XWELL, Inc. (XWEL) Earnings Call Transcript & Summary

Yes. And when you expand that, let's say, just for an example, we decide to do -- we decided to do botox in our -- in our locations with Naples, you then layer in that same recurring revenue model with a botox product. And now you're getting the benefit of both and as everyone knows, botox is something that people generally don't do once. They keep doing it, and we become that naturally recurring source of not only the service, but also the revenue coming in as a result of it.

You've emphasized you've expressed your desire to grow the out-of-airport business. And clearly, Naples Wax seems a great first step there. But where is going to be the focus going forward? Is it going to be just growing Naples Wax? Or are you still looking at other inorganic growth opportunities?

Yes. So the answer is all of the above. We absolutely intend to grow the Naples Wax footprint and expand that footprint to include other things. But we will not pass up opportunities similar in structure to Naples that can be easily bolted on and easily integrated into our portfolio. So whether that's a 3 or 4 unit company that focuses on microneedling or facials or the like. If it's an attractive business that satisfies our criteria, we will go after businesses like that because now there is a complementary architecture built that can use those services across one another. And don't forget, we launched -- just a while ago, we launched the XWELL Rewards program. Underpinning all of these things that we are adding into the portfolio of brands is this loyalty program that kind of crosses over all of the brands and creates that connective tissue, where guests, customers, members all have the ability to benefit from loyalty and from repeat usage across the board in our airports and out of our airports. So we absolutely will grow Naples Wax where it makes sense for us to grow it. Look at acquisitions that we can bolt in and kind of tuck-in and then we are going to look at and fully intend to look at a new concept that we've been talking about and putting effort against and as we've talked before, Thierry, we have this Treat brand that we started in the airport post-COVID. And we realized that the model that was built to sustain the Treat business, just -- the world wasn't ready for that, in my opinion. And as a result of that, we believe that the spa business in the airport is -- has a better potential and ramp to continue to be successful. But we have this asset, this branded asset, and we have this design for the Treat brand that kind of transcends the brick-and-mortar. And what we want to be able to do is use that brand and capitalize on the growth of the gig economy. And as you probably know as well as anyone else, post-COVID, we have seen a dramatic increase in the number of people that have moved out of the workforce to start their own careers on their own as business owners. And what we want to be able to do is take our expertise and wellness, take that Treat brand concept -- that look and feel of the Treat brand and marry them together building a location outside the airport that has rooms that can be rented by providers so that they can administer their service, all wellness focused with a suite of amenity services that can help those individuals sustain their book of business and grow their books of business. And we think that's where the Treat model can actually work for us in a much more profound way. And when we were on our site selection trip this week, we did look at potential locations that could serve this model, several thousand square feet, 10 or 12 rooms, rent those rooms out on an episodic basis -- on a monthly basis and then provide them a set of amenity services. This is not -- this kind of model isn't unique. There are competitors in the space, primarily around salons and the salon suite concept. The difference for us and what we bring to the table is we are wellness-focused. We are delivering -- bringing the wellness experience to more customers through this gig economy model. And I'll talk about it later, there'll be plenty to share more and I'd love to be able to come back and do another fireside chat just on how we intend to leverage that model more fully and financially.

Okay. I'll hold off questions on that then. Any -- when would the first one open? Do you have a line of sight with that or not yet?

I don't. I don't have a line of sight yet, but I fully expect that we'll hit the ground running and the idea is to get something up and running within the first couple of quarters of 2024.

Okay. So you still have a strong balance sheet. You've been working on the cost structure. I don't know how much more room there is there. But does the balance sheet give you enough of a runway with all these opportunities? Or should investors be concerned you might be running out of capital and has to go [indiscernible] on?

