XpresSpa Group Inc. (XSPA) Q2 2022 Earnings Call Transcript

XpresSpa Group Inc.  (NASDAQ: XSPA) Q2 2022 earnings call dated Aug. 15, 2022

Corporate Participants:

Omar Haynes — Interim Chief Financial Officer

Scott Milford — President and Chief Executive Officer

Joseph Calabrese — Investor Relations

Presentation:

Operator

Good day, and welcome to XpresSpa Group’s Second Quarter 2022 Results Conference Call. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Omar Haynes. Please go ahead.

Omar Haynes — Interim Chief Financial Officer

Good day, everyone. Welcome to our conference call to review XpresSpa Group’s second quarter 2022 operating results. Joining me on today — joining me in today’s call is Scott Milford, XpresSpa Group’s Chief Executive Officer. We have posted our second quarter earnings release on the Investor Relations section of our website located at www.xpresspagroup.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 revised 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 may 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 31, 2021, 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.

Scott Milford — President and Chief Executive Officer

Thank you, Omar, and thank you, everyone for joining us. We appreciate your interest in XpresSpa Group. I’d like to begin today’s meeting by updating you on the progress we’re making, pivot our business for growth in a post-COVID world. I’ll then turn it back over to Omar to review our financial results before we open the call for some Q&A.

As I’ve mentioned on our prior calls this year, our vision is to transform XpresSpa Group as a leading health and wellness provider for people on the go. Part of this transformation is positioning our business for sustainable long-term growth. We’re also moving forward with a strategic rebranding. We’ve selected a new name, designed a new visual identity in logo and reserved a new ticker symbol with the NASDAQ. The rebrand campaign will launch in Q4 once we have cleared the necessary legal requirements. Having said that, we continue to make steady progress on executing against our four core transformational imperatives.

First, refreshing our business in the airport to attract more customers. Second, creating and executing a completely new retail strategy, and not only drive more foot traffic into our airport locations, but also augment our online presence. Third, adding new customers through revenue-accretive acquisition and the deployment of a B2B wellness product outside the airport. And lastly, reducing infrastructure costs to better leverage capital. Our entire team is committed to delivering on these four imperatives. And while our efforts are not yet fully reflected in our results, we’re enthusiastic about the meaningful progress we’ve made during these last few months. And we firmly believe the value of the work we are doing now will become quite apparent over time.

Before we jump into our second quarter highlights, I want to thank all of our team members throughout the world that are doing their best to improve our customers’ well-being, one service and one product at a time. Whether it’s administering hydration therapy and relaxation through celebrities passing through our JFK Treat location or providing last-minute COVID testing to dignitaries hurrying to a National Urban League Gala in Washington, D.C. or even giving a neck and back message to a road-weary traveler before their red eye back from Las Vegas. Our teams are focused on delivering a memorable guest experience across all of our brands. Thank you for everything that you do to make XpresSpa a great place to shop and to work.

Now let me update you on our progress. As we look at refreshing and refining our airport locations to attract more customers, our focus is squarely on integrating our Treat and Spa businesses into a unified offering and setting up our XpresCheck business for its next evolution as part of the nation’s biosurveillance strategy. We now have 26 spas currently opened globally with another five scheduled to reopen in Q3, including our first location in Istanbul Airport. We have two Treat locations opened in the U.S. and are preparing to open our third location in Salt Lake City in the fall. And we have 15 XpresCheck locations currently open across 12 airports.

Our spa performance continues to improve quarter-over-quarter as more travelers return to the air. Bolstered by an increase in the number of airport travelers and guests looking for new and innovative health and wellness, we expect our Spa business to continue to grow, both domestically and internationally. To support that growth, we’ll continue to innovate and transform our spas, giving our loyal customers new and exciting products to try and to buy as well as creating a more interesting and inviting experience for new customers. We’re aggressively planning to bring new technologies and trends, including the use of new tech forward equipment such as therapeutic massage therapy and muscle recovery into select XpresSpa locations.

