Good day, and welcome to XpresSpa Group's Second Quarter 2022 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Omar Haynes. Please go ahead.

Good day, everyone. Welcome to our conference call to review XpresSpa Group's second quarter 2022 operating results. Joining me in today's call is Scott Milford, XpresSpa Group's Chief Executive Officer. We have posted our second quarter earnings release on the Investors Relations section of our website, located at www.expressbygroup.com. A link to the webcast of today's conference call can also be found on our site. Before turning the call over to Scott for his prepared remarks, we 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 revised 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 may 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 file with the SEC. With that said, I'd now like to turn the call over to Scott.

Thank you, Omar, and thank you, everyone, for joining us. We appreciate your interest in XpresSpa Group. I'd like to begin today's meeting by updating you on the progress we're making, pivot our business for growth in a post-COVID world. I'll then turn it back over to Omar to review our financial results before we open the call for some Q&A. As I've mentioned on our prior calls this year, our vision is to transform XpresSpa Group as a leading health and wellness provider for people on the go. Part of this transformation is positioning our business for sustainable long-term growth. We're also moving forward with a strategic rebranding. We've selected a new name, designed a new visual identity in logo and reserved a new ticker symbol with the NASDAQ. The rebrand campaign will launch in Q4 once we have cleared the necessary legal requirements. Having said that, we continue to make steady progress on executing against our four core transformational imperatives. First, refreshing our business in the airport to attract more customers. Second, creating and executing a completely new retail strategy, and not only drive more foot traffic into our airport locations, but also augment our online presence. Third, adding new customers through revenue-accretive acquisition and the deployment of a B2B wellness product outside the airport. And lastly, reducing infrastructure costs to better leverage capital. Our entire team is committed to delivering on these four imperatives. And while our efforts are not yet fully reflected in our results, we're enthusiastic about the meaningful progress we've made during these last few months, and we firmly believe the value of the work we are doing now will become quite apparent over time. Before we jump into our second quarter highlights, I want to thank all of our team members throughout the…

Thank you, Scott. I am now going to provide a brief synopsis of our second quarter results. However, for detail, please refer to the 10-Q that we filed this afternoon with the SEC. In the second quarter, revenue increased to $13.6 million compared to $9.1 million in the prior year second quarter. Q2 2022 revenue primarily consists of $7.4 million in revenue from our Express Check locations, the generation of $3.7 million in revenue from reopened Express spas as well as our treat locations, and $0.7 million in revenue related to our strategic acquisition of Hype Point earlier this year. Turning to expenses. Our cost of sales increased to $12.4 million from $7.7 million in the prior year second quarter. The principal factor of this increase was higher costs to operate the Express Check locations as well as the reopening of select XpresSpa locations that were temporarily closed last year. As we discussed last quarter, the cost of testing kits and location level labor costs remain the largest factors in our cost of sales. Switching to general and administrative. These expenses totaled $7.6 million compared to $4.6 million for the year ago comparable period. The increase was primarily due to the functional costs associated with the operations of Express Check and new Treat wellness centers, more reopened XpresSpa locations and the newly acquired Hyper Point business. We reported an operating loss in the quarter of $7.8 million compared to an operating loss of $4.2 million in the prior year second quarter. Our net loss attributable to common shareholders for the quarter was $7.9 million compared to $4.5 million in the prior year second quarter. As Scott discussed, it is important to note that we continue to strategically invest in our long-term growth initiatives. Additionally, on the capital management front, we…

Thank you, Omar. While our second quarter financial results are not indicative of our view of the business. We remain on track to achieve our long-term objectives by executing against our four core transformational imperatives. And we're pleased that we're proceeding with the CDC to provide an expanded and sustainable biosurveillance effort in the U.S. We believe that our company is well positioned to benefit from our strategies, and we look forward to updating you on our progress in the quarters ahead. And now we'll take investor questions.

Thank you, Scott. We have a few e-mails from investors congratulating the team on the CDC renewal. Is there any other guidance we can currently provide relating to the scope of that contract?

