XWELL, Inc. (XWEL) is an authority in wellness solutions for people on the go, operating multiple brands with a focus on delivering restorative, regenerative, and reinvigorating products and services to travelers. The company's transformation from its roots as XpresSpa, a global airport retailer of spa services, into a diversified wellness platform highlights its ambition to shape the future of the industry.
Business Overview and History
XWELL's journey began in 2006 when it launched its XpresSpa brand, offering premium spa services, including massage, nail and skin care, as well as spa and travel products, at airports around the world. The company's first XpresSpa location actually opened in 2004, two years before the official founding of the company. In 2016, XWELL (then known as XpresSpa Group, Inc.) acquired XpresSpa, significantly expanding its airport spa footprint. As of September 30, 2024, the company had established 19 domestic XpresSpa locations and 10 international locations, including two in Dubai International Airport, one in Abu Dhabi, three in Amsterdam, and four in Istanbul.
In 2020, XWELL pivoted its business by launching its XpresTest subsidiary, which offered COVID-19 and other medical diagnostic testing services to the traveling public, airline employees, and airport personnel during the pandemic. The company successfully launched its XpresCheck Wellness Centers, providing these services to a wide range of customers, including airline, airport and concessionaire employees, as well as TSA and U.S. Customs and Border Protection agents. However, as countries relaxed their testing requirements, the company began closing its XpresCheck Wellness Centers in 2022 and 2023, with all locations closed by the end of 2023.
The company's diversification strategy continued with the operation of the HyperPointe business, which provides direct-to-business marketing support across health and health-related channels. In 2022, the HyperPointe business was consolidated into the XpresTest segment. Further expanding its reach, in September 2023, XWELL acquired Naples Wax, LLC, a group of three high-performing locations offering face and body waxing services as well as a range of skincare and cosmetic products.
Throughout its history, XWELL has faced various challenges, including the impact of the COVID-19 pandemic on its airport spa business, the rapid decline in testing volumes at its XpresCheck Wellness Centers, and the ongoing need to optimize its cost structure and return to profitability. The company has taken steps to streamline its operations, reduce expenses, and focus on its core wellness offerings to position the business for long-term success.
Financial Performance and Ratios
Financials
XWELL's financial performance has been mixed in recent years, with the company reporting significant losses. For the nine-month period ended September 30, 2024, the company reported a net loss of $8.85 million, compared to a net loss of $23.10 million for the same period in 2023. This improvement can be attributed to the company's efforts to streamline operations and reduce costs.
For the three months ended September 30, 2024, XWELL reported total revenue of $8.42 million, an increase of $954,000 or 13% compared to the same period in the prior year. This increase was primarily driven by the growth in the XpresTest CDC contract and the addition of the Naples Wax Center segment. Cost of sales for the three-month period was $6.37 million, relatively flat compared to the prior year period.
For the nine months ended September 30, 2024, XWELL reported total revenue of $26.43 million, an increase of $3.72 million or 16% compared to the same period in the prior year. This increase was also mainly attributable to the XpresTest CDC contract and the Naples Wax Center acquisition. Cost of sales for the nine-month period decreased by $1.27 million or 6% year-over-year, primarily due to the closure of three XpresSpa locations during 2023.
The company was able to reduce total operating expenses by approximately 35% compared to the first 9 months of 2023. Additionally, XWELL reduced general & administrative expenses by around 5% compared to the first 9 months of 2023.
Liquidity
Some key financial ratios for XWELL as of September 30, 2024, include:
- Current Ratio: 1.98 - Quick Ratio: 1.91 - Debt-to-Equity Ratio: 1.84 - Return on Assets: -46.89% - Return on Equity: -163.83%
These ratios suggest that the company has maintained a relatively strong liquidity position, but continues to struggle with profitability and efficient use of its assets.
XWELL's cash and cash equivalents stood at $4,370,000 as of September 30, 2024. The company's debt-to-equity ratio was 1.85, indicating a significant level of leverage.
Strategic Initiatives and Growth Opportunities
Under the leadership of CEO Ezra Ernst, who was appointed in September 2024 succeeding Scott Milford, XWELL has been actively pursuing several strategic initiatives to drive growth and transformation. The company is prioritizing the expansion of its out-of-airport brand strategy, with plans to operate up to 10 XWELL properties in Florida by mid-2025, starting with a new location in Naples.
Additionally, XWELL is focused on enhancing its in-airport presence, with the recent opening of a tech-forward XpresSpa location at Philadelphia International Airport. This new concept features autonomous massage chairs and robotic nail systems, showcasing the company's commitment to innovation and delivering a frictionless customer experience. The company plans to open a similar location at New York's Penn Station in 2025.
The company is also exploring opportunities to align its XWELL properties with existing in-airport markets, aiming to leverage brand awareness, marketing, and operational efficiencies. Furthermore, XWELL is committed to driving higher sales and margins, with initiatives such as the partnership with Priority Pass, which has already shown promising results in terms of increased foot traffic and revenue.
XWELL operates four reportable segments: XpresSpa, XpresTest, Naples Wax Center, and Treat. The XpresSpa segment continues to be a core part of the business, with 19 domestic locations (17 company-owned and 2 franchises) and 10 international locations as of September 30, 2024. The XpresTest segment, while no longer operating XpresCheck Wellness Centers, now focuses on conducting biosurveillance monitoring in collaboration with the Centers for Disease Control and Prevention (CDC) and Concentric by Ginkgo BioWorks. This partnership has been extended multiple times, with the latest renewal in August 2024 representing approximately $11.04 million in estimated revenue for the XpresTest segment.
The Naples Wax Center segment, acquired in September 2023 for $1.62 million, operates three high-performing locations in Florida, offering core products and services such as face and body waxing, as well as a range of skincare and cosmetic products. This acquisition enables XWELL to expand beyond its airport client base and grow its retail footprint. The Treat segment provides access to wellness services for travelers at on-site centers, primarily located in airports, offering a full retail product offering and a suite of wellness and spa services.
Risks and Challenges
XWELL faces several risks and challenges that could impact its long-term growth and profitability. The company operates in a highly competitive industry, with numerous players vying for a share of the wellness and travel retail market. Its heavy reliance on airport locations also exposes it to fluctuations in air travel demand and airport regulations.
Additionally, the company's diversification efforts, such as the acquisition of Naples Wax Center, introduce integration and execution risks that could delay or derail the expected synergies and growth opportunities.
XWELL's financial performance has been inconsistent, with significant losses reported in recent years. While the company has taken steps to reduce costs and streamline operations, there is no guarantee that these efforts will translate into sustained profitability.
Conclusion
XWELL, Inc. is at a critical juncture in its transformation, as it seeks to leverage its established XpresSpa brand and diversify into new wellness-focused offerings. The company's strategic initiatives, such as the expansion of its out-of-airport locations and the enhancement of its in-airport presence, hold promise, but the execution and integration risks remain significant.
As XWELL navigates the changing landscape of the wellness and travel retail industries, its ability to successfully execute its growth plans, manage costs, and address the identified risks will be crucial in determining its long-term success. The company's focus on driving sustainable top-line growth, enhancing customer experience, and improving profitability through cost optimization efforts demonstrates a clear strategy for the future.
Investors interested in XWELL should closely monitor the company's progress, financial performance, and ability to capitalize on the growing demand for holistic wellness solutions for people on the go. The recent leadership transition and the company's commitment to innovation and expansion provide potential catalysts for growth, but the path to sustained profitability remains challenging in the competitive wellness industry.