XWELL, Inc.
Q2 2017 Earnings Call Transcript

Published: 9 Aug 2017

[Executives:]

Andrew Perlman - CEO Anastasia Nyrkovskaya - CFO Ed Jankowski - SVP, FORM and CEO, XpresSpa Darin White - VP, FORM and President, Group Mobile

[Analysts:]

David Bain - ROTH Capital Alex Silverman - Special Situations Fund Keith Goodman - Maxim Group Jamie Mendola - Pacific Grove Capital

[Operator:]

Thank you for joining us for today’s call. Before I turn the call over to the Company, we 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, and 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 the Company’s SEC filings including the Company’s report on Form 10-K for the year ended December 31, 2016, and other current and periodic reports the Company files with the SEC. At this time, I’d like to introduce Andrew Perlman, the Chief Executive Officer of FORM Holdings.

[Andrew Perlman:]

Good afternoon, and thank you all for taking the time to join us for an investor update and earnings call. I would like to update our shareholders on the Company’s progress to continue to grow our revenues and dramatically cut operating costs in the second quarter, and review our accelerated growth objectives that we introduced during our preliminary business update on July 25th. Our strategy is to focus on our wellness business, extend our brand, our reach and revenue while continuing to create efficiencies to position the Company for profitability as we complete the Company’s transition to a pure-play health and wellness company in the coming quarters. Joining me today on the call are members of the FORM Holdings, XpresSpa, and Group Mobile management teams. We have Anastasia Nyrkovskaya, FORM Holdings’ Chief Financial Officer; Ed Jankowski, FORM SVP and XpresSpa’s Chief Executive Officer; and Darin White, FORM VP and President of Group Mobile. To begin, I want to thank our existing and new shareholders for their support. Since closing on the XpresSpa acquisition in late December, our team has been completely immersed in refining its operations, identifying expense synergies and optimizing its growth strategy. Consistent with the plan we communicated previously, during the first quarter call, this work was largely completed during the second quarter. And as you can see from second quarter results, the company is already beginning to leverage its operations, demonstrated by a significant sequential reduction in consolidate general and administrative costs of $1.1 million at the end of the second quarter as well as a marked improvement of $1.3 million in adjusted EBITDA at our core XpresSpa asset from a loss of $200,000 in the first quarter to a gain of $1.1 million in the second quarter. The growth opportunities available to the company are remarkable. With the necessary capital in place, FORM and XpresSpa are in a position to execute on many of these opportunities in the near term as we look to strengthen our leadership position in the travel, health and wellness industry while building a necessary scale required to achieve profitability. Based on our revised plan which is supported by our more robust balance sheet, we increased our second half 2017 unit growth target by a minimum of seven additional units, from two units that were on original schedule to nine units that are new schedule. These additional units have associated lease agreements and term sheets in place. Beyond these nine units, we are also in negotiations on another nine potential units, some of which may open prior to year-end 2017. With the company’s operations now balanced and growth initiatives recalibrated to reflect the positive environment, management is committed to further raising its profile in the growing health and wellness industry by parting with its other disparate assets, being cognizant of maximizing value for the company’s shareholders. This work remains ongoing but our intention is to take the necessary steps to create a pure-play health and wellness services company, led by the company’s core XpresSpa asset. We look forward to sharing these developments in due course and have committed to completing this process by the end of the first quarter 2018. With that, I would like to dive into our operating segments and provide some updates on financial performance as well as our strategic outlook for each, starting with wellness. XpresSpa will be the platform by which the company will accelerate its growth in the health and wellness industries. XpresSpa provides air travelers with premium health and wellness services as well as a branded line of exclusive luxury travel products and accessories at 52 locations across 23 major airports in the United States, Holland and United Arab Emirates as of the second quarter end. Within the airport retail, XpresSpa is the market leader in its category with 48 locations domestically as of the end of the second quarter. Our new store openings schedule demonstrates we can grow this to over a 100 locations over the course of the next three years. XpresSpa’s success in penetrating new and existing airports speaks to the value our airport partners see in our superior luxury spa offering, which is complementary with our strategy of enhancing retail and service offerings. Our two openings in Phoenix Sky Harbor’s newly renovated Terminal 4 during the second quarter are great example of this, but there are many more. The opportunities available to the company are tremendous and we intend to capitalize on them. For the balance of 2017, we anticipate opening nine units, seven of which are incremental to our original plan and have signed leases or term sheets in place. Beyond these nine planned units, we have another nine that are in negotiations, some of which may fall into 2017, which puts us on pace to have over 60 locations in operation by year-end 2017. The company’s relationships with its landlords are an important ingredient in our success and will be central to the company’s ability to retain and grow market share and backfill markets. Evidence of the strength of these relationships is demonstrated through recently executed seven-year extension of our flagship store at JFK Terminal 4 at terms that are consistent with the legacy lease. This unit is currently being renovated after over nine years in operations, and we are excited about its opening at the end of September. We are separately renovating a number of locations around the country. As a result, stores may be closed for limited periods of time during the third quarter. We seek to obtain concessions or extensions from our landlords in the case of making any material improvements. Next, I’d like to speak about our store level economics and some of the strategic initiatives we have in place to drive efficiencies and support long-term comparable store sales growth. XpresSpa units have strong store level economics with modest CapEx requirements that deliver strong cash on cash returns. Further demonstrating the uniqueness of the captive airport retail environment, our spas ramp quickly and are performing near our chain average in the first few months of operation. This dynamic allows us to generate impressive cash on cash returns that allow for a full payback in two to two and a half years with the typical lease terms of seven years. Moving forward, we expect to build out of new spa locations to cost less than $500,000 per spa that was the company’s historical average. In fact, most of the new locations in the current pipeline have an estimated