Thank you, Joe, and thank you for that question. We are really excited and proud that the CDC has placed such a high level of trust in Express Check and our partner, Ginkgo Bioworks, to advance a more permanent biosurveillance strategy for the country. As I mentioned, the contract is worth as much as $61 million over two years. In terms of scope, we're going to continue to operate out of four of the busiest international airports in the U.S. JFK in New York, Newark Liberty International Airport in New Jersey, San Francisco's International Airport and Atlanta's Hartsfield-Jackson Airport. In order to accommodate a higher volume and diversity of passengers for this program expansion, we're slated to expand our footprint of pool testing locations inside our existing airport locations, along with adding a new set of locations in Washington, Dallas International Airport later this year, where we currently have an Express Check location, by the way. The new contract also allocates resources for Express Check to conduct wastewater surveillance from aircraft. Now this is going to be an especially effective tool in identifying various pathogens, not just COVID, as it will measure levels of a virus and bacteria regardless of whether individuals may have symptoms or not. An additional note that I want to make is that we don't expect the long-term work here that we're doing with the CDC to impact our efforts to close unprofitable Express Check units. And I'll say, we are super excited to build on our long-standing relationship with our partners, and we look forward to continuing to set the standard for airport biosecurity

Thanks, Scott. I have a two-part question here regarding the airport business. For modeling purposes, can you recap the number of XpresSpa and treat locations that will be open at the end of the third quarter? Also, you mentioned several new locations. Can you tell us where they're located?

Sure. By the end of the third quarter, we're expecting to have three Treat locations opened and 31 XpresSpa spa locations opened globally. Last week, we opened our fourth location in JFK Airport. And over the next several weeks, we expect to reopen two more locations in Phoenix Sky Harbor Airport, two in Hartsfield-Jackson Airport in Atlanta and our first airport locations in Istanbul Airport, followed by the remainder of those locations for a total of five during Q4. Now this does not include any locations that we add through acquisition, which we are continuing to pursue, both in the airport and outside of the airport. I also want to note that we're working on a plan to open a location in Philadelphia Airport. As you may remember, we've begun construction on the location at Philadelphia's Airport before COVID hit, and we were forced to stop. For specific reasons, at the time, the decision was made to hold off on finishing its construction and not to reopen the spa. But subsequently, with the work that we're doing now to introduce an optimized labor model and the new technology that we're bringing into our spas and the robust retail offering, we believe that we can now open this location successfully, and we're working with our partners in Philadelphia to do just that. Thanks,

Thanks Scott. Couple of investors were wondering about where you stand with your airport acquisition plans. Any updates to share?

As I've said a number of times in previous calls, my team and I are firmly in the position and believe that the growth that we have and that we're going to experience can be accelerated through acquisitions outside of the airport. We've had multiple discussions with several companies that could have added both unit count and revenue outside the airport without us having to deviate from our core mission of being a leading health and wellness provider for people on the go. But we made the decision not to advance these specific discussions further because we couldn't agree on a realistic valuation with the founders, but that's not stopped our efforts. We still believe acquisitions will continue to be a good strategy for us and a good strategic use of our capital as well as an integral part of our growth strategy. And we continue to work within our network, to identify potential new opportunities. I look forward to updating you as we continue to analyze for complementary opportunities that will further expand our business and refuel our growth.

Thank you, Scott. And you also discussed Express bar Group's capital allocation strategy and specific areas of the business where you're making investments?

Sure. Let me start with the fact that XpresSpa really takes a balanced approach to managing our capital allocation with an eye on maximizing the value for our shareholders through organic growth and external growth opportunities as well as returning excess capital to our shareholders through potential share repurchases. In a nutshell, as we continue to advance our key imperatives, we expect to make investments in the following five key areas: one, opportunities to expand outside the airport, which I've mentioned before, technology that we're going to purchase to support efficient growth, advanced services and equipment to upgrade the offering we provide, products that enhance the user experience and facility improvements to our existing locations that will refresh the brand. All that said, we're focused on building a sustainable growth engine. And with $71 million of cash, no long-term debt and a commitment to efficiently use our capital, we continue to be positioned to execute on those strategies.

Thanks, Scott. I know you and Omar already touched upon this. We have a question regarding the company's appetite for additional share repurchases and what investors should expect for the remainder of 2022 and into 2023.

Yes. As part of our disciplined capital allocation strategy, we've really tried to be opportunistic in repurchasing our shares because of the value we see at current trading multiples, as well as our commitment to maximizing the value to you, our shareholders. As Omar mentioned, demonstrating the confidence that the Board of Directors and XpresSpa Group's management team has regarding the execution of our strategic priorities, the company has repurchased about 8.5 million shares year-to-date under our current share repurchase program. And looking ahead, I think we'll continue to be opportunistic. Keeping in mind some of the other capital requirements that we have coming up and that we're really excited about.

