XpresSpa (XSPA) Stock Rockets On Q1 Performance

XpresSpa Group Inc (NASDAQ: XSPA) is screaming for the top in the market this morning after releasing its financial and operational results for the first quarter late yesterday. The report showed significantly lower losses, coupled with significant growth in revenue as the company’s XpresCheck brand continues to take shape. 

At the same time, a couple XpresSpa locations have reopened and the company announced the formation of a new brand. Here’s the scoop:

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XSPA Stock Gains On Quarterly Results

Investors are excited about XpresSpa’s quarterly results as they show a company that’s firing on all cylinders. First and foremost, while there were plenty of people that said the company would never generate a penny in revenue from its XpresCheck subsidiary, those people were proven wrong, with the company generating $8.2 million from the first quarter. 

Importantly, this revenue is pushing the company very close to profitability. In fact, net loss came in at just $0.8 million, showing significant growth year over year from $10.7 million. 

Adding to the fact that XSPA is seeing growth in its financial strength, the company ended the quarter with $102.6 million of cash in the bank and total current assets of $107.8 million. Liabilities were only $13.8 million. 

Things are going well from a business operations standpoint. 

When it comes to XpresSpa service, the company has two open locations, which are operating in Dubai International Airport and one that’s operating in Austin, Texas. While these locations continue to underperform as a result of limited airport traffic and consumer behavior changes as a result of the pandemic, they are operational, giving the company the ability to assess the best time to reopen other spa locations based on their performance. 

Nonetheless, the big opportunity lies with the company’s XpresCheck Wellness Centers. These centers provide COVID-19 testing services to airport workers and passengers alike. 

To date, the company operates 13 locations across 11 airports, including the most recent popup XpresCheck Wellness Centers, which opened in Seattle-Tacoma International Airport and San Francisco International Airport. While these are the most recent locations to come online, the company actually opened a total of six locations during the quarter.  

It seems as though policy changes are helping with revenue growth. In fact, in January, XSPA started working with several airlines to meet the Netherlands’ COVID-19 testing policy for incoming international passengers, a policy that requires a negative COVID-19 test within 72 hours before departure. 

More updates surrounding XpresCheck were provided, including:

  • Fee For Service. As of March 8, the company transitioned to a full “fee for service” model for all tests. As a result, patients pay for their tests in full at the time of the test and may be reimbursed by their insurance companies later. 
  • Rapid Testing. The company reminded investors that at the end of March, it expanded its testing lineup, adding a rapid PCR test at select airports. This was followed by yet another rapid antigen test. 
  • Delta. Finally, in early April, the company entered into an agreement with Delta Air Lines to administer the new rapid antigen test to travelers flying from John F. Kennedy International Airport to Milan Malpensa and Rome-Fiumicino International Airports.  
  • On April 5, 2021, XpresCheck announced that it had recently signed an agreement with Delta Air Lines to administer the new rapid antigen test to customers traveling from John F. Kennedy International Airport to Milan Malpensa and Rome–Fiumicino International Airports.

Beyond what it’s doing with regard to COVID-19 testing and in-airport spa services, XSPA also announced the launch of a new health and wellness brand, known as Treat. The company said that it has positioned the brand for a post-pandemic world and designed it to deliver on-demand access to integrated healthcare through technology and personal services. 

Through the platform, travelers will be able to access healthcare, records, and real-time information, as well as book appointments in on-site wellness centers as they open. 

The platform also includes a mobile app, giving patients immediate, on-demand access to virtual care, including chat and video services. Moreover, users will receive a digital travel wallet that includes medical records and test results. 

Management Commentary

In a statement, Doug Satzman, CEO at XSPA, had the following to offer:

We are pleased to have reported $8.5 million in total revenue during the first quarter. This included $8.2 million recognized from XpresCheck, of which $3.2 million was deferred from 2020. We also substantially narrowed our net loss compared to the prior year. Revenue recognition for XpresCheck this quarter was made possible due to a reassessment of our management services agreements under applicable accounting rules. The reassessment was driven by rising patient testing volumes and higher average revenue per patient, due to greater patient preference for the rapid PCR test and rapid antigen test.

As the economy reopens, and with continued testing requirements for international travel, we are encouraged to see higher passenger flow due to the growing desire of people to resume personal and leisure travel in a safe manner and believe that this will lead to a strong recovery in the second half of 2021. Importantly, XpresCheck’s gross profit margin is higher than even XpresSpa’s peak business performance during the pre-pandemic era. This is enabling us to support both existing XpresCheck operations as well as make ongoing investments in Treat™, our new travel health and wellness concept, to meet the emerging needs of travelers in a post-COVID-19 environment.

Treat is being designed to transform the way people access healthcare through technology and personalized services. The concept is a multi-channel business and lifestyle brand, bringing together virtual and on-site integrated care services at airports, as well as content and support in our new digital platform being developed which will be highly relevant to the returning traveler. Treat is intended to reach consumers at all phases of travel, including planning, while providing access to travel care and medical documentation throughout their journey.

We strongly believe that there is a convergence of ‘need’ and ‘want’ states in travel — people ‘want’ to get out of their house and back to traveling and ‘need’ to do so safely and responsibly. This creates a dynamic opportunity for a new white space in which we intend to lead. We will be introducing many of the digital assets integral to this brand in the next few months, beginning with a new website and social media presence (Phase One), and will then follow up with the mobile app (Phase Two) and the opening of our first two integrated health and wellness airport locations in late summer / early fall (Phase Three).

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The Bottom Line

While there were plenty of people that said XpresSpa would never make money from XpresCheck, they were wrong. In fact, it’s these in-airport COVID-19 testing facilities that are bringing the company closer and closer to profitability. 

At the same time, the company is launching Treat, which will be an all around, travel wellness platform, one that offers significant revenue opportunities ahead. All in all, XSPA is doing overwhelmingly well, and will likely continue to do so, making it a stock that’s well worth watching. 

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