And over the coming weeks, we expect to enter into agreements with several key suppliers to provide these advanced therapeutic solutions for our customers. We’re adding additional experiences to accompany these new therapeutic services, including the use of VR technology, that will not only enhance the experience but also create additional revenue opportunities. And we’re retooling our Treat scheduling platform, so that it can be used in our spas, giving customers the ability to schedule services in advance of their travel. Going forward, as we expand these types of add-ons to the spa experience, they may be incorporated into a loyalty benefit that we extend to repeat customers all in an effort to create recurring revenue opportunities.

Most importantly, right now, we are deploying our new retail strategy in airport locations, beginning with Treat first and a fast follow with our XpresCheck locations. In just a few minutes, I’m going to share more about our new retail strategy, but customers have already begun to see new products hitting shelves this month. New services, add-ons, better tech and retail are only part of the effort we’re putting into refreshing our Airport business. We’re also planning to refresh the look and appearance of our spa locations, beginning later this year and extending into 2023.

The new look will incorporate more modern and more approachable finishes that are designed to showcase the new tech forward experience as well as access to our stronger retail offering. Changes you’ll see include the removal and remodel of point-of-sale terminals and checkout desks to allow for more room for additional services and retail without impacting the customer experience. We’ll be deploying this new refreshed look in our Miami Airport location first, which is due for a contractual refresh and is a prime location for this new approach.

Looking ahead, we expect these actions to create a compelling potential for increased spa revenue. As research suggests guests are attracted to trying new trend-forward [Phonetic] treatment and will be more apt to spend in a positive and inviting retail environment. Additionally, our investment in new tech forward equipment and accompanying services allows us the flexibility of optimizing our labor model, allowing us to staff our spas more effectively. More details to come regarding this, but our new labor model and the accompanying technology will also initially be rolled out in Miami.

Operationally, most of our 26 spas are back to being open seven days a week. This compares with only four open locations at less than 50% capacity this time last year. Additionally, we expect that all of our locations will return to pre-COVID scheduling early in Q4, just in time for the holidays. And while we’re putting focus on our U.S. Airport growth, we’re also putting considerable effort to grow our International business. As you may have read, we expect to open our first XpresSpa location in Turkey later this month. Istanbul Airport is one of the largest and fastest-growing airports in Europe, serving approximately 250 international destinations and over 20 million passengers annually. We believe Istanbul is an ideal location for us to expand our international presence, which now includes six overseas locations operating in the Emirates and Amsterdam, and allows us to continue to take advantage of the rapid growth of travel between Europe, Asia and the rest of the world.

When we opened in Turkey, it will be the first of five new locations expected to open at the Istanbul Airport by the end of 2022. Some of the services that will be available, including massages, reflexology and aesthetic treatments ranging from 10-minute convenience services to more indulgent treatments for when travelers have more time. Further enhancing our presence outside the U.S., we have plans to open a new spa location at Abu Dhabi Airport in Q1 2023. And over the next 18 months to 24 months, we will continue to look for opportunities to further leverage our expertise into foreign markets.

Our continued growth internationally is opportunistic. And in the near-term, we’ll focus on locations where we can take better advantage of unit economics. As we refine the use of our optimized labor model in the U.S., our intention is to bring that same model and technology to more locations in Europe, where we can leverage both the volume of passengers and our strategic footprint to drive revenue in historically more expensive markets. In addition to a favorable cost of labor in our overseas locations, we found that our international customers tend to be more comfortable using newer and more on-trend health and wellness services and are willing to spend more in pursuit of their well-being.

For these reasons, we expect to continue pursuing growth outside the U.S. We also continue to analyze our Treat segment as an opportunity for innovation and growth. Today, we have two Treat locations opened at New York, JFK Airport, which opened in December 2021 and at Phoenix Sky Harbor International Airport, which opened in April 2022. Additionally, our Salt Lake City location is expected to open in late Q3. Right now, Treat offers a suite of health and wellness services for travelers, including vitamin boost shots, IV drips and hydration infusion therapy as well as diagnostic testing for virus, cold, flu and other illnesses.

