XpresSpa Group, Inc.

Good afternoon and welcome to Express Browse Group's second quarter 2021 financial report. All participants will be enlisted on your own. If you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. 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 Express Bar Group. Before our CEO, Doug Sassman, provides an update on our business and I briefly review our second 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 31, 2020, as well as our earnings release in 10-Q issued this afternoon. along with other current and periodic reports that we file with BSEC. I would now like to turn the call over to Doug.

Thank you, James. 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 Express Check, 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 ExpressCheck compared to our legacy ExpressBot segment. We also narrowed our net loss to $4.5 million from $58.5 million and retained our 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 a high personal touch business. We believe that ExpressCheck 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 ExpressSpa and ExpressCheck. 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 are transitioning from a company operating a singular concept to a family of relevant travel, health, and wellness brands with a lot of runway ahead of us. We see multiple brands that we believe have the potential to operate efficiently, simultaneously, and profitably over the long run. I would now like to share some thoughts on where we currently stand with respect to our airport-based express check and Express Spa businesses. Then I will take you on our new brand treat and how we intend to capitalize on what we believe is a large opportunity in the travel, health, and wellness space. Beginning with the ExpressCheck brand in April, we opened two ExpressCheck locations, the first in Seattle-Tacoma International Airport and the second in San Francisco International Airport. Today, we operate 13 ExpressCheck Wellness Centers seven days a week across 11 airports. In fact, agreement extensions have been agreed to at the first two airports that we've opened ExpressCheck in last year, John F. Kennedy International Airport and Newark Liberty International Airport. As you may recall, at the onset of the pandemic in March 2020, we moved extremely quickly on our vision for ExpressCheck due to the vast opportunity we saw for COVID-19 testing at major U.S. airports. We piloted, we learned, and we launched. Since then, ExpressCheck has surpassed all of the expectations we have for the brand, and we are very pleased with the results, even as vaccination rates rise. For example, patient testing was at an all-time high during the second quarter, increasing 146% sequentially when compared to the first quarter this year. We believe even with an increase in vaccination levels, on-site COVID-19 testing will still be an important and necessary service for airline employees and passengers alike for the foreseeable future due to several factors, including COVID-19 variant proliferation, ongoing international requirements, and breakthrough vaccination infection rates. International travel represents a significant portion of our patient base, as many countries outside the U.S. continue to require a COVID-19 PCR test prior to arrival. We do not see many countries changing this policy anytime in the near future and exposing their citizens to additional risk. There are simply not enough vaccines to meet the global demand, and the wealthy countries are monopolizing most of the supply. And further, now considering adding booster vaccinations. According to a Wall Street Journal article this past Friday, at the current rate, much of the world would remain unvaccinated and global stability out of reach until maybe 2023. ExpressCheck also continues to benefit from the range of rapid COVID tests that we offer, which is substantially higher and more expensive in price, a point with $200 to $250 versus $75 for the standard PCR test or the blood antibody test that we initially launched with. Almost all tests are now rapid, which has helped significantly improve gross margins and minimize our cash burn. As a reminder, it was only March of this year when we transitioned to a fee-for-service model for all testing, which has helped significantly improve our cash flow. Now, all patients pay up front at the time of service, and then they are able to submit their testing fees for insurance reimbursement on their own. The testing business has ramped up much faster than we expected. Our medical practices saw revenues Over 17 million in Q2, almost triple what was seen in the first quarter. We are confident that this will continue over this foreseeable future. Not only has testing ramped faster than any other part of our past spa business, but the four-wall performer margins continue to grow faster than any initiative that we have implemented in our spas, and they yield a return on our investment in under three months. At the end of 2020, we promoted Scott Milford, the Chief Operating Officer. Scott has quickly increased labor productivity and worked diligently to expand our operational hours to meet the needs of those requiring