Greetings, and welcome to XpresSpa Group's First Quarter 2022 Earnings Conference Call. During the presentation, all participants will be in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded Monday, May 16, 2022. I would now like to turn the conference over to James Berry, Chief Financial Officer. Please go ahead.

Good afternoon. Thank you for joining us today and for your interest in XpresSpa Group. Before our CEO, Scott Milford, offers his prepared remarks and I review first quarter 2022 financial results, I 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 31, 2021, as well as other current and periodic reports that we filed with the SEC. I would now like to turn the call over to Scott.

Thank you, James, and hello, everyone. We appreciate you all joining us this afternoon. Since taking over as CEO in late January, my team and I have been laying the foundation for our future by developing a set of strategic imperatives to accelerate our company's evolution so that we can become a leading health and wellness provider for people on the go. Today, my intention is to walk you through our first quarter performance and the progress we have made on the four business transformation strategies I laid out on our last earnings call. As we execute these strategies, we're thankful to have available capital to enable us to adjust the pace of our work in light of changing market conditions for our business, even as we continue repurchasing our undervalued stock through our buyback program. Of course, it's important for everyone to be aware that as a public company, we can repurchase our stock during certain limited open window periods. During the first quarter, we repurchased 7.1 million shares during the available open window period, and will continue to repurchase shares as the opportunity arises. To help set the stage for our discussion today, I'd like to begin sharing our first quarter’s performance. We generated consolidated revenue of $24 million and adjusted EBITDA of $0.4 million. Our quarter-end cash balance was $83 million and we have no long-term debt. I also want to call out that while the quarterly decline in overall airport testing relative to last year was not surprising, as the first quarter is typically the weakest quarter in terms of airport traffic, we did see a decrease that was faster and more significant than we had planned as countries have moved to significantly relax their testing requirements. We further see this decreasing trend through April and…

Thank you, Scott. I'm going to provide a brief synopsis on our first quarter results, but please refer to the 10-Q that we filed this afternoon for greater details. Revenue rose to $24 million in the first quarter of 2022 compared to $8.5 million in the prior year first quarter. The increase was primarily due to the recognition of revenue from XpresCheck locations, although we also generated $2.6 million in revenue from our re-opened XpresSpa locations and $0.5 million related to the HyperPointe business we acquired early in the quarter. Cost of sales increased to $15 million from $4.2 million in the prior year first quarter. The increase was primarily due to higher cost to operate the XpresCheck locations and the reopening of certain XpresSpa locations that were temporarily closed during the first quarter of 2021. Note that the largest component in the cost of sales or cost of testing kits and labor cost at the location level. General and administrative expenses were $10.2 million, compared to $4.5 million for the year ago comparable period. The increase was related primarily due to the functional costs associated with the operations of XpresCheck and Treat wellness centers, XpresSpa locations, and the newly acquired HyperPointe segment. We reported an operating loss in the quarter of $2.5 million, compared to an operating loss of $0.9 million in the prior year first quarter. We generated net loss attributable to common shareholders for the quarter of $4.3 million, compared to $1.1 million in the prior year first quarter. Finally, with respect to our GAAP financials, our liquidity remains solid with cash and cash equivalents totaling $83 million and we have no long-term debt. Operating cash flow also improved to minus $1.8 million from minus $3.5 million and we deployed $11.1 million for share repurchase. During the…

Thank you, James. The first question is as follows. When will you be changing the company name and ticker to something more relevant to where you are headed?

Thank you for that question. I'm really excited to be able to share that we've kicked off work already to start a rebranding exercise. We have identified an agency and are already well-underway. Once we hire Pablo, and he joins us on May 31, this will be one of his first priorities to have him lead this exercise for us so that we can finalize it and conclude it.

Great. Next question is about cash. You've earned a lot of cash, compared to the fourth quarter of last year and your core business is deteriorating, should you really be looking at acquisitions at this point in time?

Let me say that we absolutely believe that growth through acquisition is the right path for us to achieve longer-term revenue and profitability. To ensure that we're optimizing the cash we do have on hand, we're going to continue cutting costs throughout the organization and making sure that our resources that we believe we need to drive the most opportunity for accretive revenue generation are firmly in place.