The next strategic imperative I’d like to update you on is our progress towards creating and executing a completely new retail strategy to drive more foot traffic into our airport locations as well as to our online platform. I’m very excited to share that new retail products began hitting our shelves in early August, and once fully deployed, our locations will include more than 90 SKUs available in store and online. And our goal is to add an additional 30 more SKUs later this year, just in time for the busy holiday season. New products range from individual traveler wellness items to more comprehensive traveler kits designed to holistically address a wider set of travel-specific needs, ranging from stress and anxiety management, immunity defense and gut health.

We’ll be starting with about seven different kits, and we’ll continue to enhance and modify our approach as customer needs and preferences evolve. Customers will also have the opportunity to purchase these wellness kits prior to or after traveling via our online store and through the Treat app, which is being modified to serve all XpresSpa Group brands. Additionally, although we’re still determining an international launch date for these wellness kits, we do plan to work with our international partners to see if we can achieve a consistent product on a global level. And while we’re confident that our new retail offering will have significant appeal to today’s travelers, we’re also taking the time to build necessary infrastructure into how we’re training and incentivizing our on-the-ground teams. This new training will be focused on product knowledge and product add-on selling to ensure we’re able to deliver a memorable experience while also driving increased retail sales. Together with the launch of our new product assortment, this training will help drive improved revenue and contribute margin to our bottom line.

Next, we remain focused on our third imperative to add new customers through revenue-accretive acquisitions and deployment of a B2B wellness product outside the airport. We continue to believe that we can accelerate our growth through unit acquisition. And while I’m not able to share specific news about an acquisition, I can share that we are aggressively advancing discussions with potential targets for acquisition. And I’ll have more information to share on this subject in subsequent calls. For us to serve a reimagining of our Airport business, creation of a strong retail engine and expansion outside of the airport, we must be focused on optimizing our available capital and organizing our business to be able to manage sustainable growth in the future. This includes embracing a lean and agile approach to our business while also ensuring we can scale XpresSpa Group’s growth in a responsible way that drives shareholder value.

In support of our fourth key imperatives, beginning in June, we began to aggressively identify areas of savings within our business. And we were able to successfully eliminate approximately $1 million a month in cost from our system. which we expect to materialize in Q3 and beyond. These savings were accomplished by being very rigorous about capital allocation as well as identifying areas where we can create greater efficiencies and achieve a materially lower cost base, while still maintaining our ability to invest in and strengthen XpresSpa Group’s retail engine and execute against our growth focus initiatives.

As I said during our Q1 earnings call, my intention was to update you periodically on our progress bring each of our four key imperatives to life. I am pleased to be able to announce specific results in at least three of these imperatives with our international expansion, launch of new retail in our airport locations, and significant cost reductions to efficiently conserve our capital. And I expect to share more around the financial outcomes associated with these key imperatives on our next earnings call. Further, I expect to be able to share more progress in our efforts to grow outside the airport in subsequent announcements as well. Thanks for allowing me to talk to you about our progress to reimagine our business for the future.

I’d now like to spend a few minutes talking about our XpresCheck locations. As we see every day in the news, COVID still poses a real risk, both here and abroad, and our XpresCheck locations continue to offer fast reliable testing. Nevertheless, like we said in May during our last investor call, we’ve tempered expectations for XpresCheck as there has been a notable decline in overall testing relative to last year. This was not surprising as many countries have moved to significantly relax their testing requirements. Accordingly, based on how we see the continued evolution of testing globally, and the creation of longer-term biosurveillance efforts, coupled with the current performance of our XpresCheck segment, we are in the process of laying out a plan to close unprofitable XpresCheck locations, without compromising our biosurveillance apparatus, and we’ll report that plan in the coming weeks.

