Greetings, and welcome to XWELL's Third Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded on Thursday, November 10, 2020. I would now like to turn the conference over to Omar Haynes, Interim Chief Financial Officer for XWELL. Please go ahead, sir.

Good day, everyone. Welcome to our conference call to review XWELL's Third quarter 2022 operating results. Joining me on today's call is Scott Milford, XWELL's Chief Executive Officer. We have posted our third quarter earnings release on the Investor Relations section of our website located at www.exfo.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 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 amended, 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. Good afternoon, everyone. We appreciate you joining us today. Since our second quarter earnings conference call, we've made considerable progress executing against our 4 key imperatives. And more importantly, we continued laying the foundation to enter 2023 as a leaner business with a path to return to profitability. As outlined on previous calls, we're rolling out our new retail strategy, enhancing our spa and wellness locations and adding new customers while simultaneously reducing overhead costs. Illustrating the progress we're making on our transformation efforts. We recently unveiled a new corporate identity and began trading under a new NASDAQ ticker symbol, XWEL for XWELL. On October 25. The seamless evolution to XWELL captures our emphasis on well-being and our commitment to being a leading authority in delivering innovative wellness solutions for people on the go. Supporting our efforts, we just opened a new treat location in Concourse B at Salt Lake City Airport in Utah. This opening reaffirms XWELL's commitment to the company's transformation and focus on evolving our existing brands to include more desirable services and products aimed at capturing more customers. Taking a closer look at our existing brands. Our spa business continues to improve as we staff up to meet continued demand. Our wellness footprint currently includes 20 spas in the United States and 8 internationally. We're also growing in advance of the holiday travel season. We reopened 3 XpresSpa locations during the third quarter, and we're expanding internationally. This includes the launch of 5 new Express spas in a symbol Turkey, 3 of which are already open with 2 more expected to open by year-end. As one of the largest and fastest-growing airports in Europe, is Istanbul is an ideal location for us to extend our international presence. Regarding 2023 growth, we plan to…

Thank you, Scott. I'm now going to provide a brief synopsis of our third quarter results. In the third quarter, total revenue was $10.7 million compared to $26.8 million in the prior year third quarter. This decline is primarily driven by softening in demand at our Express Check testing facilities. Q3 2022 revenue primarily consists of $4 million in revenue from reopened Express spa locations as well as our treat locations, million in revenue related to our acquisition of Hype Point earlier this year, $1.8 million in revenue from our file biosurveillance partnership and $4.3 million from our XpressCheck locations. Turning to expenses. Our total cost of sales decreased to $9.3 million from $13.7 million in the prior year third quarter. The principal factor leading to this decline was the closure of underperforming XpressCheck locations. As we've discussed on prior calls, 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 $6.4 million compared to $5.2 million for the year prior comparable period. The $1.2 million variance was primarily due to certain nonrecurring credits that were recorded in Q3 2021. We reported an operating loss in the quarter of $7.6 million compared to an operating profit of $7.1 million in the prior year third quarter. Our net loss attritable to common shareholders for Q3 was $7.2 million compared to net income of $5.6 million in the prior year third quarter. As Scott discussed, it is important to note that we continue to strategically invest and our third -- in our long-term growth initiatives. Additionally, on the capital management front, we have successfully removed approximately $1 million in costs from our system and began to see the benefits of those initiatives in the late…

Thanks, Omar. Scott, an investor pointed out new language on the website about how XWELL's brands are conveniently located around the world, and are soon to be in local communities as well, and we're hoping you could share some insight regarding this.

Thanks, Joe. Absolutely. Our expansion into local communities is part of our overall strategy to expand outside the airport. It's something I've discussed during prior earnings call and strategically, I believe extending our innovative wellness presence outside of the airport is a natural extension for our brands. The question is, when? We're still laying the groundwork to be able to do this effectively. Off-airport is very appealing to us. And I also think it's appealing to our customers. And as the right opportunity presents itself, we plan to make a strategic acquisition or make an investment in an off-airport health and wellness business.

Thanks, Scott. Speaking of acquisitions, we have a question regarding the M&A agreement with Benchmark. I don't know if you're willing to talk about timing on that, but there's interest from investors in hearing more.

Sure. As I mentioned earlier, in September, we engaged benchmark to help us identify potential new acquisition opportunities. We've maintained that growth acquisitions is something that we fully tend to take advantage of, and we're actively focused on it. As of today, I don't have any definitive agreement in place. So I'm not able to comment on anything specific regarding timing. We are looking at 3 to 4 potential opportunities, but I can't really speak to these opportunities just yet. I can say that acquisitions are a core component of our overall growth strategy and growth outside the airport is key to that.

