Good afternoon. And welcome to XpresSpa Group's Second Quarter of 2021 financial report. All participants will be [Operator Instructions] After this presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. Now, I'd like to turn the call over to Mr. James Berry, CFO, please go ahead.

Good afternoon. Thank you for joining us today and for your interest in XpresSpa group. Before I, CEO, Doug Satzman, provides an update on our business, and I briefly review our 2nd quarter 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. 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 31st, 2020, as well as our earnings release and 10-Q issued this afternoon, along with other current and periodic reports that we file with the SEC. I would now like to turn the call over to Doug (ph.).

Thank you, James (ph.). Hello, everyone. Thank you for taking the time to join us this afternoon. Before we begin, I'd like to express our deep appreciation for all of our shareholders including both institutional and especially our retail investors, for all of the support that you've given us over the past year. Our goals are aligned and we look to create significant shareholder value for everyone in the future. Let me begin by expressing how pleased we are with the financial results during the second quarter. We generated net revenue of 9.1 million, including 8.7 million from XpresCheck, and narrowed our Adjusted EBITDA loss to 2.3 million down from 3.4 million in the prior-year second quarter. The improvement of $1.1 million is indicative of the profitability of XpresCheck compared to our legacy XpresSpa segment. We also narrowed our net loss to 4.5 million from 58.5 million and retained a strong liquidity position with an unrestricted cash balance of $102.5 million. I want to be clear on a new view that we see as we look to the future. At one point, we believe the future of the airport Spa business was highly uncertain considering the nature of the high personal touch business. We believe that XpresCheck would be a short-term bridge to the future. We also believe that Treat would be the sole destination as it combines the most relevant parts of XpresSpa and XpresCheck and expands the health and wellness services for travelers while adding a significant digital engine so revenue is no longer limited to the airports where we operate units. Now, we see a much bigger opportunity based on our experience during this pandemic. The data that we have collected and analyzed, and customer views. We now see three sustainable business models for the future. We…

Thank you, Doug. As we mentioned last quarter, we were very pleased to have been able to recognize revenue for XpresCheck during the first quarter, based on a reassessment at the management service agreement relative to ASC 606. Turning to the second quarter, we were able to recognize a total of $9.1 million, compared to a $143,000, in the second quarter of last year. Only one center did not meet the ASC 606 requirement for revenue recognition in Q2. The increase in revenue was primarily due to the recognition of the revenue from the 12-13 XpresCheck Wellness centers that were wholly or partially opened during the quarter. Please note during the quarter, a majority of the XpresSpa locations remained closed. In the third quarter, we will be able to recognize the revenue associated with the 4 XpresSpa s opening -- opened on July 1st. Managed service fees totaled $8.7 million compared to 0 in the second quarter of the prior year. We also generated revenues from services and products of $338,000 and $79,000 respectively from sales and marketing agreements with strategic scrap partners related to our 2 locations in Dubai. Cost of sales increased to $7.7 million from $978,000 in the prior-year Second Quarter. The increase in the cost of sales was primarily due to the cost of sales encouraged in the XpresCheck most notably for the rapid test kit, offset by the decrease in the variable costs associated with the decline in XpresSpa revenues and decrease in occupancy costs as a result of rent concessions received from airports. Gross profit was $1.14 million -- was $1.4 million compared to a negative Gross profit of $835,000 in the prior year, Second Quarter, primarily due to the higher revenues. Generally, in a minute [Indiscernible] rated expenses were $4.6 million compared to…

Thank you. At this time, we'll be conducting a question-and-answer session. Michelle (ph), you may now proceed with the questions.

Good afternoon, Doug (ph), and thank you. The first question we have, you mentioned that the medical practices did 14 million in revenues in the second quarter. How does that reconcile as XpresCheck 's 9.1 million revenues recorded?

I'm going to turn this question over to James (ph).

