XWELL, Inc. Q2 FY2021 Earnings Call

Good afternoon. And welcome to XpresSpa Group's Second Quarter of 2021 financial report. After this presentation, there will be an opportunity for questions. Please note that this event is being recorded. Now, I'd like to turn the call over to Mr. James Berry, CFO. Please go ahead.

Good afternoon. Thank you for joining us today and for your interest in XpresSpa Group. Before CEO Doug Satzman provides an update on our business, I briefly review our second 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 that 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 31st, 2020, as well as our earnings release and 10-Q issued this afternoon, along with other current and periodic reports that we file with the SEC. I would now like to turn the call over to Doug.

Thank you, James. Hello, everyone. Thank you for taking the time to join us this afternoon. Before we begin, I would like to express our deep appreciation for all of our shareholders, including both institutional and especially our retail investors, for all of the support that you've given us over the past year. Our goals are aligned, and we look to create significant shareholder value for everyone in the future. Let me begin by expressing how pleased we are with the financial results during the second quarter. We generated net revenue of $9.1 million, including $8.7 million from XpresCheck, and narrowed our Adjusted EBITDA loss to $2.3 million down from $3.4 million in the prior-year second quarter. The improvement of $1.1 million is indicative of the profitability of XpresCheck compared to our legacy XpresSpa segment. We also narrowed our net loss to $4.5 million from $58.5 million and retained a strong liquidity position with an unrestricted cash balance of $102.5 million. I want to be clear on a new view that we see as we look to the future. At one point, we believed the future of the airport Spa business was highly uncertain considering the nature of the high personal touch business. We believed that XpresCheck would be a short-term bridge to the future. We also believe that Treat would be the sole destination as it combines the most relevant parts of XpresSpa and XpresCheck and expands the health and wellness services for travelers while adding a significant digital engine so revenue is no longer limited to the airports where we operate units. Now, we see a much bigger opportunity based on our experience during this pandemic. The data that we have collected and analyzed and customer views. We now see three sustainable business models for the future. We are transitioning from a company operating a singular concept to a family of relevant travel, health, and wellness brands with a lot of runways ahead of us. We see multiple brands that we believe have the potential to operate efficiently, simultaneously, and profitably over the long run. I would now like to share some thoughts on where we currently stand with respect to our airport-based XpresCheck and XpresSpa businesses. Then I will take you on our new brand, Treat, and how we intend to capitalize on what we believe is a large opportunity in the travel health enrollment space. Beginning with the XpresCheck brand, in April, we opened 2 XpresCheck locations, the first in Seattle-Tacoma International Airport and the second in San Francisco International Airport. Today, we operate 13 XpresCheck Wellness Centers, 7 days a week across 11 airports. In fact, agreement extensions have been agreed to at the first two airports that we've opened XpresCheck last year, John F. Kennedy International Airport and Newark Liberty International Airport. As you may recall, at the onset of the pandemic in March 2020, we moved extremely quickly on our vision for XpresCheck due to the vast opportunity we saw for COVID-19 testing at major U.S. airports. We piloted, we learned, and we launched. Since then, XpresCheck has surpassed all of the expectations we have for the brand, and we're very pleased with the results even as vaccination rates rise. For example, patient testing was at an all-time high during the second quarter, increasing 146% sequentially when compared to the first quarter this year. We believe even with an increase in vaccination levels, on-site COVID-19 testing will still be an important and necessary service for airline employees and passengers alike for the foreseeable future due to several factors, including COVID-19 variant proliferation, ongoing international requirements, and breakthrough vaccination infection rates. International travel represents a significant portion of our patient base as many countries outside the U.S. continue to require a COVID-19 PCR test prior to arrival. We do not see many countries changing this policy any time in the near future, exposing their citizens to additional risk. There are simply not enough vaccines to meet the global demand, and wealthy countries are monopolizing most of the supply. Furthermore, now considering adding booster vaccinations. According to a Wall Street Journal article this past Friday, at the current rate, much of the world would remain unvaccinated, and global stability out of reach until maybe 2023. XpresCheck also continues to benefit from the range of rapid COVID tests that we offer, which is substantially higher in price point with $200 to $250 versus $75 for the standard PCR test or the blood antibody test that we initially launched with. Almost all tests are now rapid, which has helped significantly improve gross margins and minimize