COVID testing, while still only operating when the terminals are the busiest to ensure profitability. Scott and our new CFO, James Berry, have brought a sharp focus on financial discipline, cash generation, and the execution of our operational strategies while still creating an employer-of-choice people culture. In late July, we announced a partnership with the Go Give One campaign. The Go Give One campaign was created by the World Health Organization Foundation and is dedicated to funding COVID-19 vaccines worldwide in the fight to reduce the growing vaccine equity gap. As a kickoff to the campaign, Express Spa is matching public donations up to an aggregate of $100,000. We are honored to support this incredible campaign in the fight against COVID-19. For those in lower income countries lacking access to critical vaccinations, Our investment in the health and wellness of our customers has opened up the door for this incredible partnership, which we hope to continue to grow in the future. Additionally, last week we received approval for a $2 million contract with the Centers for Disease Control and Prevention, the CDC, for biosurveillance tracking at three airports, JFK International Airport, Newark Liberty International Airport, and San Francisco International Airport. Many of you will remember that I have spoken about our government affairs efforts with the federal government over the past year. This is one of the outputs from those many conversations. This is an eight-week program with a six-month contract with the CDC that is aimed at identifying existing and new COVID-19 variants. including the highly contagious Delta variant and other new variants surfacing that could start surfacing in the U.S. Let me be clear. This six-month contract with a six-month extension in place allows the CDC, at their discretion, to direct ExpressCheck to set up a national biosurveillance program with installments of incremental funding in any or all airports. regardless of whether there's an express check fully operating in place. The CDC has the ability to dictate how real estate is used in airports for national safety concerns, whereas the current express check model requires the airport to grant access to their real estate on an airport-by-airport basis. The first $2 million commitment is only for this eight-week pilot across three airports targeting seven daily flights. While we're starting with the incoming flights from India, we are testing and developing protocol for future interventions that can be directed to many flights arriving from various countries of concern. The program being developed could easily be implemented for any incoming port beyond airports upon the CDC's direction. And because this at-the-gate program primarily includes the collection of self-administered passenger swabs that ExpressCheck sends out to select external labs for the testing, similar to what is used by children in some elementary school COVID testing programs, there is not a limit to capacity that we might typically have in an ExpressCheck facility with a specific number of testing rooms. As this program expands, we see this as a potentially significant business line extension for ExpressCheck and with the foundation of the government contract in place. Again, we will pilot, we will look to learn, we plan to launch. Our collaborations with government agencies as the CDC demonstrate the confidence these agencies have in the ExpressCheck brand. Express Tech aims to further the relationship with the CDC and extend the program into all major U.S. international airports in the near future. Based on what we have learned and are seeing today, COVID-19 testing, let alone future infectious disease testing, is here to stay for the foreseeable future for people traveling internationally in and out of the U.S. ExpressCheck also continues to work with several airlines, providing COVID-19 testing for passengers to select location. In April, we signed an agreement with Delta Airlines to administer the new rapid antigen test to customers traveling from John F. Kennedy International Airport to Milan Malpensa and Rome from the Chino International Airports. In early August, We launched a pilot program with El Al Israeli Airlines, the national airline of Israel. The state of Israel requires a negative COVID-19 PCR test within 72 hours of the travel when passengers and flight crew departing the US and then another COVID-19 PCR test once arriving in Ben Gurion International Airport in Tel Aviv. If this pilot is successful, an express check may provide free travel COVID rapid COVID-19 PCR testing onsite at JFK and other US airports for all LL passengers and crew on multiple daily flights in place of the second PCR administered in Israel. The protocol will get US originating LL passengers out of the airport significantly faster after a 10-plus hour flight, been sitting in line with all the other arriving passengers from every country and other airlines in queue for an on-site COVID-19 test before being released from the airport. Again, we piloted, we learned, and we're looking to launch. Now, turning to the airport business. On July 1st, we reopened four historically top-performing