Thanks, Scott. We have an e-mail asking if you could comment on plans to increase XWELL's global reach.

Sure. For those of you that might be new to our story, our health and wellness brands operate outside the U.S. in Dubai, the Netherlands, and of course, now Istanbul, as I mentioned earlier. We've been expanding our addressable markets and our international customer base for some time. Last month, we opened 2 XpressCheck locations in Istanbul, and I was fortunate enough to be able to attend those openings. We just opened our third location in that same airport today, and we're opening 2 more locations in that airport before the end of the year. We believe there's opportunity for additional growth in that large airport but also additional growth potentially in Istanbul's original airport. And we're taking that momentum into the new year with the planned opening of our 12th international location, as I referenced, in Abu Dhabi International Airport. I think further out, we're considering other overseas markets and continuing to leverage our existing footprint. I think our innovative wellness service offerings resonate with international travelers and our continued international growth is not only realistic, but a tangible opportunity for us.

Great. Thanks for that, Scott. Omar, we have a question on labor. Can you comment on staffing trends and if your locations are seeing any challenges with hiring?

Sure. As you know, it's no surprise that the labor market in general continues to be challenging, especially for airports, and we hit hard by the pandemic. To further add complexity, we are staffing for licensed professionals who have picked their own violets to work in. Fortunately, we have refined our recruiting tactics and have made some considerable inroads towards being fully staffed. But for example, we've added incentives and programs to retain and incentivize our staff like retail sales targets and other bonuses. We have also dedicated resources to training our team members to upsell, which is not only in line with our growth objectives, but increases their earnings potential in lieu of other opportunities that they may have. Staffing and training will continue to be a focus for our business as we complete 2022 and move into 2023.

Great. Thanks, Omar. Scott, we have a question regarding your reduction of expenses. Investor was hoping you could share some thoughts into how these actions will get you to profitability quicker than before.

Sure. The team has worked very hard on this -- the balance of the year. And although we didn't see the results we expected in Q3, which were due in a large part to delays in our ability to close unprofitable XpressCheck locations where the cost of labor is significant. We're pleased with the plan that we have in place, and we're very confident that the savings we identified will accelerate as we materialize not only the closures but related infrastructure cuts and refinement to our spa economics. As mentioned, our plan reduces over $1 million a month from our cost structure without compromising the growth of our wellness brands, and investing in marketing so that we can continue to connect and grow our customer base. And I expect as these cuts further materialize, we'll actually see an acceleration in our path towards profitability.

Thanks, Scott. Next, we have a housekeeping question asking how they should think of your XpressCheck footprint going forward?

That's a great question. Looking back, beginning just over 2.5 years now, this company met the COVID-19 pandemic head on. Implementing health and wellness and screening testing through our XpressCheck locations and also helping to build the nation's first biosurveillance capability, which is now fully in place. Based on how we see testing evolving globally, we've begun shuttering unprofitable XpressCheck locations, as I mentioned. Now we realize that, that's a shift for some of you, but it's the right short and long-term economic decision. We'll enter 2023 with 2 check locations and 5 biosurveillance locations serving the XpressCheck business. Keep in mind, though, that we firmly believe a strong safety program is critical to the control of COVA-19 and other potential viruses and as demonstrated by our partnership, XWELL is focused on supporting the invaluable national effort. If the landscape changes again, we can certainly come back and update our approach and our existing locations are available to pivot back into that.

Great. Scott, directionally, are you able to make any comments in terms of growth next year?

Yes. Thanks for the question. We believe there is a lot of opportunity for attractive growth. First, as I've said before, we need to refresh our existing core spa locations to attract more customers into our ecosystem and grow the profitability of our existing business. That is first and foremost, paramount. I've already discussed our growth internationally and our emphasis on international growth going forward. To reiterate, we continue to have plans to grow through potential acquisitions as evidenced by our agreement with Benchmark. And also, I've discussed plans to grow our customer base through our enhanced retail. That, coupled with how we're evolving XpressCheck into a full-service biosurveillance business, encourages me to see solid momentum in the area -- in these areas. And we're confident in our long-term strategy. We're optimistic about finishing the year strong and in a good place to accelerate our path towards profitability. But there's still more work to do. Clearly, we're entering 2023 as a leaner, more profitable business, and I'm excited about the path ahead. The fastest way for us, grow our overall business is to ensure we create a sustainably profitable core business and use that to expand our brand globally. On future earnings calls, I think investors are going to want to hear more about how we are delivering rationally to drive revenue, maintaining a disciplined and efficient cost basis and how we're progressing on our path towards profitability. I'm going to ask you to stay tuned and I look forward to sharing that progress with each and every one of you in future earnings calls. Thanks.

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.