our cash burn. As a reminder, it was only March of this year when we transitioned to a fee-for-service model for all testing, which has helped significantly improve our cash flow. Now, all patients pay upfront at the time of service, and then they are able to submit their testing fees for insurance reimbursement on their own. The testing business has ramped up much faster than we expected. Our medical practices saw revenues over $17 million in Q2, almost triple what was seen in the first quarter. We are confident that this will continue over the foreseeable future. Not only has testing ramped faster than any other part of our past file business, but the four-wall Performa margins continue to grow faster than any initiative that we have implemented in our spas, with yield and return on our investment in under 3 months. At the end of 2020, we promoted Scott Milford to Chief Operating Officer. Scott has quickly increased labor productivity and worked diligently to expand our operational hours to meet the needs of those requiring COVID testing while still only operating when the terminals are the busiest to ensure profitability. Scott and our new CFO, James Berry, have brought a sharp focus on financial discipline, cash generation, and execution of our operational strategies while still creating an employer of choice, people culture. In late July, we announced a partnership with the Go Give One campaign. The Go Give One campaign was created by the World Health Organization Foundation and is dedicated to funding COVID-19 vaccines worldwide in the fight to reduce the growing vaccine equity gap. As a kickoff to the campaign, XpresSpa is matching public donations up to an aggregate of $100,000. We are honored to support this incredible campaign in the fight against COVID-19 for those in lower-income countries lacking access to critical vaccinations. Our investment in the health and wellness of our customers has opened up the door for this incredible partnership, which we hope to continue to grow in the future. Additionally, last week, we received approval for a $2 million contract with the Centers for Disease Control and Prevention, the CDC for bio surveillance tracking at 3 airports: JFK International Airport, Newark Liberty International Airport, and San Francisco International Airport. Many of you will remember that I have spoken about our government affairs efforts with the federal government over the past year. This is one of the outputs from those many conversations. This is an 8-week program with a 6-month contract with the CDC that is aimed at identifying existing and new COVID-19 variants, including the highly contagious Delta variant and other new variants surfacing that could start surfacing in the U.S. Let me be clear, this 6-month contract with the 6-month extension in place allows the CDC at their discretion to direct XpresCheck to set up a national bio surveillance program, with installments of incremental funding in any or all airports, regardless of whether there's an XpresCheck fully operating in place. The CDC has the ability to dictate how real estate is used in airports for national safety concerns, whereas the current XpresCheck model requires the airport to grant access to the real estate on an airport-by-airport basis. The first $2 million commitment is only for this 8-week pilot across 3 airports, targeting 7 daily flights. While we're starting with the incoming flights from India, we're testing and developing a protocol for future interventions that can be directed to many flights arriving from various countries of concern. The program being developed could easily be implemented for any incoming port beyond airports upon the CDC's direction. Because this at-the-gate program primarily includes the collection of self-administered passenger swabs that XpresCheck sends out to select external labs for testing, similar to what is used by children in some elementary school COVID testing programs, there is not a limit to capacity that we might typically have in an XpresCheck facility with a specific number of testing rooms. As this program expands, we see this as a potentially significant business line extension for XpresCheck, with the foundation of the government contract in place. Again, we will pilot, we will look to learn, and we plan to launch. Our collaborations with government agencies like the CDC demonstrate the confidence these agencies have in the XpresCheck brand. XpresCheck aims to further its relationship with the CDC and extend the program into all major U.S. international airports in the near future. Based on what we have learned and are seeing today, COVID-19 testing, let alone future infectious disease testing, is here to stay for the foreseeable future for people traveling internationally in and out of the U.S. XpresCheck also continues to work with several airlines, providing COVID-19 testing for passengers to select a location. In April, we signed an agreement with Delta Airlines to administer the new rapid antigen test to customers traveling from JFK International Airport to Milan Malpensa in Rome and Moschino International airports. In early August, we launched a pilot program with El Al, Israeli Airlines, the national airline of Israel. The State of Israel requires a negative COVID-19 PCR test within 72 hours of travel from passengers and flight crew departing the U.S. and then another COVID-19 PCR test once arriving at Ben Gurion International Airport in Tel Aviv. If this pilot is successful, XpresCheck may provide free travel, rapid COVID-19 PCR testing on site at JFK and other U.S. airports for all El Al passengers and crew on multiple daily flights in place of the second PCR administered in Israel. The protocol will get U.S.