ExpressBot locations. These locations include Hartsfield-Jackson Atlanta International in Concourse A, Dallas-Fort Worth International Airport in Concourse A, Charlotte Douglas International Airport, Concourse D, and Las Vegas McCarran International Airport, Concourse D. In order to maximize profitability across these spas, we negotiated the right to operate these four spas during the busiest hours and only start with our highest performing services, which are massages, manicures, and pedicures. As a reminder, we had already opened our two Express Spa locations in Dubai International Airport in the UAE and a single franchised Express Spa location in Austin Bergstrom International Airport. We also opened a new Express Spa expanded concept on June 17th in Dubai International Airport. This is an international wellness prototype focused on testing new wellness treatments and technology, expanding our core Express Spa offerings to hopefully export the winners into existing domestic and international Express Spa businesses. Today, this brings us up to eight Express Spa locations currently reopened and operating. As we analyze the first 30 days of performance of the four high volume US locations that we opened on July 1st, their sales are lower than previous 2019 run rates, despite the increase in airport traffic and rising vaccination levels. The good news is that even with the lower revenue baseline, we believe we can generate the same or better gross profit margins While the legacy spa business on its own may not have been highly profitable in the past, today it has the benefit of cost-cutting measures we implemented in 2019, as well as sharing the corporate overhead across two other operating brands leveraging the same corporate support structure. Our operations team is currently reviewing our pricing, service model, and labor model to find further upside beyond the efficiencies of operating reduced hours during the airport's busiest times. As vaccination rates increase and airport traffic continues to return, especially with anxious flyers and business travelers who have been a significant service segment in the past, we see enthusiasm for travel spot services and at airports returning. We now have plans to open the next wave of 8 to 10 high-performing express spas by early fall to continue the profitable restoration of the pre-COVID business model of $40 to $50 million in annual revenue as the economy reopens. We piloted the openings. We are learning. We are relaunching. We will continue to reevaluate each airport on a month-by-month basis, as well as review continued learnings as our portfolio continues to be reactivated. Now let's discuss our new brand, TREAT, a comprehensive travel, health, and wellness concept that is positioned for the post-pandemic world. While this multichannel business is coming to market in record time in 2021, take advantage of this singular moment in history the return to travel, it has a runway to be a larger business than Express Spa or Express Check with better revenue and gross margins over time. TRAIT started as the vision of our collective new executive team after many planning sessions in late 2019 and early 2020. The brand and concept has been refined by one of our new executives, Kelsey Hansen, SVP of Marketing and Communications, who has wrapped these services with a beautiful lifestyle brand with timely digital content in a modern retail store design that connects with today's re-emerging traveler. Through this leadership team's strategic thinking, we found a way to leverage Express Spa's historic travel wellness experience and ExpressCheck's healthcare expertise to provide travelers access to integrated healthcare through technology and on-site personalized services. We have a classic need and want converging. People want to get back to traveling but need to do it safely and responsibly. We are not building an average brand for average people at above average prices. We are passionately working towards creating a concept worth creating with a story worth telling. and a contribution worth talking about. TREAT is positioned to be a leader in what we view as an emerging new category of health-focused travel and personal wellness services. TREAT will act as a wellness concierge, providing original content to help you plan travel as well as medical care and wellness services to consumers as they return to travel. Through TREAT's mobile app, travelers will be able to access 24-7 on-demand virtual healthcare, a travel health wallet with your medical records, and real-time global COVID-19 travel requirements all in one place, as well as book appointments in our on-site wellness centers as they open. Our goal is to be your travel champion, making it easier for you to be well as you return to traveling the world. To ensure a seamless launch of this new brand, we are rolling TREAT out in three distinct phases. If you recall on our Q1 earnings call in May, we announced phase one of the new brand, our website, www.treatcare.com. And brand campaign would launch in June. Thanks to the hard work of our new chief technology officer, David Cole, we met this target and officially launched our website on