Okay. Next question is about evolving your existing business from XpresCheck and to Treat. Are you not confident enough in Treat that you need to look elsewhere for revenue? I'm assuming that means through acquisitions.

Yeah. So, we actually think we can do both at the same time. I think it's important to note that with our XpresCheck leases, they were created at a time and with specific limits on the types of services that we could offer. So, we may not be able to include integrated services at every XpresCheck location. So, as a result of that, I think, we're going to be offering additional services and reinvented retail where we can and work with airports to see if we can expand those services at the same time, while we also look outside of the airport to expand our business.

Question on the CDC, when do you expect to hear from them on renewing the current contract, which expires shortly? And as of now, are you going to stop the biosurveillance work, the end of June when the contract ends?

We expect to hear about this at any time. That is the intention. And we're going to continue to refine schedules, stretch available labor dollars, as well as even reducing the number of flights that we’re screening. So, in the past, where we may have screened five or six flights coming in from India, we may reduce that down to two, still allowing us to pool test, but stretching that available labor out enough and long enough, so that we can secure hopefully the renewal of the contract.

Next question, are you considering a reverse stock split? And if so, do you need shareholder approval? How concerned are you about getting a notice for delisting?

We are very sensitive to the stock price right now. And my team and I are focused on delivering strategies that we've outlined in our earlier comments that we believe will drive shareholder value long-term. We got very little credit for the results that we've delivered over last year, but we're confident that the strategies that we're developing now and deploying now will reverse the current trend and help drive long-term value on our stock price.

How many XpresSpas are not currently open? And what do you plan to do with them? Why would you be acquiring other non-XpresSpa airport spas when you have your own airport locations that are sitting dormant? Is it because of better real estate? Why can't you just take over the real estate without having to acquire anything?

That's a big question. So, let me see if I can answer it altogether. So, we currently have 11 spas that are in various stages of decision making around possible closure. Some of those we may reopen, others are either poor site locations or require very high cost to operate. And so, we're using this opportunity now to make tough decisions to reduce our exposure later. The pandemic affected a number of businesses, including some of our competitors, who may not have the financial means to have stayed closed. And now they might be looking for ways to exit. We're going to be opportunistic in these instances. If it allows us to enter a new airport or improve our airport locations, we're going to take advantage of that. And we'll explore multiple paths to increase our footprint and keep cost of entry down.

How much of the Treat revenue is actually COVID-testing versus other services at this point? And also are you making any money from the digital component of Treat or is this really going to be a retail play versus a digital play in terms of treatment?

So, I'm going to answer the latter part of the question first. We fully expect to leverage both retail and digital in the Treat brand. We're in the process now of re-tooling our digital assets to better align with the product services and evolution of Treat as we see it, now that we have a couple of retail units under our belt open. In reference to the first part of the question, when Treat opened, a significant portion of the revenue was testing-related. It has begun to shift as testing has slowed down and more wellness services are being purchased. Right now, about 66% of our Treat revenue is from testing and 34% is from other services in retail, but those percentages themselves are even shifting as more customers are exploring Treat’s other services like hydration therapy and vitamin boosts.

Okay. If COVID testing is waning, how does the recent HyperPointe acquisition even help your overall business?

So, when we made the HyperPointe acquisition, it was done in part to help support our overall development of our biosecurity programs and designed to protect travelers. That strategy was and continues to remain an important part of our business. And while testing requirements may relax, it doesn't reduce the need for building out that strategy. I think as we continue to optimize costs within our own G&A structure, we'll leverage resources between HyperPointe and XpresSpa in a more holistic way to ensure that we can keep costs in line with the revenue that they drive.

Thanks, Scott. I'm not seeing any more questions at this time.

Thank you very much.

I believe that concludes our call for this evening. Appreciate everyone's participation. I think you now can disconnect your lines. Thank you.

Thank you very much.

And that does indeed conclude our call today everyone. You may now disconnect.