Yes. I don't think that investors should be concerned. In fact, I'm hoping that our investors see the activity and the work that we're doing in a way that helps reinvigorate value in our stock. But we still have cost we can take out of the business, and we fully intend to do that. We still have activities that we are rapidly driving to bring breakeven and profitability to our other business units. And as soon as they get to the point where they're throwing off cash for us, that just builds that confidence in our ability to use the available capital that we have to grow. And I think one of the points I wanted to make earlier is something to consider here as we look at growth outside the airport, it is less expensive for us to build a Naples Wax Center, for example, than it is for us to build a spot in an airport. Now that is logical. People would assume that's the case. But when you understand how much more -- how much less expensive it is, we can actually advance our growth outside the airport at a much faster clip than we can if we just stayed focused on our airport business. And so I think because of that, because we're shifting that balance, we'll have more opportunity to use the available cash to grow further forward faster. And I think the other comment I'd make as we look at acquisitions, we're not taking our foot off the gas pedal on the XpresSpa brand either. Where we've said before and hopefully, you'll see something in the next couple of weeks about our new brand, our new rebrand of the spa. But also, we're looking to take XpresSpa out of the airport and maintain it in other transportation hubs. We're talking to rail stations now, both here in the U.S. and also overseas to potentially look at an autonomous service model within a train station, for example, where we can have a retail technician that's there, but we don't have any labor other than that because all of the services we're providing, both through our new massage chairs and through our autonomous manicures and retail we don't have the labor model -- the labor expense that we do traditionally in an airport. So we can build these things much smaller and much more cost effectively, which will generate revenue faster and profit faster.

Great. Well, I mean, I must say in terms of capital utilization, I was happy when I saw the Naples Wax acquisition because I felt putting the balance sheet in parallel. And at the same time, it does look like it's got the potential to be a substantial platform for your business. So that was interesting. This I wasn't going to talk about -- much about the airport business, but you had an announcement with stretching services. And I was kind of wondering could give us a bit of color there? Is it [indiscernible] towards a different audience. Is it for people when they are done with their flights? Or what's the difference between stretching and massages?

Well, as you probably know, and I've had multiple conversations with folks about how quickly stretching is assuming its role and place as both a part of your fitness regimen. In a way in which to manage fitness, but also just as a general way to relax, just like a massage. And what is interesting is that for our -- when you become a massage tech, your part of your certification involves learning about stretch modality. And we've been leveraging our massage techs to do traditional massage, which is great. And now we have this additional opportunity to leverage them on the stretch side to provide short burst stretches 15, 30, 45 minute stretch that cost -- its price point is at or around our massage price point in our spas, but it doesn't -- we don't expect it to cannibalize on the massage work because it's actually a completely different experience. And for those that do stretch as part of their regular regimen, they know the value of getting stretched before they get on a flight, and they feel 10x better on that flight. They feel more limber, they feel more energized. They're able to absorb the 6-hour flight to 5-hour flight sitting in a middle seat. And then on the way back, as they get off the plane, having sat for 4 or 5 hours in a middle seat, getting that stretching and just getting completely loosen and limber as they leave the airport. So we view it as win-win whether you're getting on a flight or whether you're getting off the flight. But our target right now is to just build awareness as folks are getting on flight. And we've just started our awareness campaigns, and we're starting to see some traction on it. So we're really excited about it.

Great. Well, we covered a lot of ground. It looks like you have quite a few interesting initiatives going on. And again, I'm really very excited to see how the Naples Wax business grows. Maybe before we go, Scott, we have a couple of minutes if you want to maybe wrap this up for us and then I'll give some closing statements.

Sure, sure. Well, first of all, thank you for giving us the time to come and talk. We have a lot to share. There is a lot going on in this organization. And we have been very purposeful in the timing of how we want to share this messaging. I think a big piece of it was closing our agreement with Naples Wax as that foundation for growth outside the airport. It is something I've been talking about for a long time. And like you, I was super excited to be able to finally announce it. And it is -- think of Naples Wax as just the beginning, and we're really excited about that. And one of the benefits we have is that bringing Brandon on as one of the original founders of Naples Wax, we're not taking off the business and then having to learn it. We've got the expert in the business who can provide us insight. He knows the market. He knows where we're going to be growing next. It's all a matter of just aligning on that, and we have cut out a tremendous amount of lag time and lead time that we need to actually grow this thing. And so I am very excited about where we're going. And I fully expect that we will continue to communicate the great things that this company as doing to regain shareholder confidence and rebuild value.

Great Well, Scott, Brandon, thank you for your time today. That was very interesting, very helpful. I would also like to thank the audience, the live audience and our recorded audience. We will have a transcript of the chat today. Probably in the next 3 to 4 business days with some summary bullet points and so on. This will be available in our website. Again, it's watertowerresearch.com. Scott, thank you. Brandon, thank you, and this concludes our Fireside chat today. Thank you.

Thank you very much.

Thanks, Thierry. Thank you, everybody.

Be well.