-originating El Al passengers out of the airport significantly faster after a 10+ hour flight than sitting in line with all the other arriving passengers from every country and other airline in the queue for an onsite COVID-19 test before being released from the airport. Again, we piloted, we learned, and we're looking to launch. Now, turning to the airport business. On July 1st, we reopened 4 historically top-performing XpresSpa locations. These locations include Hartsfield-Jackson Atlanta International, in Concourse A, Dallas Fort Worth International Airport, in Concourse A, Charlotte Douglas International Airport, Concourse D, and Las Vegas McCarran International Airport, Concourse D. In order to maximize profitability across these spas, we negotiated the right to operate these 4 spas during the busiest hours and only start with our highest performing services, which are massages, manicures, and pedicures. As a reminder, we've opened two XpresSpa locations at Dubai International Airport in the UAE, as well as a franchised XpresSpa location at Austin Bergstrom International Airport. Additionally, we launched a new expanded XpresSpa concept on June 17th at Dubai International Airport. This new international wellness prototype aims to test innovative wellness treatments and technology while broadening our core XpresSpa services to potentially introduce successful offerings into existing domestic and international XpresSpa operations. Currently, we have eight XpresSpa locations that are reopened and operational. However, after reviewing the first 30 days of performance for the four high-volume U.S. locations that opened on July 1st, we found that their sales are below the levels seen in 2019, even with the uptick in airport traffic and increasing vaccination rates. The good news is that even with the lower revenue baseline, we believe we can generate the same or better gross profit margins while the legacy XpresSpa business on its own may not have been highly profitable in the past. Today, it has the benefit of cost-cutting measures we implemented in 2019, as well as sharing the corporate overhead across 2 other operating brands, leveraging the same corporate support structure. Our operations team is currently reviewing our pricing, service model, and labor model to find further upside beyond the efficiencies of operating reduced hours during the airport's busiest times, as vaccination rates increase and airport traffic continues to return, especially with anxious flyers and business travelers. We've had a significant service segment in the past. We see enthusiasm for travel spa services at airports returning. We now have plans to open the next wave of 8 to 10 high-performing XpresSpa locations by early fall to continue the profitable restoration of the pre-COVID business model of $40 to $50 million in annual revenue as the economy reopens. We piloted reopenings, we are learning, and we are relaunching. We will continue to reevaluate each airport on a month-by-month basis, as well as review continued learnings as our portfolio continues to be reactivated. Now let's discuss our new brand, Treat. Comprehensive travel, health, and wellness, the concept that is positioned for the post-pandemic world. While this multi-channeled business is coming to market in record time in 2021, to take advantage of this singular moment in history, the return to travel, it has a runway to be a larger business than XpresSpa or XpresCheck, with better revenue and gross margins over time. Treat started as a division of our collective new executive team, after many planning sessions in late 2019 and early 2020. The brand and concept have been refined by one of our new executives, Kelsey Hanson, SVP of Marketing and Communications, who has wrapped these services with a beautiful lifestyle brand, with timely digital content in a modern retail store design that connects with today's reemerging traveler. Through this leadership team's strategic thinking, we found a way to leverage XpresSpa's historic travel wellness experience and XpresCheck's healthcare expertise to provide travelers access to integrated healthcare through technology and on-site personalized services. We have a classic need and want to converge. People want to get back to traveling but need to do it safely and responsibly. We are not building an average brand for average people at above-average prices. We are passionately working towards creating a concept worth creating, with a story worth telling and a contribution worth talking about. Treat is positioned to be a leader in what we view as an emerging new category of health-focused travel and personal loan and services. Treat will act as a wellness concierge, providing original content to help you plan to travel, along with medical care and wellness services to consumers as they return to travel. Through Treat's mobile app, travelers will be able to access 24/7 on-demand virtual healthcare, a travel health wallet with their medical records, and real-time global COVID-19 travel requirements all in one place, as well as book appointments in our on-site wellness centers as they open. Our goal is to be a travel champion, making it easier for you to be well as you return to traveling the world. To ensure a seamless launch of this new