We’re also looking at ways to continue to deliver necessary testing in a more cost-effective manner. This will include reverting former spa locations that became XpresCheck locations back into spas that also offer testing in a safe and reliable manner. As it relates to our biosurveillance efforts, during the second quarter, we continued to support our CDC partnership at four of our airports. This was part of a $5.6 million pilot program launched in September 2021, which involves pool testing travelers from over 20 countries.

We’ve been very pleased with the success of the collaboration and the positive role XpresCheck continues to play in supporting the nation’s bio-safety strategy. In partnership with Ginkgo Bioworks and the CDC, the traveler-based genomic sequencing program has had numerous successes including the first detection of BA.2 in the U.S. and the first detection of BA.3 in North America. The program has also had some of its findings published in the prestigious Journal of Clinical Infectious Diseases. As part of this program, we recognized $1.9 million of revenue during the second quarter.

The benefits of monitoring disease spread through travel programs like this remain extremely prevalent. And in partnership with Ginkgo Bioworks, we are extremely pleased that XpresCheck has been granted a new contract to support the CDC’s traveler-based SARS-CoV-2 genomic surveillance program. The new two-year contract is currently funded at approximately $16 million. However, the total contract value could reach approximately $61 million. This is a significant milestone for XpresCheck, and we’re extremely honored to continue to support efforts to track new and emerging infectious diseases.

Further, there is ample room to continue to build upon the platform with the CDC and Ginkgo Bioworks, including the ability to leverage a variety of sampling modalities, including testing wastewater and a variety of genomic sequencing approaches. I’m proud of the Company’s role in helping the U.S. prepare and safeguard against future potential biologic outbreaks. And we look forward to updating you further about our progress.

In summary, we have been very deliberate in leveraging our unique capabilities and position in the marketplace and guests are responding. While there is still much work that needs to be done, our underlying fundamentals are solid, and we believe XpresSpa Group is poised to deliver on its long-term objectives.

I’m now going to turn the call back over to Omar to discuss our second quarter financial performance. Omar?

Omar Haynes — Interim Chief Financial Officer

Thank you, Scott. I am now going to provide a brief synopsis of our second quarter results. However, for detail, please refer to the 10-Q that we filed this afternoon with the SEC. In the second quarter, revenue increased to $13.6 million compared to $9.1 million in the prior year second quarter. Q2 2022 revenue primarily consists of $7.4 million in revenue from our XpresCheck locations, the generation of $3.7 million in revenue from reopened XpresSpas as well as our Treat locations, and $0.7 million in revenue related to our strategic acquisition of HyperPointe earlier this year.

Turning to expenses. Our cost of sales increased to $12.4 million from $7.7 million in the prior year second quarter. The principal factor of this increase was higher costs to operate the XpresCheck locations as well as the reopening of select XpresSpa locations that were temporarily closed last year. As we discussed last quarter, the cost of testing kits and location level labor costs remain the largest factors in our cost of sales.

Switching to general and administrative. These expenses totaled $7.6 million compared to $4.6 million for the year ago comparable period. The increase was primarily due to the functional costs associated with the operations of XpresCheck and new Treat wellness centers, more reopened XpresSpa locations and the newly acquired HyperPointe business. We reported an operating loss in the quarter of $7.8 million compared to an operating loss of $4.2 million in the prior year second quarter. Our net loss attributable to common shareholders for the quarter was $7.9 million compared to $4.5 million in the prior year second quarter.

As Scott discussed, it is important to note that we continue to strategically invest in our long-term growth initiatives. Additionally, on the capital management front, we have successfully removed approximately $1 million a month in cost from our system and expect to begin to see the benefits of those initiatives beginning in the third quarter. As Scott also mentioned, we will begin to close unprofitable XpresCheck locations, which will yield further savings in the latter half of this year.