All right. Great. Looks like we have a few more questions. Can you talk more about your B2B strategy?

Thanks for bringing that question up is I don't think I talked about that very much in the earlier portion of our conversation. Earlier this summer, we hired an experienced leader to help us build out a targeted B2B strategy. And we're now aligned on a simple and refined set of services and products that we want to offer that allow us to actively pursue potential partnerships. Right now, our focus is going to be on selling promotional packages to companies for airport services, pop-up locations in high-traffic areas that can leverage our new labor model and heavy travel retail as well as service offerings in our -- in airport lounges.

Thanks, Scott. You mentioned earlier the strategic rebranding efforts you're engaged in. Can you provide any more information on the new brand and when you'll launch it?

I know everyone thanks us about that. No one is more anxious than I am. And we are really excited that we've landed on a new brand for our parent company as well as reserve the new ticker symbol. We believe the new brand reflects the future of our company and aligns closely with where I think the direction is going in the future. I wish I could share more or even debut the new design for you right now, but we're still finalizing the clearing of specific trademark and registration hurdles. What I can say is that as soon as those hurdles are cleared, we will share the news. And while I'm specifically talking about our parent brand change, we're also on a parallel path to ensure that our unit level branding also aligns with our new brand. And we'll share more about that work as we get closer to our official brand launch, which will occur in Q4.

Great. Thanks, Scott. We have a follow-up question here regarding the CDC renewal. Investors are interested in knowing if the program can be expanded to include Monkeypox testing?

Yes. Thanks for that question. We're actually -- we're thrilled that our bio surveillance program continues to play a strong role in detecting new COVID variants. But also other pathogens entering the country, further highlighting the importance of testing. Regarding Monkeypox, we're actually already working with Ginkgo and the CDC to investigate how to incorporate testing for this virus into our protocols. As most of you know, testing modalities for virus detection are different for each virus. And there are significant logistical hurdles that have to be crossed in order for us to be able to execute a testing regimen in volume, but we are working on that as we speak.

All right. Great. Looks like a final question. So you're relatively new to XpresSpa Group, and it's only been a couple of quarters since you took on the CEO role -- CEO role. Can you give us a little bit of your perspective of what you've seen if XpresSpa is headed in the right direction and how the transformation is going?

Absolutely. Let me answer your question directly. Yes. I absolutely believe XpresSpa Group is headed in the right direction. We have the right balance and experience and know-how to not only transform this business but to also chart a new course of its growth. What really excites me and continues to excite me and energize the work that I do here is that I have the opportunity to work with an amazing team. When I reflect on our business pivot in 2020, for example, I think about the agility and the flexibility of the team we assembled to build Express Check. It really reinforces the reason why I joined the company in the first place. And as part of the treat launch team, I had the opportunity to help influence that brands development and the opening of our first three locations. Have we learned from that experience? Absolutely. Will we do things differently? Absolutely. But remember, we built Treat knowing we would adapt and evolve the offering over time. What I may not have expected was the abrupt drop in testing that put more pressure on our other lines of business to perform. And that's why we continue to be aggressive about refreshing our spas and reinventing the offering. And why I believe the integration of Treat and spa services in an approachable customer-friendly environment is not only what the airport traveler wants, but I believe it can serve as a way for consumers to access wellness services in this new self-care world inside, but also outside the airport. And I think the imperatives that we laid out earlier this year set us up and set up a strong foundation for us to achieve that vision of wellness for people on the go. As I look back on what I've learned, I believe we need to take action at a speed that reflects the strength of our expertise and experience. And while we're not necessarily pleased with our financial results this quarter, I am resolute in my commitment and the commitment of my entire team to pivot once again and set a new course for our business. Thank you.

Thanks, Scott. It looks like that will wrap up the question-and-answer period. Any closing comments?

Sure. Thanks again, everyone, for joining us. We continue to manage growth opportunities and near-term challenges with an eye toward our long-term potential. And we hope that you're as excited about the future of XpresSpa Group as we are. As always, I'd like to thank our shareholders and everyone on this call for their interest in our company and for their continued support. We look forward to updating you on our continued developments, progress and financial performance in the third quarter. I hope you all have a very good evening. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.