Well, the patient service fees collected by the practices. In addition to paying for the medical provider's services there, they're used to pay past, current, and future MSA charges. The information that we provide about those practices is to give a better understanding of the current levels of activities at that very top level.

I'm going to jump in too on the end of it. And the number was 17 million, not 14. And this is unbelievable, guys. As you look at the traffic that's coming through, vaccination rates are going up. Infection rates are lower than the height of the pandemic. yet testing is still more relevant -- not still, is more relevant today than it ever has been. And we don't see it changing anywhere in the near future. As travel picks up, more countries are going to continue requiring these tests. So, it's important to understand the revenues and the fees that come through these practices because that's the indicator of the demand that's coming through in the runway that we have. It blew us away when we saw what Q2 looked like compared to Q1, and we're very excited for the rest of the year from a business perspective.

Great. Thank you, Doug (ph). The next question, the Company has over 100 million of cash on the balance sheet, a great position to be in. However, how are you going to make efficient use of this cash?

James?

Well, I would report that our stewardship of cash is always top of buying. In addition to funding new segments such as Treat that are so exciting and dynamic, we've stated that we continue to evaluate opportunities including acquisitions, strategic business transactions, and essentially stock repurchases. So, you're right, it is great to have that on that amount of money. It's a flexibility that it gives us, but we take it very seriously in making sure that there is an efficient return on that capital.

I'm going to tag on too. We're getting visibility to a lot of emerging concepts. As the world's changed in this post-COVID world, there are other companies, other good ideas, that are well-suited to be strategic partners with us to amplify what we're doing with Treat and accelerate some of the other services that we're offering. And so, like James said, being a good steward of cash and making sure it is invested wisely, where there is a much bigger benefit for us than just a return on the investment. But a strategic value to further accelerate our offerings in some of our new contracts and purchases.

Great. Thank you, Doug (ph). There's a lot of talk from employers, especially municipal employers, saying that any employee who has not been vaccinated will need a weekly COVID test in order for them to be able to go to work. Is this an opportunity you see for XpresCheck?

Absolutely. So now as we've settled into this new norm of testing, we've been talking a lot about for travelers to go somewhere. But we're seeing more municipalities just like the investor asked. That's going to require regular testing. So, there is a clear opportunity for the XpresCheck business line to grow outside of airports to provide testing services. We've already built the protocol and can handle large peaks. And we continue to evaluate a broad number of opportunities that don't just have to limit us to be in an airport.

Great. Thanks, Doug (ph). What will you do with the rest of your real estate? How many leases expire in the near term that you will have to decide shortly on the go-forward path for those locations?

So, the real estate we have continues to be a very valuable asset. Literally, it took us 15-16 years to get the 50 locations that we had pre-pandemic. A lot of RFPs and -- but once you're in the airport and you've demonstrated that you are a good operator, it's much easier to stay in an airport and get extensions. One of the things we're seeing quite often now, and you may be reading about, is rent concessions are being offered by airports because of the lack of business. Often the rent concessions are funded by EPP funds or other government COVID dollars, that come federally down to the state, that worked their way to the airports. But one of the things they can offer, it doesn't cost them anything, is extending your term. And we're getting more term, and other airport operators as well, so it gives us more runway to make an evaluation, whether a piece of XpresSpa real estate is best suited for Treat, which we think is the highest sales and profit opportunity, or an XpresCheck, or reopen it as an XpresSpa with some of the features that I spoke before. But there could be a couple that we cut, these were -- maybe small kiosks at the end of a terminal,

No, it wasn't very busy before. It's not magically going to be very busy now. But the real estate that we have under contract and frankly XpresCheck got us even more real estate under contract in at least 3 more airports we'd never operated in. It's become a very important part of our strategy.

Great. Thank you, Doug (ph). For the next question. What made you choose John F. Kennedy Airport and Sky Harbor as the first two locate -- Treat locations?

