Greetings and welcome to XpresSpa Group Third Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Douglas Satzman for opening remarks. Please begin, sir.

This is James Berry, the Chief Financial Officer and good afternoon. Thank you for joining us today and for your interest in XpresSpa Group. Before our CEO, Douglas Satzman provides a business update and I briefly review third quarter 2021 financial results. I first 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 involve a 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 might 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, 2020, as well as our earnings release and Form 10-Q issued this afternoon, along with other current and periodic reports that we filed with the PSEC. I would now like to turn the call over to Doug.

Thank you James, and hello everyone. We appreciate you taking the time today to join us this afternoon. Let me begin by expressing my appreciation to both our institutional and retail shareholders and for their continued confidence in us and for their support as we execute our business plan. I know that I speak for the entire board and management team when I say that our interests are firmly aligned and that we're all working very hard every day to significantly enhance the value of our Company. With that in mind, let's now briefly discuss our extraordinary financial results. This was a record-breaking quarter for XpresSpa Group across both sales and profitability and I couldn't be prouder of our teams for getting us here. This is truly a remarkable achievement. We generated our highest quarterly top-line ever with a consolidated revenues for Passing $26.8 million, including a $25.4 million contribution from XpresCheck and a $1.4 million contribution from our legacy XpresSpa business. We also achieved our first ever full quarter of profitability as measured by both net income and adjusted EBITDA. Net income came in at $5.6 million and adjusted EBITDA reached $8.7 million in Q3. In fact, based on the performance of this third quarter, XpresSpa Group has reached a record year-to-date consolidated revenue of $44.4 million with a year-to-date net income of $74,000, and a year-to-date adjusted EBITDA of $6.6 million. At the segment level, XpresCheck generated operating profit of $12 million, or 47.4% of XpresCheck revenue, which demonstrates it's incredibly strong profitability and margin. Our liquidity position also remained strong. Our cash balance has grown to $109.2 million, and we have had positive working capital of $96 million and under $6 million of debt. James will walk through all the financials in greater detail shortly, including a…

Thank you, Doug. I certainly share Doug 's enthusiasm for our outstanding financial results and I'm pleased to be sharing them with you now in greater detail. Let me first explain a change to our accounting practice that, enabled us to recognize revenue. It more closely reflects our actual patient volumes and how much we're charging patients per test. Recall, that we have entered into management services agreements with professional corporations that, actually provide the healthcare services to the patients. These MSA's, which may be modified based upon certain conditions define, that we provide all of the non-licensed staff, equipment supplies, office space, and management services in return for a management fee. Accounting standards require that, we assess these arrangements to determine if there exists a variable interest in a variable interest entity or VIE. These evaluations are complex and involve judgment. Effective July 1st, we determine that these PCs and VIE -- these PCs are VIEs because their equity holders have insufficient capital at risk, and we have a variable interest in them. Prior to that, our MSAPs (ph) were commensurate with the expected patient traffic, and the associated billings of the PCs were not assessed -- were assessed did not VIE. Now, the contractual arrangements between us, the medical groups, and the nominated shareholders, have been changed in a way that changes the characteristic or adequacy of the nominee shareholders equity investment, at risk, and residual returns. This is because the nominee shareholders, notwithstanding their legal form of ownership of equity interest in the PCs, are not the primary economic beneficiary. The primary beneficiary of the affiliated medical groups is, the Company, as it meets both of the following criteria: has the power to make decisions that, most significantly affect the economic performance of the affiliated medical group,…

Thank you. At this time, we'll be conducting a question-and-answer session. Michelle, you may now proceed with the questions.

Hi, Doug, The first question we have today is, with over a $100 million of cash on the Balance Sheet, you are in a great position to be repurchasing shares, but we're not very aggressive in Q3, can we expect more activity in Q4?

Yes, thanks for the question. The share amount repurchased in the third quarter is not a reflection of how aggressive we want to be. The repurchase program, was officially documented and accounts open just days prior to the official blackout period, which prevented any further buying until the blackout period ended. Based on our cash balances, current and prospective view of our overall businesses and the current share price, the Company, I believe, its shares are undervalued and can therefore create shareholder value by purchasing our own stock at discounted -- at a discount, compared to our intrinsic value. So, expect more.

Thanks Doug. Given your enthusiasm for the CDC program, do you think it will be renewed? And then the second part to my question, when will you have indications from them with respect to the extension or expansion?

Well, first of all, we're very proud of the fact that, we're working very closely with the CDC in developing and implementing the first national bio-service program that, we've ever had in U.S. airports. The pilot is going very well, we have proven that we can execute and implement this new CDC Program, while incoming passenger participation is increasing each week. We believe that, it may be extended to include a testing program for other countries or regions, as flights come in. You can watch, as COVID cases uptick in some countries. I mentioned before, like, the UK or Germany or Eastern Europe, even South Africa. But, with that said, while we are working very closely with the CDC, it's hard to say when this would be expanded and under what terms. We're having conversations but there's nothing that is ready to announce.

Great. Thanks, Doug. Do you expect to be profitable on a consolidated basis from now on or will you be incurring losses on 3 XpresSpa going forward? And will that limit the gains you're making with XpresCheck?

Well, let me start by saying, we believe we've turned the corner with our first profitable quarter and year-to-date, we're marginally profitable. We believe, we're in a position to continue expanding and finish the year profitably. Our success has come out of a lot of hard work and focus by highly talented and nimble management team, who is equally focused on increasing revenue and managing costs in this very difficult environment. Now, to the second part of the question, while XpresCheck is currently the leader in airport COVID testing, we are determined to build and rebuild each business line to sustain itself and bring long-term shareholder value. So --

Okay. Thanks, Doug. If XpresChecks are so profitable, why do you discuss it (ph) by XpresSpa or Treat at all? Why not go into every airport that had a spa and just replace it with an XpresCheck?

