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XI

XWELL, Inc. (XWEL)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue was $8.4M, up ~13% y/y, but down sequentially from $9.3M in Q2; operating loss widened to $4.8M due to higher G&A (including >$2.0M extraordinary legal costs) and absence of prior-year ERC credit benefit .
  • Segment mix: XpresSpa/Treat $4.9M, XpresTest (incl. HyperPointe) $3.1M, Naples Wax Center $0.4M; liquidity at quarter-end: cash $4.4M, marketable securities $11.7M; no long-term debt .
  • Management reiterated focus on cost discipline and profitability; highlighted Priority Pass partnership driving traffic, tech-forward formats, and 2025 expansion into Penn Station and ~10 out‑of‑airport locations .
  • Consensus estimates via S&P Global were unavailable in this session; estimate comparison not possible. Note: estimates unavailable via S&P Global at time of request.
  • Near-term catalysts: CDC biosurveillance program continuity, Naples Wax openings, Penn Station launch, and resolution of extraordinary legal expenses normalization .

What Went Well and What Went Wrong

What Went Well

  • Revenue growth: Q3 revenue grew ~13% y/y to $8.4M, with year-to-date revenue up ~16%; CEO affirmed confidence in a “strong 2025” .
  • Cost actions: Year-to-date, total operating expenses reduced ~35%, cost of sales down ~6%, G&A down ~5%; management emphasized “holding our labor costs constant while delivering more revenue” .
  • Strategic momentum: Solid foot traffic at tech-forward PHL XpresSpa; Priority Pass partnership broadened reach; Penn Station XpresSpa targeted for 2025 and ~10 out‑of‑airport locations in 2025 .

What Went Wrong

  • Profitability: Operating loss widened to $4.8M and net loss was $4.8M; sequential revenue declined vs. Q2’s $9.3M .
  • Elevated G&A: G&A was ~$4.5M, including >$2.0M extraordinary legal expenses; salaries/benefits appeared higher y/y due to absence of ~$1M ERC benefit that lowered Q3 2023 expenses .
  • Biosurveillance footprint: XpresCheck stations decreased to 7 in 6 airports (from 9 in 7 in prior quarters), potentially pressuring segment revenue trajectory .

Financial Results

Consolidated Financials (USD Millions)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($M)$8.7 $9.3 $8.4
Total Cost of Sales ($M)$6.1 $6.2 $6.4
Total Operating Expenses ($M)$5.1 $5.0 $6.8
Operating Loss ($M)$(2.4) $(1.9) $(4.8)
Net Loss ($M)$(2.5) $(2.0) $(4.8)
Diluted EPS ($)N/A – not disclosed N/A – not disclosed N/A – not disclosed
EBIT Margin %−27.6% −20.4% −57.1%
Net Income Margin %−28.7% −21.5% −57.1%

Segment Revenue Breakdown (USD Millions)

SegmentQ1 2024Q2 2024Q3 2024
XpresSpa + Treat~$4.4 ~$4.9 ~$4.9
XpresTest (incl. HyperPointe)~$3.6 ~$3.8 ~$3.1
Naples Wax Center~$0.6 ~$0.5 ~$0.4
Total$8.7 $9.3 $8.4

KPIs and Liquidity

KPIQ1 2024Q2 2024Q3 2024
XpresSpa locations (global)32 in 15 airports 33 in 16 airports 19 domestic + 10 international (29 total)
Biosurveillance stations / airports9 / 7 9 / 7 7 / 6
Cash & Equivalents ($M)$4.3 $5.4 $4.4
Marketable Securities ($M)$14.8 $13.0 $11.7
Current Assets ($M)$24.5 $23.1 $19.5
Long-term DebtNone None None