brand, we're rolling Treat out in 3 distinct phases. If you recall, on our Q1 earnings call in May, we announced Phase One of the new brand, our website, www.treatcare.com, and the brand campaign would launch in June. Thanks to the hard work of our new Chief Technology Officer, David Cole, we met this target and officially launched our website on June 1. The Treat website features original content, access to resources about COVID-19 requirements for travelers, and curated e-commerce with emerging products targeting the savvy traveler living a wellness lifestyle. The initial website launch is gaining traction daily. We have over 100,000 unique visitors. The website also allows consumers to opt-in to a biweekly newsletter. The treatment has started with over a thousand readers, with an average 30 to 35% Saturday morning open rate. If you've not signed up for the treatment on treatcare.com, I think you'll enjoy it. As seen in the press release issued this morning, phase 2 of Treat's mobile app launched today. Our internal goal was to have this mobile app up and running by the end of summer, as communicated on our last earnings call. I'm happy to report that through the team's smart work led by David, we started on the track and launched ahead of schedule. The mobile app is available today at no charge for Apple and Android devices and provides access to on-demand virtual care, including check care, video care, and a travel alignment with access to a person's medical records and test results. Memberships are available, which include a mobile app subscription with access to Unlimited 24/7 on-demand medical care virtually. Also included in the membership is one free PCR COVID-19 test, one free flu vaccine shot per year, and discounts on prescriptions, which will be added in a few weeks. Over time, there will be additional capabilities added to the app, such as in-person scheduling once our airport wellness center locations begin to open, plus other exclusive offers and discounts. Memberships start at $200 for 3 months or can be $720 for 12 months. Now moving onto Phase 3, which includes the launch of Treat in the Airport wellness centers, which will both leverage some of our existing airport real estate as well as take shape and new spaces. We're starting construction this week and plan to open the first pilot location at JFK Terminal 4 in mid Q4 in a converted XpresSpa location and a second pilot Treat location in Phoenix Sky Harbor International Airport before the holidays in a converted XpresCheck location. Again, we pilot, we learn, we launch. Treat in airport wellness centers will offer services such as COVID-19 testing, travel vaccines, anxiety care, emergency prescriptions, vitamin IV therapies, as well as private technology-led wellness sessions, including fitness, yoga, meditation, and mindfulness sessions in a premium hospitality environment. Upon entering, customers will see a beautifully curated retail and check-in area and will be greeted by Treat Wellness coffee areas. Well-appointed treatment rooms will allow a break from the hectic airport environment and offer a list of health and wellness services designed specifically for travelers. We intend to roll out Treat Wellness centers across many additional airports in 2022 and 2023, leveraging our existing XpresSpa real estate. Most importantly, we're building the one travel brand that provides access to integrated holistic care and can seamlessly fit into a health and wellness lifestyle. Over the long term, we envision that Treat's digital channels will provide more significant growth opportunities for revenue and profit than our airport real estate. This is because we believe this customer is everywhere and not just captive in the airports. The success of this revenue stream will be achieved through both subscription-based services that provide care and digital tools supporting travel, health, and wellness. Furthermore, we anticipate offering upstream content that can be monetized for affiliate revenue, as well as curated retail through e-commerce channels. In 2021, we are building the long-term infrastructure and habits to transition from an airport wellness operator to a technology-led company with unparalleled customer data coming in through multiple channels. And that also operates profitable and convenient health and wellness operations for travelers in airports. While we are excited about this new brand and see Treat as the central pillar to the future of XpresSpa Group, we also now believe that there is a significant opportunity for 3 sustainable growth brands. While healthy unit-level economics can run adjacent to each other and leverage the efficient corporate structure, as well as our relationships and experience operating in global airports. We have an extremely clear vision for the company with a focus on elevating our brands, being nimble, and further expanding our services and products inside and outside the airports to increase value for all XpresSpa shareholders. As I have expressed here today, we have also assembled an extremely strong management team over the last 6 to 9 months, which is already contributing today, as seen by our Q1 and Q2 results in recent announcements while laying the foundation for the long-term success of this developing global multichannel company. We believe that our portfolio of health and wellness brands will enable us to build and enhance shareholder value for years to come. The best days are ahead of us. With that, I'll turn it to you, James.