Glad you asked. I don't think I've talked about this much. They are really ideal for what we want to pilot with our Treat Wellness centers. So, JFK Terminal 4 is one of the preeminent terminals, I think in the world. The ownership JFKIT has been an outstanding partner with us. The Port Authority of New York and New Jersey has also been very supportive of what we've done with XpresCheck, and now Treat. And what is great about JFK, well, let me tell you a touch about Phoenix and then compare and contrast. Phoenix also, with great management in place, has been a very important airport for us with our XpresSpa portfolio. But it is another one where we have access to a really good piece of real estate, just like in JFK Terminal 4. So, New York, one is East Coast, one is West Coast. One location is pre-security, the other is post-security. One is maybe 1,200 square feet, the other is close to 2,000 square feet. So, we really get good data to see and inform and to learn from, to inform, you know, the next 20, 30, 40 that we build. That's where, again, we take a very disciplined approach to pilot, learning, and then launching. And we find we have a much higher success rate as we've used this methodology again and again since I've been here at the Company. So that's why we have chosen. And we also had just two very good pieces of real estate that we could easily convert and get open this fall.

Great. Thanks, Doug. Are you finding it hard to staff your XpresCheck and XpresSpas? Is there a labor shortage you're seeing?

There absolutely is a labor shortage. We -- we are starting to see relief as federal and state funding expires for the unemployed. And it's whether you are a food service worker, or you're a delivery driver, or you work in an airport, it's a challenge to find people, but our people team -- our HR team has done an excellent job. Scott Milford (ph), who was promoted to COO, his -- most of his career background in HR, so there is a very strong team with recruiters that have kept us generally staffed. The medical side -- the medical techs that we get, those can be competitive too, but it's loosened up. During the height of the pandemic, lots of urgent care and hospitals and testing centers were all vying for a fixed population. But that's eased up and labor has not been a big challenge for us so far. But I really attribute it to having good benefits, good pay, good middle management that takes care of our people. And that's part of what I brought Scott into to do. And it's working.

Great. Thank you, Doug. And my final question, should we expect to see an increase in personnel-related to Treat? Will your current G&A be able to support this new business?

It's a good question. So, we are being very careful as we add new talent. First, we look at some of the talents we have internally, we have some very strong folks who have been promoted. And then we go to the outside to bring in talent that we may not have. As we balance the cost of it with this new business, we have the good fortune of XpresCheck, which has dramatically changed our cash burn situation. And with the reemergence of XpresSpa, we're going to have more registers ringing, more income sources to distribute, and really leverage this corporate team that we have. So, our senior leadership team supports all of the Company.

Most of the people, as you go through the organization, support all three brands. If your recruiter or you're an accountant, you are able to support them. And frankly, that's a benefit XpresSpa never had. All the corporate overhead was purely paid for by the spas, but now it is being redistributed with these different growing businesses. Then -- I'm also being careful not to starve the growth. So, one of the mistakes one can make is your staff so slowly that you never reach your potential. This -- these three businesses and this Company is picking up speed. So, we are bringing on talent as we need to while keeping an eye on the overall expense rate while we have more centers of revenue, contributing and distributing these costs. So, I feel good with the practices that we have in place. And I got to tell you the leadership team, bringing the 1st people in when the sky was falling in the pandemic, really took some true believers. Now, it's much easier to hire.

We have a lot of people who would love to get working at XpresSpa group under these men and women that we're bringing in. And we're very pleased to be in this position. So, it's been an awesome Q2, and we're deep into Q3 doing what we do, and I look forward to sharing more news at our next quarterly earnings call. Is there -- are there any more questions? I think you said the last question?

That would be it for today, Doug. Thank you.

Okay. Well, I just want to reiterate a big thank you to all of our investors, being our retail investors or institutional investors or any of the men and women in between. We worked very hard to produce and create mid and long-term value. The day traders that are in and out, that's not necessarily our customer. We are building a Company that is growing outside of airports into multiple revenue streams with multiple brands, and we're just getting started. So, thank you for calling in and for your continued support.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.