XWELL, Inc.

Greetings. Welcome to Exwell's second quarter 2023 earnings conference call. During today's presentation, all parties will be in a listen-only mode. As a reminder, this conference is being recorded on August 14th, 2023. I would now like to turn the conference over to Suzanne Skravis, Chief Financial Officer for Exwell. Please go ahead.

Good day, everyone. Welcome to Exwell's conference call to review our second quarter 2023 operating results. Joining me on today's call is Scott Milford, Exwell's chief executive officer. We have posted our fiscal year earnings release on the investor relations section of our website located at www.exwell.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 31st, 2022, 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.

Hello, everyone, and thank you for joining our second quarter 2023 earnings conference call. We had a productive second quarter and continue with our efforts towards profitability by improving revenue growth in our spa business, reducing expenses, and honing in on EBITDA accretive acquisitions that will help drive our future. As I've said before, there is still much work to do, but I'm encouraged by the progress we're making. The business delivered sequential revenue growth of approximately 15.7% and a sequential reduction in operating expenses of approximately 13%. Our net loss for the second quarter of 2023 on a GAAP basis was approximately $5.7 million, representing a reduction of approximately $2.2 million or 28% compared to the same period in 2022. The changes we're making are beginning to take hold, and I believe we're on the right path to improved performance and profitability. As you may know, given our international operations, fluctuations in the U.S. dollar exchange rates can impact reported results. For example, a portion of Exwell's business is conducted in Turkish lira. While never converted into dollars, It's translated into dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings. I point this out as our Q2 earnings reflects the unfavorable impact of converting Turkish lira generated from our new spas in Turkey to U.S. dollars, which increased our second quarter 2023 net loss by approximately 1.1 million dollars. Excluding this adjustment, our net loss would have been approximately $4.5 million on a currency-neutral, non-GAAP basis, which would have represented a 43% reduction over Q2 of last year. Our SPAs are performing better compared to a year ago, driven by increases in staffing and the introduction of new products and services that leverage technology and take advantage of growing wellness trends. Our spa business delivered sales growth of approximately 64% when compared to the same six-month period last year. We also delivered a total product margin of 58% at our spa locations and our treat segments. Our international airport spas remain an area of strong performance delivering net sales growth of approximately 30% compared to the same six-month period last year. This was driven by the addition of our Istanbul spa locations and increased passenger traffic at our Amsterdam and Dubai locations. On the innovation front, we continue to expand our relationships with autonomous service providers, enabling us to deliver a more efficient experience at a lower labor cost. We recently expanded our pilot with clockwork and successfully launched autonomous manicures in our Miami location, with our site set on launching in Orlando and Atlanta after that. Our autonomous massage chairs are also performing very well and have reduced the payback for these machines from seven weeks to five weeks since launching late last year. These new technologies coupled with the continued growth of our retail business, further strengthens the viability of the spa business in this space and enables us to take a modified concept of our spa with a lower labor cost to other transportation hubs, both here and abroad. Turning to our express test business, we continue to help the country in its effort to monitor and hopefully reduce the threat of pathogen transmission through its first-ever national biosurveillance program. Our eight passenger screening centers continue to test incoming travelers in six of the nation's busiest airports. Biosurveillance continues to be a critical and profitable part of our business, delivering sequential revenue growth of 35% or $2.3 million in the second quarter. We're pleased to continue our partnership with the CDC. The CDC has renewed the traveler-based SARS-CoV-2 Genomic Surveillance Program to a new one-year contract awarded on August 12, 2023. The partnership will support public health and biosecurity services with a contract valued totaling approximately $15.9 million. As I've said on prior calls, our primary goal is to improve our profitability, and we continue to make strides in achieving that, as I've outlined earlier. Ultimately, however, our long-term strategic goal is to transform Exwell into a leading provider of wellness and lifestyle services for anyone on the go. And to do that, we must first build a sustainable and profitable foundation, which we're working towards now, and also smartly drive the growth of our brand. Even with our continued focus on expense management, we've made calculated decisions to grow our existing spa portfolio with the addition of a new spa at Philadelphia Airport and the opening of our 11th international location in Abu Dhabi. Further, we've created a model that we can now take into other transportation hubs that I believe leverages technology and retail expertise with a smaller footprint and a lower cost of labor. As we identify locations that we can bring this model to market, both domestically and internationally, I expect to share more details in the coming months. Next, we have made considerable strides in advancing our out-of-airport acquisition strategy. And while I'm unable to comment on any specific discussions we're having, to potentially expand Exwell's health and wellness product offering, I'm confident we have the right team in place to execute our acquisition strategy. And I want to reiterate that we're pursuing opportunities on multiple fronts and that our path forward will potentially involve one or more businesses. We're committed to delivering improved results, which requires operational execution and a deep focus on balancing growth and profitability. To help us achieve this, I'd like to take a moment to formally welcome Suzanne Scravis to our team. Suzanne joined Exwell as our new Chief Financial Officer in early July, bringing more than 25 years of deep financial and operating experience, including CFO at Maverick Technologies. She has an impressive track record of efficiently operating companies at scale, seamlessly integrating acquisitions, and driving profitable growth. You'll hear from Suzanne again in a moment, but we believe her strategic, value-oriented mindset makes her an invaluable asset to our leadership team. And we intend to fully leverage her unique combination of operations and financial expertise to help Exwell accelerate efforts to remove costs diligently and thoughtfully from our business, while also advancing our plans to build long-term profitability through continued innovation and acquisition. With that, I'd like to turn the call over to Suzanne for a quick introduction.