10-Q: XWELL Inc. Reports Q1 2025 Results, Revenue Declines Amid Strategic Shifts

XWELL Inc.'s Q1 2025 revenue decreased by 20% year-over-year, driven by lower XpresTest and XpresSpa revenue, while the company addresses going concern doubts and Nasdaq compliance.

Summary

• XWELL Inc. reported a net loss attributable to XWELL, Inc. of $4.719 million for the three months ended March 31, 2025, compared to a net loss of $2.512 million for the same period in 2024.
• Total revenue decreased by 20% to $7.023 million from $8.726 million year-over-year, primarily due to lower CDC XpresTest revenue and XpresSpa revenue.
• The company is implementing strategic initiatives to reduce operating expenses, improve working capital, and enhance cash flow to address going concern doubts.
• XWELL is focusing on returning to overall profitability by reducing operating and overhead expenses.
• The company received a notification from Nasdaq regarding non-compliance with the minimum bid price rule and has until November 10, 2025, to regain compliance.
• XWELL completed a private placement in January 2025, raising $4 million in gross proceeds through the issuance of Series G Convertible Preferred Stock and warrants.
• The company is expanding its retail strategy and exploring opportunities to deliver health and wellness services outside of airports.
• XWELL is pursuing strategic partnerships to strengthen long-term profitability.
• The company is working to remediate material weaknesses in internal control over financial reporting.
• The company entered into an omnibus amendment with each of the holders of the Series A Warrants and Series B Warrants on May 16, 2025.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While the company is taking steps to improve its financial position and expand its business, there are significant concerns about its ability to continue as a going concern and its compliance with Nasdaq listing requirements. The decrease in revenue and increase in net loss also contribute to the negative sentiment.

Positives

• XWELL is actively implementing strategic initiatives to reduce operating expenses and improve working capital.
• The company is pursuing strategic partnerships to strengthen long-term profitability.
• XWELL is expanding its retail strategy and exploring opportunities to deliver health and wellness services outside of airports.
• The company is working to remediate material weaknesses in internal control over financial reporting.
• The program was extended in February 2025 through a three-year contract with a total base value of $22.2 million over three years, and a maximum ceiling value of $24.8 million within the same timeframe.

Negatives

• XWELL has suffered recurring losses from operations and has insufficient liquidity to fund its future operations, raising substantial doubt about its ability to continue as a going concern.
• Q1 2025 revenue decreased by 20% compared to Q1 2024.
• The company received a Nasdaq notification regarding non-compliance with the minimum bid price rule.
• XWELL's disclosure controls and procedures were not effective as of March 31, 2025, due to material weaknesses in internal control over financial reporting.

Risks

• The company's ability to continue as a going concern is uncertain due to recurring losses and insufficient liquidity.
• Failure to regain compliance with Nasdaq's minimum bid price rule could result in delisting of the company's common stock.
• Material weaknesses in internal control over financial reporting could lead to material misstatements in the company's financial statements.
• Ongoing conflicts in Russia and Ukraine, and Israel and Palestine, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.

Future Outlook

XWELL is focused on returning to overall profitability by reducing operating and overhead expenses, pursuing strategic partnerships, and expanding its retail strategy. The company is also working to remediate material weaknesses in internal control over financial reporting.

Management Comments

• Management is implementing various strategic initiatives to reduce operating expenses, improve working capital and enhance cash flow.
• The Company is aggressively pursuing strategic partnerships that the Company expects will further strengthen the long-term profitability of the business, which puts the Company in a position of strength as the Company raises more capital.

Industry Context

XWELL's performance is affected by the number of airline travelers and their propensity for health and wellness spending. The company is adapting to changes in the travel industry and expanding its services beyond airports to diversify its revenue streams.

Comparison to Industry Standards

• It is difficult to compare XWELL directly to industry standards due to its unique combination of spa services, testing, and retail operations.
• Comparable companies in the spa and wellness industry include Massage Envy and Hand & Stone, but their business models differ significantly from XWELL's airport-focused strategy.
• In the airport retail sector, companies like WHSmith and Areas operate diverse retail and food & beverage concessions, but they do not focus specifically on wellness services.
• XWELL's XpresTest segment competes with companies like Ginkgo Bioworks in the bio surveillance and testing space, but XWELL's overall business model is more diversified.

Legal Proceedings

• XpresSpa Holdings, LLC is party to an arbitration proceeding requested by the City of Atlanta, Georgia related agreements by and between Cordial and XpresSpa for the operation of the XpresSpa locations in Hartsfield Jackson Atlanta International Airport (ATL) in ATL Terminal A and ATL Terminal C.

Related Party Transactions

• The Company entered into a consulting agreement with XWEL INV I, LLC and Jason Aintabi for advisory services, with Mr. Aintabi serving as the Manager of XWEL INV I.

Stakeholder Impact

• Shareholders face the risk of delisting from Nasdaq and potential loss of investment if the company cannot regain compliance with listing requirements.
• Employees may be affected by cost reduction efforts and potential restructuring of operations.
• Customers may experience changes in service offerings and availability as the company adapts its business model.
• Suppliers and creditors may be impacted by the company's efforts to improve working capital and manage cash flow.

Next Steps

• XWELL must regain compliance with Nasdaq's minimum bid price rule by November 10, 2025.
• The company will continue to implement strategic initiatives to reduce operating expenses and improve working capital.
• XWELL will pursue strategic partnerships to strengthen long-term profitability.
• The company will work to remediate material weaknesses in internal control over financial reporting.

Key Dates

Keywords

XWELL, revenue, XpresSpa, XpresTest, Naples Wax Center, going concern, Nasdaq, private placement, warrants, internal control, material weakness, liquidity, profitability, bio surveillance, Series G Preferred Stock