want to nail this first one right to build the right programs and systems that support our larger franchise systems. And that’s part of the reason we decided to open in the same venue so we can both kind of learn from each other and make sure they get off to not only a successful financial start but we want them to be a great operator and a seamless guest experience. Any customer coming to an XpresSpa, they don’t have to worry about who’s signs their paycheck. They get the great service for the same prices and the same guest experience. So far we’ve been really very happy and likely more to come, but it won’t superfast.

Okay. Thank you.

[Operator Instructions]. Our next question comes from Marissa Steele [ph], a private investor. Please go ahead.

Hi. Thanks for taking my questions. I’m just wondering, how much more cutting do you think is possible I guess with your D&A or you kind of need to grow into leverage with our revenues and more spas?

Well, before I joined the company in February, there was an active cost cutting in the turnaround activities and behaviors had already started. And I was liking it to surgery with an axe. At this point we’re doing surgery with a scalpel now. So there is more cut cost to cut but we have been very thoughtful that we are not going to risk our top line sales, we’re not going to risk our guests experience. As you’ve heard before, our people initiatives are very important to the turnaround. Nobody wants a massage from a disgruntled massage therapist. So we’re going around looking under each category, each part of our business, value engineering processes. And frankly this was a founder-led private company for a long time and those historically are not efficient organizations. In my background I’ve been at some very efficient companies. Things like professional fees are – has been high at times and we’re being very thoughtful where that happens looking at our corporate overhead. So we moved our offices, bringing the substantial savings, but still being able to maintain the workforce we have with very inexpensive sublease. I think there’s more to be done in the spas and how we manage our inventory of our supplies. In some instances, I think we’ve gone too thin where some of our technicians have kind of run out of nailfiles that afternoon and the delivery is coming the next morning. So I don’t want to go too far where we inhibit sales, but it’s charging every person in the corporate office as well as my leadership in the field. Every day, you should either be doing something to grow sales or save money and possibly both. And if you’re not doing something to support either one of those activities, that’s not how you turn a business around. But I want to underscore maintaining our customer experience and enhancing it will not be sacrificed, but there’s certainly more efficiency.

Our next question comes from Bill McGovern [ph], a private investor. Please go ahead.

Hi, Doug. Good evening. Thank you for taking my call. Hopefully you could turn this company around. So what I wanted to know was, are you able to provide any insights on the litigation? And pardon me for saying this, but the business [indiscernible] brought against this company, and when do you feel that you’ll be profitable? Thank you.

On legal issues, I can’t really comment on it. I’m not highly concerned. But it’s not something I’m allowed to talk about. Your second question, when we’ll be profitable? I expect next year in 2020 with the trends that we’re going. And from our sales growth, especially if you look at our average store sales and our same store sales and the trajectory we’re on with saving money, we’re getting very close. And I am confident next year will be that turning point.

I appreciate it. Thank you for taking the call, sir.

Sure. Thanks for your interest.

This concludes the question-and-answer session. I would like to turn the conference back over to Doug Satzman for any closing remarks.

Okay. Well, just in summary, this is a company with a lot of potential. Health and wellness continues to boom. Airport traffic continues to grow. And I looked joining this company, I thought long and hard about it. But what I saw was an underperforming and an undervalued asset. Right now, I’m working on the performance and the values are going to follow. We are absolutely in a transition year but in many instances I’ve been pleasantly surprised. Some things are going faster than I expected, and positive things. And the team is really very committed. The moral has definitely returned. If you have ever gone in our spas and I encourage you to go and enjoy our services, you can immediately feel whether there’s a great team environment or if it feels like a room full of independent contractors. We have more and more of our spas that are transitioning from that feel of independent contractors and hired guns to a team and people who are very passionate about healing, about beauty, about health and wellness and certainly about XpresSpa. And that is why you see the turn in our sales. And we just came out of a three-day quarterly business review with our team reviewing our Q3 results and our commitments to finish the year strong and planning for next year, and there is so much energy as much from our tenured, long-term leaders and the new leaders that have come on. So I think this is a great time to watch and participate, and the turnaround is taking root. And I would say we’re probably in the second or third inning of a nine-inning game, so you’re not too late. Thank you and I look forward to speaking to everyone next quarter.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating. Have a pleasant day.