June 1st. The TREAT website features original content, access to resources about COVID-19 requirements for travelers, and curated e-commerce with emerging products targeting the savvy traveler living a wellness lifestyle. The initial website launch is gaining traction daily. We have over 100,000 unique visitors. The website also allows consumers to opt in to bi-weekly newsletter, The Treatment, which has started with over 1,000 readers and an average 30% to 35% Saturday morning open rate. If you've not signed up for The Treatment on treatcare.com, I think you'll enjoy it. As seen in the press release issued this morning, phase two of Treat's mobile app launched today. Our internal goal was to have this mobile app up and running by the end of summer, as communicated in our last earnings call. I'm happy to report that through the team's smart work, led by David, we stayed on track and launched ahead of schedule. The mobile app is available today at no charge for Apple and Android devices and provides access to on-demand virtual care, including chat care, video care, and a travel wallet with access to a person's medical records and test results. Memberships are available, which include a mobile app subscription with access to unlimited 24-7 on-demand medical care virtually. Also included in the membership is one free PCR COVID-19 test, one free flu vaccine shot per year, and discounts on prescriptions, which will be added in a few weeks. Over time, there will be additional capabilities added to the app, such as in-person scheduling once our airport wellness centers locations begin to open, plus other exclusive offers and discounts. Memberships start at $200 for three months or can be $720 for 12 months. Now moving on to phase three, which includes the launch of Treat in Airport Wellness Centers, which will both leverage some of our existing in-airport real estate, as well as take shape in new spaces. We're starting construction this week and plan to open the first pilot location at JFK Terminal 4 in mid-Q4 in a converted express spot location and a second pilot treat location in Phoenix Sky Harbor International Airport before the holidays in a converted express check location. Again, We pilot, we learn, we launch. Treat and Airport Wellness Centers will offer services such as COVID-19 testing, travel vaccines, anxiety care, emergency prescriptions, vitamin IV therapies, as well as private technology-led wellness sessions, including fitness, yoga, meditation, and mindfulness sessions in a premium hospitality environment. Upon entering, Customers will see a beautifully curated retail and check-in area and will be greeted by treat wellness concierges. Well-appointed treatment rooms will allow a break from the hectic airport environment and offer a list of health and wellness services designed specifically for travelers. We intend to roll out treat wellness centers across many additional airports in 2022 and 2023, leveraging our existing Express Spa real estate. Most importantly, we are building the one travel brand that provides access to integrated holistic care and can seamlessly fit into a health and wellness lifestyle. Over the long term, we envision that Treat's digital channels will provide more significant growth opportunities for revenue and profit than our airport real estate. This is because we believe this customer is everywhere and not just captive in the airports. The success of this revenue stream will be achieved through both subscription-based services that provide care and digital tools supporting travel, health, and wellness. Furthermore, we anticipate offering upstream content that can be monetized through affiliate revenue, as well as curated retail through e-commerce channels. In 2021, we are building the long-term infrastructure and habits to transition from an airport wellness operator to a technology-led company with unparalleled customer data coming in through multiple channels. And that also operates a profitable and convenient health and wellness operations for travelers and airports. While we are excited about this new brand and see Treat as the central pillar to the future of ExpressBot Group, we also now believe that there is significant opportunity for three sustainable growth brands while healthy unit-level economics can run adjacent to each other and leverage the efficient corporate structure as well as our relationships and experience operating in global airports. We have an extremely clear vision for the company with a focus on elevating our brands, being nimble, further expanding our services and products inside and outside the airports to increase value for all ExpressBot shareholders. As I have expressed here today, we have also assembled an extremely strong management team over the last six to nine months, which is already contributing today, as seen by our Q1 and Q2 results and recent announcements, while laying the foundation for a long-term success of this developing global multichannel company. We believe that our portfolio of health and wellness brands will enable us to build and enhance shareholder value for years to come, the best days are ahead of us. With that, I'll turn it to you, James.