Let me answer that first by saying XpresCheck is front and center, and receiving full focus on further expansion, whether it's through additional airport locations or through an expanded partnership with the CDC at a national level. XpresSpa and Treat are not distractions. In fact, our conversations with airports incorporate all 3 businesses. Today, not every airport wants COVID testing only and we require their approval for converting any of our XpresSpa spaces. As I mentioned before, gaining new contracts are very difficult, which have allowed us to use our existing XpresSpa real estate portfolio and contracts to our advantage and it's allowed us to move as quickly as we have. But many XpresSpa locations aren't necessarily in the right part of the airport. Most are pre -- or post security, and frankly, some are just too small. So, the airports are focusing forward on the future of healthcare in airports, which is where Treat can fill a void by providing so many more additional health and wellness services. With that said, XpresCheck receives significant focus in continuing to capture the demand that's continuing to grow and build this profitable line of business today.

Thanks Doug. And when do you think, we will begin to see some revenue from Treat?

Well, Treat as launching now. We talked about phases. Phase 1, was getting our website up. Phase 2, was launched in our app. And Phase 3, is getting our first brick-and-mortar location, which is set to open next month. We'll see revenue begin to contribute in 2022. And as a reminder, as I've mentioned in the past, Treat as a mid-term play with long-term value creation. We're very focused on XpresCheck today, but we see an open field to extend our health and wellness leadership position in travel. Leading to complementary business model that is more robust like Treat and offers multiple revenue channels, not just in the airport, but also outside the airport.

Thanks, Doug. Next question we have today is, can you talk about the opportunity with the CDC, as you complete the $2 million pilot programs? Is it going to be rolled out nationally now that the U.S. open their borders so far in travel?

Yes. Well, as the White House continues to take steps to open our borders, they are also responsible to keep our country safe from further COVID threats, as well as infectious diseases, entering our country. You might have read a little while ago, there is a fear of Ebola taking grip again. In the natural world, these things do come up. There is a recognition that, our country was not prepared for this last pandemic and this administration is trying to take in the preparation for future threats very seriously. XpresCheck, is uniquely positioned as the largest and only testing service operating in most of the country's largest airports across multiple states. The CDC, has identified our infrastructure and capabilities, as a strategic tool to supply critical bio surveillance across the country. So we're -- we remain even more optimistic than ever. T that we can be a very useful tool in national bio-surveillance, at least in our airports today.

Thanks, Doug. And the next one, how big can this CDC contract be in terms of revenue to the Company?

Obviously, we don't know how large this program can become, but you can do the math. You can see that, any expanded program could become big dollars. Currently, we're engaged in a $2 million 8-week Program that, is focused on 3 airports testing flights from one country, India. If we're to expand the program into additional airports, to add other countries for extended time or even years, you can see how this can multiply.

Great. thanks, Doug. Does the U.S. reopening international travel help, as the number of passengers fly home would increase substantially, which could be required to test before entering their home country?

Absolutely. We've been waiting for this. The reopening of our country to fully vaccinated international tourists, will not only help our economy, but should also create a boost in demand for testing when traveling back to various countries. We have ensured that, we have secured extra supply chain of our Rapid PCR Tests, as this has proven to be our highest value product and one of our differentiators from many testing centers outside of airports. So we are prepared and anticipating even more activity.

Thank you. How sustainable do you view the testing business now that, vaccines are rolled out and case numbers are coming down?

Well, interestingly, we've seen our testing numbers go up, while vaccination rates go up and case numbers go down. With the resurgence of variants, as well as breakthrough vaccine cases, most countries require a negative test prior to entry. In similar to our relationship with El Al, we're having discussions with other country's airlines, to test passengers prior to flying to those countries. I can't share yet. There is even a movement with some in Congress here, in our country, to require negative test prior to boarding domestic flights in the U.S. We do not know how this will play out, but I think testing will be around for the foreseeable future and some type of bio surveillance program will be implemented for the long term, which XpresCheck, again, is uniquely positioned to play a major role.

Great. Thanks, Doug. And my final question, given your market cap is entirely made up of cash, have you thought, anything outside of the buybacks to create shareholder value for the business that you have -- the businesses you have. Is it possible to spin out one of the businesses to unlock value?

Well, while the market has placed little value on our operating businesses, or even future of those businesses, we're anticipating the market cap should improve from today's reported results. However, in any case, we're considering many options in the future. In the unplanned expansion and relevance of COVID and other future infectious disease testing across, travel may present significant opportunities to create additional shareholder value in 2022 and beyond. As this management team and board has demonstrated the ability to be agile and opportunistic in this uncertain and fast-changing environment, I would not roll out any options to unlock value, including potential spin-offs.

I have no further questions today, Doug.

Well then, thank you for those who submitted questions. Thank you, Michelle, for sorting through, I know a lot of them are -- can be similar. But as we end, I want to thank and recognize our shareholders who have been very supportive, as we have grown this business. I was very excited to share the results from Q3 and I was brought on 2, 2.5 years ago to turn around this business and revamp the management team and it's great to see the product and the fruits of all that labor, especially dealing with the pandemic. Hats off to the team for again, remaining opportunistic, agile, yet still building a mid and long long term strategy that's going to go much further than just being opportunistic during the pandemic. Thank you and look forward to sharing more results in the future, as we continue down this track. Thank you. Have a great day.

Thank you.

Thank you. This concludes today's teleconference, you may disconnect your lines at this time. And thank you for your participation and have a great day.