Thank you, Doug. As we mentioned last quarter, we were very pleased to have been able to recognize revenue for XpresCheck during the first quarter, based on a reassessment at the management service agreement relative to ASC 606. Turning to the second quarter, we were able to recognize a total of $9.1 million compared to $143,000 in the second quarter of last year. Only one center did not meet the ASC 606 requirement for revenue recognition in Q2. The increase in revenue was primarily due to the recognition of the revenue from the 12-13 XpresCheck Wellness Centers that were wholly or partially opened during the quarter. Please note that during the quarter, a majority of the XpresSpa locations remained closed. In the third quarter, we will be able to recognize the revenue associated with the 4 XpresSpa locations opened on July 1st. Managed service fees totaled $8.7 million compared to 0 in the second quarter of the prior year. We also generated revenues from services and products of $338,000 and $79,000 respectively from sales and marketing agreements with strategic scrap partners related to our 2 locations in Dubai. Cost of sales increased to $7.7 million from $978,000 in the prior-year second quarter. The increase in the cost of sales was primarily due to the cost of sales incurred in the XpresCheck, most notably for the rapid test kit, offset by the decrease in variable costs associated with the decline in XpresSpa revenues and decrease in occupancy costs as a result of rent concessions received from airports. Gross profit was $1.4 million compared to a negative gross profit of $835,000 in the prior year, primarily due to the higher revenues. Generally, administrative expenses were $4.6 million compared to approximately $3.4 million for the year-ago comparable period. The increase was related primarily to startup costs associated with XpresCheck, development of Treat, and additional legal fees related to the resolution of certain XpresSpa litigation matters, offset by reduced variable costs related to the closed XpresSpa locations and the realized benefits of cost-cutting and control initiatives instituted throughout 2019, primarily in salaries, occupancy, and professional fees. Operating losses from operations decreased to $4.7 million compared to $58.5 million in the prior year's second quarter due to higher revenues and the recognized loss on revaluation of warrants and conversion options in 2020. Net loss attributable to common shareholders was $4.55 million compared to a net loss attributable to common shareholders of $58.1 million in the prior-year second quarter. Finally, with respect to GAAP financial, their liquidity remains strong with cash and cash equivalents totaling $102.5 million as of June 30th, 2021. On a non-GAAP basis, Adjusted EBITDA loss of $2.3 million compared to Adjusted EBITDA loss of $3.4 million in the prior year. This represents an improvement of $1.1 million, always indicative of the profitability of the XpresCheck wellness sector. Redefined, Adjusted EBITDA adjusting before interest taxes depreciation, amortization expense, and adjusted for stock-based compensation and impairment, disposal of assets. We consider Adjusted EBITDA to be an important indicator of the performance of our operating business, XpresCheck. In particular, we believe that it is useful for analysts and investors to understand that Adjusted EBITDA excludes certain transactions not related to our core cash operating activity, which are primarily related to our XpresCheck Wellness Centers. We believe that excluding these transactions allows investors to meaningfully analyze the performance of our core cash operations. For further details, please refer to our Annual Report on Form 10-Q filed today. Let me now conclude with the non-GAAP financial metrics with respect to XpresCheck, that we believe will be helpful in providing greater transparency in terms of performance. Although we do not generate revenue directly from patient testing volumes, as detailed above, in the interest of providing investors with greater transparency regarding XpresCheck's performance, we've opted to disclose recent and current average daily patient testing volumes, along with other relevant non-GAAP financial metrics. During the 2nd quarter of 2021, the average daily patient testing volume for all XpresCheck Wellness Centers was more than 1,000 visitors per day. With the additional centers open, total patient volumes grew merely 146 in the 2nd quarter compared to the first quarter. Notably, the number of higher revenues, higher-margin COVID-19 rapid tests increased from just over 300 per day in Q1 to more than 800 per day in Q2, a 176% increase. During July, higher revenue and higher-margin COVID rapid tests, molecular PCR as a percentage of total tests, averaged 97%. Total patient volume was over 33,700, including those rapid tests. And with that, I would be happy to take your questions.