YoY and Sequential Commentary

  • Q3 2024 revenue +13% y/y ($8.4M vs. $7.5M Q3 2023) but −9.7% q/q vs. Q2 2024’s $9.3M; operating loss widened sharply on higher G&A and lack of ERC benefit .
  • XpresTest revenue declined sequentially ($3.1M vs. $3.8M in Q2), consistent with fewer biosurveillance stations/airports .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Out-of-airport locations (Naples Wax / broader XWELL)2025“~10 Naples Wax Center locations by early 2025” “~10 XWELL out‑of‑airport locations in 2025” Maintained/clarified scope
Penn Station XpresSpa opening2024 (Q2 PR) → 2025 (Q3 PR)“Expected to open later this year” (2024) “Executing plans to open in 2025” Timing deferred
Revenue/Margins/OpExFY/Q4 2024Not providedNot providedN/A (no explicit financial guidance)
Tax rate, OI&E, dividendsFY/Q4 2024Not providedNot providedN/A (no explicit guidance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2024)Trend
Tech-forward spa automationQ1: AI-powered manicures, autonomous massage; IV hydration launch at MIA ; Q2: PHL opening; Ceragem beds expansion PHL traction “solid”; autonomous chairs/robotic nails showing promising indicators Positive adoption; scaling
Out-of-airport expansionQ1: 3 new Naples leases; targeting ~10 by early 2025 ; Q2: facial services added; ~10 by early 2025 Forecasting ~10 out‑of‑airport locations in 2025; opening first Naples Wax in Nov Execution beginning
Biosurveillance (CDC TGS)Q1: program expansion to MIA/ORD; funding to ~$36.7M ; Q2: new 3-year RFP; anticipated similar value Operating 7 stations in 6 airports; HyperPointe reported within XpresCheck Footprint down; program continuity expected
Cost disciplineQ1: OpEx −26% y/y; G&A −47% y/y ; Q2: OpEx −16% y/y; salaries/benefits −22% y/y 9M: OpEx −35%, CoS −6%, G&A −5% y/y Sustained improvement
Partnerships/trafficPriority Pass benefits implied in store traffic (emerging)Priority Pass noted as traffic driver and awareness booster Strengthening lever

Management Commentary

  • CEO outlook: “Looking forward, we believe we're well-positioned for a strong 2025, and we remain confident that our consistent strategy execution will benefit our customers, partners, employees, and shareholders” .
  • CEO growth focus: Penn Station 2025 opening; ~10 out‑of‑airport locations planned; solid PHL traction; Priority Pass partnership increasing foot traffic .
  • Cost focus: “We reduced total operating expenses by approximately 35%... reduced cost of sales by ~6% and... G&A by ~5%” (9M 2024 vs. 9M 2023); commitment to a “more profitable operating model” .
  • Liquidity: “Cash and cash equivalents totaled $4.4M... $11.7M in marketable securities... no long-term debt” .

Q&A Highlights

  • The provided transcript contained prepared remarks only; no analyst Q&A captured. CFO directed listeners to the 10‑Q for additional details .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q3 2024 were unavailable at time of request due to data access limits; therefore, beat/miss analysis vs. Wall Street consensus cannot be provided in this recap.
  • Implication: Without consensus figures, investors should anchor on segment and cost dynamics and monitor subsequent estimate revisions following the reported extraordinary legal expenses and sequential revenue mix shift .

Key Takeaways for Investors

  • Sequential softness: Revenue fell from $9.3M in Q2 to $8.4M in Q3; operating loss widened to $4.8M on higher G&A and lack of prior-year ERC benefit—watch for normalization of extraordinary legal costs in Q4 .
  • Segment mix matters: XpresTest revenue moderated with fewer stations/airports; monitor CDC RFP outcomes and footprint changes to gauge 2025 biosurveillance run-rate .
  • Liquidity intact: $4.4M cash and $11.7M in marketable securities; August $1.4M raise supports working capital; no long-term debt—provides flexibility for expansion .
  • Growth levers: Priority Pass partnership, tech-forward format (PHL traction), and Penn Station opening provide tangible drivers for traffic and margin efficiency in 2025 .
  • Out-of-airport scaling: Execution is starting (Naples opening in November); ~10 locations planned in 2025—track unit economics and cross-market synergies with in‑airport presence .
  • Cost discipline persists: 9M reductions in OpEx, G&A, and cost of sales demonstrate structural improvements; ensure these translate to improved operating leverage as revenue scales .
  • Near-term trading lens: Stock likely sensitive to updates on CDC contract status, legal expense normalization, and tangible milestones (Penn Station timeline, Naples unit openings)—monitor ensuing disclosures and any 8‑K updates .