With respect to our GAAP financials, our liquidity remains strong with cash and cash equivalents totaling $71.1 million, working capital of $61.8 million, and we have no long-term debt. Year-to-date, we have repurchased approximately 8.5 million shares outside of blackout periods. And as of August 15, 2022, 11.8 million shares remain available under the $25 million share repurchase program that was announced on August 31, 2021, and subsequently increased on May 20, 2022. Given the current share price, which we view as substantially undervalued, we intend to be active during the next open window period.

On a non-GAAP basis, adjusted EBITDA was minus $5 million compared to adjusted EBITDA of minus $2.9 million in the prior year second quarter. We define adjusted EBITDA as earnings before interest, taxes, depreciation and amortization expense and adjusted for stock-based compensation and impairment disposal of assets. We consider adjusted EBITDA to be an important indicator, but please understand that it does not exclude certain transactions not related to our core cash operating activities. We also furnished in the earnings release metrics with respect to patient testing, along with the percentages that are opting for rapid testing.

This concludes our financial review, and I’d now like to turn the call back to Scott for some closing remarks.

Scott Milford — President and Chief Executive Officer

Thank you, Omar. While our second quarter financial results are not indicative of our view of the business, we remain on track to achieve our long-term objectives by executing against our four core transformational imperatives. And we’re pleased that we’re proceeding with the CDC to provide an expanded and sustainable biosurveillance effort in the U.S. We believe that our Company is well positioned to benefit from our strategies. And we look forward to updating you on our progress in the quarters ahead.

And now we’ll take investor questions.

Questions and Answers:

Joseph Calabrese — Investor Relations

Thank you, Scott. We have a few emails from investors congratulating the team on the CDC renewal. Is there any other guidance we can currently provide relating to the scope of that contract?

Scott Milford — President and Chief Executive Officer

Thank you, Joe, and thank you for that question. We are really excited and proud that the CDC has placed such a high level of trust in XpresCheck and our partner, Ginkgo Bioworks, to advance a more permanent biosurveillance strategy for the country. As I mentioned, the contract is worth as much as $61 million over two years. In terms of scope, we’re going to continue to operate out of four of the busiest international airports in the U.S., JFK in New York, Newark Liberty International Airport in New Jersey, San Francisco’s International Airport and Atlanta’s Hartsfield-Jackson Airport.

In order to accommodate a higher volume and diversity of passengers for this program expansion, we’re slated to expand our footprint of pool testing locations inside our existing airport locations, along with adding a new set of locations in Washington, Dallas International Airport later this year, where we currently have an XpresCheck location by the way. The new contract also allocates resources for XpresCheck to conduct wastewater surveillance from aircraft.

Now this is going to be an especially effective tool in identifying various pathogens, not just COVID, as it will measure levels of a virus and bacteria regardless of whether individuals may have symptoms or not. An additional note that I want to make is that we don’t expect the long-term work here that we’re doing with the CDC to impact our efforts to close unprofitable XpresCheck units. And I’ll say, we are super excited to build on our long-standing relationship with our partners, and we look forward to continuing to set the standard for airport bio-security.

Joseph Calabrese — Investor Relations

Thanks, Scott. I have a two-part question here regarding the Airport business. For modeling purposes, can you recap the number of XpresSpa and Treat locations that will be open at the end of the third quarter? Also, you mentioned several new locations. Can you tell us where they’re located?

Scott Milford — President and Chief Executive Officer

Sure. By the end of the third quarter, we’re expecting to have three Treat locations opened and 31 XpresSpa locations opened globally. Last week, we opened our fourth location in JFK Airport. And over the next several weeks, we expect to reopen two more locations in Phoenix Sky Harbor Airport, two in Hartsfield-Jackson Airport in Atlanta, and our first airport locations in Istanbul Airport, followed by the remainder of those locations for a total of five during Q4.

Now this does not include any locations that we add through acquisition, which we are continuing to pursue, both in the airport and outside of the airport. I also want to note that we’re working on a plan to open a location in Philadelphia Airport. As you may remember, we’ve begun construction on the location at Philadelphia’s Airport before COVID hit and we were forced to stop.

