XWELL, Inc.

Good day, and welcome to the Exwell, Inc. Third Quarter 2024 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. I would now like to turn the conference over to Suzanne Skravis, Chief Financial Officer. Please go ahead, ma'am.

Good day, everyone. Welcome to Exwell's conference call to review our Third Quarter 2024 financial results. Joining me on today's call is Ezra Ernst, 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 Ezra 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, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on current assumptions as of the date of this earnings conference call and webcast 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 annual report on Form 10-K for the year ended December 31, 2023, as well as our other current and periodic reports that we file with the SEC. With that said, I'd now like to turn the call over to Ezra.

Thank you so much, Suzanne. I want to thank everyone who's joining us on the call today and also express our appreciation for your continued interest in Exwell. As this is my first earnings call as the company's CEO, I'd like to give you a brief overview of my 25-plus year career. For those of you who may not know me, I've been with Exwell for several years. Having first served as CEO of our HyperPoint brand beginning in March of 2020, and CEO of ExpressCheck brand since January of 2022. Operationally, during this time, I led the collaboration with the Center for Disease Control and Prevention, under which we helped establish the CDC's traveler-based genomic surveillance program. Initially, it was a small pilot. It was built on ExpressCheck's advanced COVID-19 testing capabilities and HyperPoint's marketing expertise. Over time, we evolved the program into a key component of the United States biosecurity infrastructure, and we continue to be very proud of the important work we are doing with our partners and the CDC. Prior to joining Exwell, I held multiple senior management positions, including CEO of Physicians Weekly, Chief Commercial Officer of Trito, General Manager at WebMD, and President at Optum Health Education, a United Healthcare company, as well as a few others. With that color, in mid-September, I was excited to take on the expanded role as sole chief executive officer for Exwell. The transition from Scott has been very smooth, and I'm pleased with Exwell's continued momentum. From my perspective, by consolidating our dual CEO operating structure, we successfully realigned resources while creating a leaner, more agile decision-making structure. This streamlined approach also aligns with our broader cost reduction strategy and supports our efforts to return the company to profitability. At the same time, it advances the board of directors mandate to drive growth, innovation, and expansion. In short, we have a talented, engaged team at Exwell, and we have many compelling opportunities in front of us. Towards that end, I'd like to now spend a few minutes discussing several company initiatives we're actively pursuing. We will continue to prioritize our out of airport brand strategy, which we believe to be a major contributor to top line growth over the long term. We're planning to expand into several attractive markets in Florida. And by mid 2025, we expect to be in a position to operate up to 10 Exwell properties. In fact, we're opening our first Naples wax location in November and look forward to building on this momentum. Our team is also exploring opportunities to align additional Exwell properties with our existing in-airport markets. We believe that syncing our current geographic markets with additional Exwell properties will allow us to enhance our competitive positioning from a brand awareness, marketing, and operating efficiency standpoint. Turning to our in-airport growth, foot traffic and customer traction at our recently opened Express Spa at Philadelphia International Airport has been solid. It's a great location. It's our first airport spa that fully leverages our tech-forward concepts, and I'm pleased with the initial customer demand and overall feedback. Our autonomous massage chairs and robotic mail systems are showing promising performance indicators. As part of our strategic growth in other transit hubs, the company plans to open its Penn Station Express Spa next year. This location, as previously discussed, will showcase a tech-forward, labor-light spa designed to cater to commuters, local residents, and tourists alike. It will offer wellness-focused retail, autonomous massage, and nail care services. I expect we'll have more to share regarding this, as well as other actual growth initiatives in 2025. Furthermore, as we strategically build out our new locations, we also remain committed to driving higher sales and margins. For example, customers are taking advantage of our new partnership with Priority Pass, which we believe has enhanced brand awareness, broadened our reach, and allowed us to engage with new customers. We're pleased with the resulting increase in foot traffic to our locations, as well as the positive revenue implications. We're also committed to making sure that every guest enjoys an exceptional experience when they visit our stores. To deepen engagement, we've been expanding our service menu while emphasizing our selection of fully autonomous and innovative wellness solutions. Additionally, we've added new skilled retail and store management professionals to help us maintain a customer-first focus across all of our efforts. Our team has been focused on simplifying the way in which guests can reserve a spa appointment. Convenience is really the key, and we understand that pre-booking a service should be as seamless and as straightforward as possible. To help support this, our social media platforms have expanded in an effort to highlight how easy it is to interact with staff and our autonomous offerings. By embracing technology and mobile platforms, our goal is to make the process more frictionless and convenient so our customers can just focus on relaxing and rejuvenating. As we look ahead, we remain focused on driving sustainable top-line growth and believe we are taking the right steps to accomplish this goal. As we have discussed many times over the past year, we've been looking at every cost in an effort to improve efficiencies across all our brands, and deliver a more profitable operating model. Towards this end, looking at our nine-month 2024 performance, we reduced total operating expenses by approximately 35% when compared with a similar 2023 nine-month period. We also reduced cost of sales by approximately 6% and our general and administrative expenses by approximately 5% when compared to the comparable nine-month period in 2023. This commitment to optimizing our business structure and holding our labor costs constant while delivering more revenue should benefit our bottom line as we enter and work our way through 2025. In summary, a lot has been accomplished over the year to date. We're excited about our tremendous growth potential. We're committed to executing on all levels. I really want to thank the entire organization for their continued hard work, dedication, and commitment to our guests. I also want to assure our shareholders that we are making the right decisions consistent with the long-term health of the business and our brands. Thank you for your continued support. At this point, Suzanne can give you some additional details on the third quarter, as well as our continued momentum reducing operating expenses and driving growth.

Thank you, Ezra. I'm now going to provide a brief synopsis of our third quarter results. However, for details, please refer to the 10Q filed with the SEC. For the quarter, total revenue was approximately $8.4 million compared to $7.5 million in the prior year period. Third quarter 2024 revenue primarily consisted of approximately $4.9 million from express draw locations and treat locations, approximately $3.1 million from Express Test, which includes Exwell's biosurveillance partnership and its HyperPoint business, and approximately $0.4 million from Naples WAC Center, which was acquired near the end of the 2023 third quarter. Turning to expenses, salaries and benefits were approximately $1.9 million in the third quarter of 2024, compared to $1.2 million in the same period in 2023. It's important to note that our 2023 third quarter included approximately $1 million from a non-recurring employee retention credit, or ERC, which helped reduce salary and benefit costs last year. If you exclude the non-recurring ERC credit, our 2024 third quarter salaries and benefits would have decreased 4% year over year. Our general administrative expenses were approximately $4.5 million, including over $2 million related to extraordinary legal expenses compared to approximately $3 million for the 2023 third quarter. Total operating expenses were approximately $6.8 million compared to approximately $13.2 million for the 2023 third quarter. We reported an operating loss for the third quarter of $4.8 million compared to an operating loss of $12.1 million in the prior year third quarter. Our net loss attributable to common shareholders was $4.8 million compared to $11.5 million in the prior year same period. Turning to our balance sheet, our liquidity remained solid. Our cash and cash equivalents totaled $4.4 million, and we had $11.7 million in marketable securities. Our total current assets were approximately $19.5 million, and we have no long-term debt. Looking ahead, we remain focused on continued improvements in execution, including prudent cost management and enhanced operational processes. That concludes my remarks, and thanks again for joining our call today. Both Ezra and I look forward to speaking with you again in the months ahead. I'll now turn the call back to the operator.

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