XWELL, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; compared with FY 2022. The filing does not provide separate fourth-quarter results. Dollar amounts below are in millions unless stated otherwise.
Business context
XWELL operates wellness and personal-care businesses, primarily in airports: XpresSpa, XpresTest, Treat and Naples Wax Center. It reported 37 spas and wellness centers across 18 airport and off-airport locations at year-end. All XpresCheck testing centers had closed by December 31, 2023 as COVID-19 testing demand declined. XWELL acquired Naples Wax Center in September 2023 for $1.624 million.
Financial performance
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $30.109 | $55.939 |
| Gross profit / margin | $3.681 / 12.2% | $12.048 / 21.5% |
| Operating loss | $(28.206) | $(31.163) |
| Net loss | $(28.029) | $(32.629) |
| Net loss attributable to XWELL | $(27.741) | $(32.837) |
| Operating cash used | $(16.074) | $(24.188) |
- Revenue fell 46%, principally from the XpresTest patient-testing business: patient services revenue declined to $0.250 million from $32.776 million. Services revenue increased to $27.053 million from $21.227 million.
- Operating loss narrowed despite lower revenue, alongside lower general and administrative expense ($12.957 million, down 39%) and salaries and benefits ($7.954 million, down 20%). FY 2023 included $4.024 million of goodwill impairment, $3.927 million of long-lived asset impairment and $0.926 million of right-of-use asset impairment.
- Year-end cash and cash equivalents were $8.437 million and marketable securities were $14.613 million. Current assets were $26.566 million versus current liabilities of $9.330 million; working capital was $17.236 million, down from $36.376 million.
- Total liabilities were $18.022 million, including $11.094 million of operating lease liabilities. The filing reports no outstanding borrowing debt at year-end; the PPP loan was repaid in 2022.
- Cash, cash equivalents and restricted cash declined by $10.601 million during 2023. Investing activities provided $5.650 million, mainly from marketable-security sales; financing activities provided $0.008 million.
Material changes and segments
- XpresSpa revenue rose to $19.067 million from $13.680 million, but its operating loss remained about $12.951 million.
- XpresTest revenue declined to $9.912 million from $40.867 million; its operating result shifted to a $4.701 million loss from $1.238 million income.
- Treat revenue was $0.444 million versus $1.392 million, with a $2.315 million operating loss. Naples Wax contributed $0.686 million revenue and $0.162 million operating income after its September acquisition.
- On September 28, 2023, XWELL effected a 1-for-20 reverse stock split. It reported regaining Nasdaq’s minimum-bid-price compliance in October 2023.
Outlook, risks and unusual items
- Management’s stated priorities are to right-size airport operations, reduce costs, expand off-airport wellness through acquisitions and concepts such as TreatStudios, and pursue international growth. It provided no quantified FY 2024 financial guidance in the supplied filing text.
- In March 2024, after year-end, the CDC bio-surveillance program’s funding and scope were expanded; XWELL estimated revenue to its XpresTest segment of approximately $11.044 million under the one-year extension. The amount and timing depend on contract performance and funding.
- The company restated its unaudited Q3 2023 results after identifying an impairment-accounting error involving Treat. The correction increased Q3 net loss by $1.613 million. Management identified material weaknesses in lease accounting, financial close and reporting, service-organization oversight, revenue controls and foreign-subsidiary controls. Controls were deemed ineffective at year-end; remediation was ongoing and not assured.
- Management cited a need to manage existing cash and may need additional capital; financing could be unavailable, on unfavorable terms or dilutive. Other key risks include airport passenger and consumer demand, rent and lease commitments, staffing, execution of acquisitions and new locations, and potential reductions in CDC or other government funding.
- XWELL accrued $0.449 million for outstanding legal matters. In a Philadelphia airport sublease lawsuit, OTG claimed accelerated rent of approximately $0.864 million to $2.250 million; the case was placed on Civil Suspense in January 2024. Management said it did not expect outstanding matters to have a material adverse effect, while noting outcomes are uncertain.
Investor facts to verify
- Review the full audited statements and notes for liquidity trends, operating cash burn, lease commitments and assumptions underlying asset impairments.
- Track whether XWELL remediates the five material weaknesses and whether any further reporting errors or restatements occur.
- Verify the CDC contract’s funding, scope, revenue recognition and renewal prospects, and assess XpresTest’s results after testing-center closures.
- Monitor progress and returns from Naples Wax, TreatStudios and other off-airport initiatives, including required capital spending.
- Follow the OTG lawsuit and other contingencies, along with Nasdaq listing compliance and the company’s need for possible additional financing.