XWELL, Inc. — Q1 2023 Form 10-Q Summary
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise noted. Financial statement amounts are in thousands of dollars, except per-share data. XWELL operates airport spa, testing, and wellness businesses, as well as HyperPointe, a health-focused marketing services business.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $7,063 | $24,048 |
| Gross profit / gross margin | $522 / 7.4% | $9,001 / 37.4% |
| Operating loss | $(6,288) | $(2,451) |
| Net loss | $(5,829) | $(2,762) |
| Net loss attributable to XWELL | $(5,509) | $(4,283) |
| Basic and diluted loss per share | $(0.07) | $(0.04) |
| Cash used in operating activities | $(5,865) | $(1,774) |
Revenue declined 71%, principally reflecting the sharp contraction in airport testing as testing requirements eased and most XpresCheck locations closed. XpresSpa revenue increased to $4,499 from $2,643; XpresTest revenue fell to $1,799 from $20,596. HyperPointe revenue was $561, versus $523, while Treat revenue was $204, versus $286.
Cost of sales declined 57% to $6,541, but less than revenue, driving the lower gross margin. General and administrative expense fell 40% to $6,091 following cost reductions and the closure of testing centers. Interest income was $393, compared with $7 in Q1 2022. Q1 2023 also included a $132 loss on disposal of assets related to demolition at closed XpresCheck locations.
Liquidity, cash flow, and liabilities
At March 31, 2023, cash and cash equivalents were $9,869, marketable securities were $25,241, and working capital was $30,840. Current assets were $39,893 versus current liabilities of $9,053. Cash, cash equivalents, and restricted cash totaled $10,620, down $9,169 during the quarter. Investing activities used $3,290, including $1,882 invested in marketable securities; financing activities used $22.
Total liabilities were $20,004, including operating lease liabilities of $13,327 ($2,376 current and $10,951 long-term). The filing reports no conventional borrowing balance. Operating cash use increased year over year, and management said it continues to focus on returning to overall profitability. The company reported a working-capital surplus but did not provide a profitability or cash-flow forecast.
Business developments, outlook, and risks
- As of March 31, 2023, XWELL had 25 domestic and 10 international XpresSpa locations, one operating XpresCheck location, and two Treat locations. The Phoenix pre-security Treat location had been closed in 2022.
- XpresTest’s Ginkgo biosurveillance contract was renewed for a two-year term. The filing cites approximately $7.331 million in first-year revenue; funding for the second year was anticipated but not confirmed. Management also describes a broader program with potential value above $61 million, subject to options and public-health priorities.
- Management’s strategy includes expanding retail and wellness offerings, pursuing growth outside airports and internationally, and building scalable operations. These are strategic plans, not quantified financial guidance.
- A Philadelphia airport sublease lawsuit seeks between $864,000 and $2.25 million in accelerated rent. XWELL had accrued $449,000 for litigation overall at quarter-end; the filing does not specify that this accrual relates to the Philadelphia claim. Management stated it believes outstanding legal matters will not materially harm the company, while noting outcomes are uncertain.
- Disclosure controls and procedures were deemed ineffective at March 31, 2023 because of material weaknesses in internal control over financial reporting. Management described remediation steps, including outside accounting support and hiring a permanent CFO, whose planned start date was June 12, 2023. The filing cautions that remediation may not be successful.
- Management cited cash balances above FDIC insurance limits and overseas cash that may be delayed or reduced in availability if distributed. It also noted that airport volumes fluctuate and that Treat had underperformed, prompting changes to its offerings.
Important facts for investors to verify
- Whether XWELL can reduce operating cash burn and improve gross margins as testing-related revenue declines.
- Actual funding, renewal terms, and revenue realization for the second year of the Ginkgo biosurveillance program.
- The status and potential financial exposure of the Philadelphia lease litigation and other contingencies.
- Progress and independent validation of the internal-control remediation plan.
- Liquidity and access to marketable securities and overseas cash, alongside ongoing lease commitments and planned expansion spending.