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

Good afternoon, Doug, and thank you. The first question we have, you mentioned that the medical practices did $14 million in revenues in the second quarter. How does that reconcile with XpresCheck's $9.1 million revenues recorded?

I'm going to turn this question over to James.

Well, the patient service fees collected by the practices. In addition to paying for the medical provider's services there, they're used to pay past, current, and future MSA charges. The information that we provide about those practices is to give a better understanding of the current levels of activities at that very top level.

I'm going to jump in too on the end of it. And the number was $17 million, not $14 million. And this is unbelievable, guys. As you look at the traffic that's coming through, vaccination rates are going up. Infection rates are lower than the height of the pandemic, yet testing is still relevant today more than ever. We don't see it changing anywhere in the near future. As travel picks up, more countries are going to continue requiring these tests. So, it's important to understand the revenues and the fees that come through these practices because that's the indicator of the demand that's coming through and the runway that we have. It blew us away when we saw what Q2 looked like compared to Q1, and we're very excited for the rest of the year from a business perspective.

Great. Thank you, Doug. The next question, the company has over $100 million of cash on the balance sheet, a great position to be in. However, how are you going to make efficient use of this cash?

James?

Well, I would report that our stewardship of cash is always top of mind. In addition to funding new segments such as Treat that are so exciting and dynamic, we've stated that we continue to evaluate opportunities including acquisitions, strategic business transactions, and essentially stock repurchases. So, you're right, it is great to have that amount of money. It's a flexibility that it gives us, but we take it very seriously in making sure that there is an efficient return on that capital.

I'm going to tag on too. We're getting visibility to a lot of emerging concepts. As the world has changed in this post-COVID world, there are other companies, other good ideas that are well-suited to be strategic partners with us to amplify what we're doing with Treat and accelerate some of the other services that we're offering. Like James said, being a good steward of cash and making sure it is invested wisely, where there is a much bigger benefit for us than just a return on the investment, but a strategic value to further accelerate our offerings in some of our new contracts and purchases.

Great. Thank you, Doug. There's a lot of talk from employers, especially municipal employers, saying that any employee who has not been vaccinated will need a weekly COVID test in order for them to be able to go to work. Is this an opportunity you see for XpresCheck?

Absolutely. So now as we've settled into this new norm of testing, we've been talking a lot about travelers needing to go somewhere. But we're seeing more municipalities just like the investor asked, that are going to require regular testing. So, there is a clear opportunity for the XpresCheck business line to grow outside of airports to provide testing services. We've already built the protocol and can handle large peaks. We continue to evaluate a broad number of opportunities that don't just have to limit us to being in an airport.

Great. Thanks, Doug. What will you do with the rest of your real estate? How many leases expire in the near term that you will have to decide shortly on the go-forward path for those locations?

The real estate we have continues to be a very valuable asset. Literally, it took us 15 to 16 years to get the 50 locations that we had pre-pandemic. A lot of RFPs, but once you're in the airport and you've demonstrated that you are a good operator, it's much easier to stay in an airport and get extensions. One of the things we're seeing quite often now, and you may be reading about, is rent concessions being offered by airports because of the lack of business. Often, the rent concessions are funded by EPP funds or other government COVID dollars that come federally down to the state and worked their way to the airports. But one of the things they can offer doesn't cost them anything is extending your term. We're getting more terms, and other airport operators as well, so it gives us more runway to evaluate whether a piece of XpresSpa real estate is best suited for Treat, which we think is the highest sales and profit opportunity, or an XpresCheck, or to reopen it as an XpresSpa with some of the features that I spoke about before. But there could be a couple that we cut. These were maybe small kiosks at the end of a terminal, that weren't very busy before. It's not magically going to be very busy now. But the real estate that we have under contract, and frankly, XpresCheck got us even more real estate under contract in at least 3 more airports we'd never operated in. It's become a very important part of our strategy.