For specific reasons, at the time, the decision was made to hold off on finishing its construction and not to reopen the spa. But subsequently, with the work that we’re doing now to introduce an optimized labor model and the new technology that we’re bringing into our spas and the robust retail offering, we believe that we can now open this location successfully, and we’re working with our partners in Philadelphia to do just that. Thanks.

Joseph Calabrese — Investor Relations

Thanks, Scott. Couple of investors were wondering about where you stand with your airport acquisition plans. Any updates to share?

Scott Milford — President and Chief Executive Officer

As I’ve said a number of times in previous calls, my team and I are firmly in the position and believe that the growth that we have and that we’re going to experience can be accelerated through acquisitions outside of the airport. We’ve had multiple discussions with several companies that could have added both unit count and revenue outside the airport without us having to deviate from our core mission of being a leading health and wellness provider for people on the go.

But we made the decision not to advance these specific discussions further because we couldn’t agree on a realistic valuation with the founders, but that’s not stopped our efforts. We still believe acquisitions will continue to be a good strategy for us and a good strategic use of our capital as well as an integral part of our growth strategy. And we continue to work within our network to identify potential new opportunities. I look forward to updating you as we continue to analyze for complementary opportunities that will further expand our business and refuel our growth.

Joseph Calabrese — Investor Relations

Thank you, Scott. And you also discuss XpresSpa Group’s capital allocation strategy and specific areas of the business where you’re making investments?

Scott Milford — President and Chief Executive Officer

Sure. Let me start with the fact that XpresSpa really takes a balanced approach to managing our capital allocation with an eye on maximizing the value for our shareholders through organic growth and external growth opportunities as well as returning excess capital to our shareholders through potential share repurchases.

In a nutshell, as we continue to advance our key imperatives, we expect to make investments in the following five key areas: one, opportunities to expand outside the airport, which I’ve mentioned before, technology that we’re going to purchase to support efficient growth, advanced services and equipment to upgrade the offering we provide, products that enhance the user experience and facility improvements to our existing locations that will refresh the brand. All that said, we’re focused on building a sustainable growth engine. And with $71 million of cash, no long-term debt and a commitment to efficiently use our capital, we continue to be positioned to execute on those strategies.

Joseph Calabrese — Investor Relations

Thanks, Scott. I know you and Omar already touched upon this. We have a question regarding the Company’s appetite for additional share repurchases, and what investors should expect for the remainder of 2022 and into 2023?

Scott Milford — President and Chief Executive Officer

Yeah. As part of our disciplined capital allocation strategy, we’ve really tried to be opportunistic in repurchasing our shares because of the value we see at current trading multiples, as well as our commitment to maximizing the value to you, our shareholders. As Omar mentioned, demonstrating the confidence that the Board of Directors and XpresSpa Group’s management team has regarding the execution of our strategic priorities, the Company has repurchased about 8.5 million shares year-to-date under our current share repurchase program. And looking ahead, I think we’ll continue to be opportunistic, keeping in mind some of the other capital requirements that we got — we have coming up and that we’re really excited about.

Joseph Calabrese — Investor Relations

All right, great. Looks like we have a few more questions. Can you talk more about your B2B strategy?

Scott Milford — President and Chief Executive Officer

Thanks for bringing that question up as I don’t think I talked about that very much in the earlier portion of our conversation. Earlier this summer, we hired an experienced leader to help us build out our targeted B2B strategy. And we’re now aligned on a simple and refined set of services and products that we want to offer that allow us to actively pursue potential partnerships. Right now, our focus is going to be on selling promotional packages to companies for airport services, pop-up locations and high traffic areas that can leverage our new labor model and heavy travel retail as well as service offerings in our — in airport lounges.

Joseph Calabrese — Investor Relations

Thanks, Scott. You mentioned earlier the strategic rebranding efforts you’re engaged in. Can you provide any more information on the new brand and when you’ll launch it?

Scott Milford — President and Chief Executive Officer

I know everyone is anxious about that. No one is more anxious than I am. And we are really excited that we’ve landed on a new brand for our parent Company as well as reserved a new ticker symbol. We believe the new brand reflects the future of our Company and aligns closely with where I think the direction is going in the future.

I wish I could share more or even debut the new design for you right now, but we’re still finalizing the clearing of specific trademark and registration hurdles. What I can say is that as soon as those hurdles are cleared, we will share the news. And while I’m specifically talking about our parent brand change, we’re also on a parallel path to ensure that our unit level branding also aligns with our new brand. And we’ll share more about that work as we get closer to our official brand launch, which will occur in Q4.

Joseph Calabrese — Investor Relations

Great. Thanks, Scott.

Scott Milford — President and Chief Executive Officer

Sure.

Joseph Calabrese — Investor Relations

We have a follow-up question here regarding the CDC renewal. Investors are interested in knowing if the program can be expanded to include monkeypox testing?

Scott Milford — President and Chief Executive Officer

Yeah. Thanks for that question. We’re actually — we’re thrilled that our biosurveillance program continues to play a strong role in detecting new COVID variants, but also other pathogens entering the country further highlighting the importance of testing. Regarding monkeypox, we’re actually already working with Ginkgo and the CDC to investigate how to incorporate testing for this virus into our protocols. As most of you know, testing modalities for virus detection are different for each virus. And there are significant logistical hurdles that have to be crossed in order for us to be able to execute a testing regimen in volume, but we are working on that as we speak.

Joseph Calabrese — Investor Relations

All right. Great. Thanks. Looks like a final question. Scott, you’re relatively new to XpresSpa Group, and it’s only been a couple of quarters since you took on the CEO role. Can you give us a little bit of your perspective of what you’ve seen if XpresSpa is headed in the right direction and how the transformation is going?

Scott Milford — President and Chief Executive Officer

Absolutely. Let me answer — let me answer your question directly. Yes. I absolutely believe XpresSpa Group is headed in the right direction. We have the right balance and experience and know-how to not only transform this business but to also chart a new course of its growth. What really excites me and continues to excite me and energize the work that I do here is that I have the opportunity to work with an amazing team.

When I reflect on our business pivot in 2020, for example, I think about the agility and the flexibility of the team we assembled to build XpresCheck. It really reinforces the reason why I joined the Company in the first place. And as part of the Treat launch team, I had the opportunity to help influence that brand’s development and the opening of our first three locations. Have we learned from that experience? Absolutely. Will we do things differently? Absolutely.

But remember, we built Treat knowing we would adapt and evolve the offering over time. What I may not have expected was the abrupt drop in testing that put more pressure on our other lines of business to perform. And that’s why we continue to be aggressive about refreshing our spas and reinventing the offering. And why I believe the integration of Treat and Spa services in an approachable customer-friendly environment is not only what the airport traveler wants, but I believe it can serve as a way for consumers to access wellness services in this new self-care world inside but also outside the airport.

And I think the imperatives that we laid out earlier this year set us up and set up a strong foundation for us to achieve that vision of wellness for people on the go. As I look back on what I’ve learned, I believe we need to take action at a speed that reflects the strength of our expertise and experience. And while we’re not necessarily pleased with our financial results this quarter, I am resolute in my commitment and the commitment of my entire team to pivot once again and set a new course for our business. Thank you.

Joseph Calabrese — Investor Relations

Thanks, Scott. It looks like that will wrap up the question-and-answer period. Any closing comments?

Scott Milford — President and Chief Executive Officer

Sure. Thanks again, everyone, for joining us. We continue to manage growth opportunities and near-term challenges with an eye toward our long-term potential. And we hope that you’re as excited about the future of XpresSpa Group as we are. As always, I’d like to thank our shareholders and everyone on this call for their interest in our Company and for their continued support. We look forward to updating you on our continued developments, progress and financial performance in the third quarter. I hope you all have a very good evening. Thank you.

Operator

[Operator Closing Remarks]