Great. Thank you, Doug. For the next question, what made you choose John F. Kennedy Airport and Sky Harbor as the first two locations for Treat?

Glad you asked. I don't think I've talked about this much. They are really ideal for what we want to pilot with our Treat Wellness centers. So, JFK Terminal 4 is one of the preeminent terminals, I think, in the world. The ownership JFKIT has been an outstanding partner with us. The Port Authority of New York and New Jersey has also been very supportive of what we've done with XpresCheck and now Treat. And what is great about JFK, well, let me tell you a touch about Phoenix and then compare and contrast. Phoenix also, with great management in place, has been a very important airport for us with our XpresSpa portfolio. But it is another one where we have access to a really good piece of real estate, just like in JFK Terminal 4. So, New York, one is East Coast, one is West Coast. One location is pre-security, the other is post-security. One is maybe 1,200 square feet, the other is close to 2,000 square feet. So, we really get good data to see and inform and to learn from, to inform the next 20, 30, 40 that we build. That's where, again, we take a very disciplined approach to pilot, learning, and then launching. We find we have a much higher success rate as we've used this methodology again and again since I've been here at the company. So that's why we have chosen. And we also had just two very good pieces of real estate that we could easily convert and get open this fall.

Great. Thanks, Doug. Are you finding it hard to staff your XpresCheck and XpresSpas? Is there a labor shortage you're seeing?

There is definitely a labor shortage. We are beginning to see some relief as federal and state funding for the unemployed comes to an end. It's challenging to find workers in various roles like food service, delivery driving, or at airports, but our HR team has done an excellent job. Scott Milford, who was recently promoted to COO, has a strong background in HR and leads a capable team of recruiters that has kept us adequately staffed. The competition for medical technicians has also eased since the peak of the pandemic when urgent care facilities, hospitals, and testing centers all competed for a limited pool of workers. Now, labor has not posed a significant challenge for us, largely due to our good benefits, competitive pay, and effective middle management that supports our staff. This is one of the reasons I brought Scott on board, and it’s proving to be effective.

Great. Thank you, Doug. And my final question, should we expect to see an increase in personnel related to Treat? Will your current G&A be able to support this new business?

It's a good question. So, we are being very careful as we add new talent. First, we look at some of the talent we have internally, we have some very strong folks who have been promoted. Then we go to the outside to bring in talent that we may not have. As we balance the cost of it with this new business, we have the good fortune of XpresCheck, which has dramatically changed our cash burn situation. With the reemergence of XpresSpa, we're going to have more registers ringing, more income sources to distribute, and really leverage this corporate team that we have. So, our senior leadership team supports all of the company. Most of the people, as you go through the organization, support all three brands. If you're a recruiter or you're an accountant, you are able to support them. And frankly, that's a benefit XpresSpa never had. All the corporate overhead was purely paid for by the spas, but now it is being redistributed with these different growing businesses. I'm also being careful not to starve the growth. One of the mistakes one can make is to staff so slowly that you never reach your potential. These three businesses and this company are picking up speed. So, we are bringing on talent as we need to while keeping an eye on the overall expense rate while we have more centers of revenue contributing and distributing these costs. I feel good with the practices that we have in place. I got to tell you the leadership team, bringing the first people in when the sky was falling in the pandemic, really took some true believers. Now, it's much easier to hire. We have a lot of people excited about the opportunity to work at XpresSpa Group under the new leadership team we've assembled. We are very happy with our current position. It's been a fantastic second quarter, and we are actively engaged in the third quarter, continuing our efforts. I look forward to sharing more updates at our next quarterly earnings call. Are there any additional questions? I believe you mentioned that was the last question.

That would be it for today, Doug. Thank you.

Okay. Well, I just want to reiterate a big thank you to all of our investors, being our retail investors or institutional investors or any of the men and women in between. We worked very hard to produce and create mid and long-term value. The day traders that are in and out, that's not necessarily our customer. We are building a company that is growing outside of airports into multiple revenue streams with multiple brands, and we're just getting started. So, thank you for calling in and for your continued support.

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