build out cost of $300,000. Our expectation is that these new units will produce in excess of $1 million in revenue with the store level contribution margin of approximately 20%. The Company’s recent class of openings continue to perform at these levels and provide us with the necessary conviction to accelerate our unit growth program in the end of second half of 2017. We are comfortable that we can maintain and improve upon the store level profitability over time as we continue to refine our operating model and implement initiatives that will not only drive margins but improve sales. In the past, we’ve talked about the tremendous opportunity to improve the operational aspects of the business. In parallel with our unit level analysis, which is now complete, we’ve been taking a hard look at the relative performance of our portfolio and the drivers behind those with a particular emphasis on our employees. Our employees drive our business day in and day out, and are our most important asset. This is especially true considering XpresSpa offers a product where demand outstrips supply. By executing on our workforce expansion initiatives of improving recruitment and retention of employees, the company should be able to better address this demand, improve customer service and ultimately allow us to drive revenue growth. XpresSpa is a service business where people are the difference between an outperforming unit and an average unit. We are committed to maximizing each employee’s individual talents and placing them in a position to succeed. As an example, we identified an employee itself scheduling riddle that was previously accepted unsolvable. He’s been promoted into our corporate team and is now helping us implement this work in other markets and establish best practices. We have another employee, who started with us as a customer greeter at one of our locations and has grown into one of our top performing store managers in the organization. Her positive attitude is infectious, which is precisely the sort of spirit our customers are seeking during their hectic travel schedules. Conversely, we’ve also been forced to make difficult decisions where employee capabilities weren’t meeting the demands very well. Fortunately, we have a talented group across the XpresSpa organization that is embracing change and together we’ve made great strides toward creating solutions to obstacles that will be central to our goal of driving consistent comparable store sales for many years to come. Another aspect of the business that the leadership team spends a lot of time on is our store format. As I mentioned, labor is our most important asset but once the customer is engaged, we want to ensure that we can offer a complete experience from both the service and retail perspective while casting the XpresSpa brand in the best possible way. In May, we announced our exclusive partnership with Capelli New York, global designers and manufacturers of on-trend private label and branded products to co-produce and sell XpresSpa’s line of branded travel and spa products and accessories which include neck pillows, blankets, massagers and masks among others. This partnership will kick off in October and create synergies from a margin and working capital standpoint while generating a new revenue stream via our licensing agreement that allows their use of the XpresSpa brand outside the airport environment. In the second quarter, you may have noticed, growth in our current assets. This is due to an inventory investment with our existing vendor to ensure that the Company has enough inventory in place during the transition period to our new partner Capelli. We are continuing to pursue other complementary partnerships that can improve our customer experience and provide additional revenue opportunities within skincare and travel-related product lines. Our latest store layout continues to perform well and is helping us test new concepts and offerings that will expand our addressable market over time. Of note are an increased emphasis on nail care by providing a dedicated service area with clean and attractive workstations that immediately communicate our offering to potential customers. The initial enhancements and productivity we are seeing are extremely encouraging. Additionally, the company has made extensive strides in developing its franchise platform, which will address some of the demands we are receiving for XpresSpa locations in secondary and tertiary airports. The purpose of our franchise development program is to broaden our platform to leverage the XpresSpa brand and put the operational elements in place to support additional channels of growth in the future. Finally, a few comments on technology. As we said previously, upgrading our systems is a major opportunity for us to better leverage our customer relationships and harness that underlying data to drive sales and allow us to operate more efficiently. We continue to plan for an upgrade to our legacy IT infrastructure and point-of-sale systems which will roll out in fourth quarter of 2017. These systems will enable management to better understand the demands on each spa, pricing opportunities, and optimize labor needs in conjunction with employment so that we can bring a level of consistency to our customers and allow us to execute on our promise of timeliness which is central to our efforts to put the express back in XpresSpa. These systems will also allow a more complete solution for the company’s traveling customers, permitting reservations and opening up targeted digital marketing to approximately 150,000 affinity members already in our system. Now, let’s shift towards segment level financials for wellness. Please note that we have provided segment level income statement on page 20 of the 10-Q for the quarter ended June 30, 2017 and we have also added an adjusted EBITDA reconciliation as well to further assist in your analysis of our progress. For the second quarter 2017, we generated revenues of approximately $12.9 million, which represents an increase of 16% versus the prior year period. The second quarter growth was driven by the sales from new locations, as well as comparable store sales of 3.2%, which were impacted by some ongoing scheduling challenges. We’ve already made improvements and continue to actively work on this, so that we are in a position to maximize our opportunities with customers going forward, and continue to feel confident that we have the elements in place to drive positive comparable sales over the long term. We are reiterating our full year 2017 revenue forecast of $50 million. Through the first six months, the Wellness segment generated $23.9 million of revenues, which based on our historical seasonal cadence should approximate 47% of annual revenues, giving us the confidence in this annual forecast. Importantly, given the timing of some store closures due to renovations and planned openings which will fall at the end of the third quarter and beginning of the fourth, the seasonality in the second half of the year will be temporarily skewed towards fourth quarter. The most notable highlight for the second quarter was the segment’s sequential improvement in adjusted EBITDA, which increased from a loss of $200,000 in the first quarter to income of $1.1 million in the second quarter. This was beyond the expectations we previously communicated and even beyond the goals we had set internally for ourselves in this period of time. And I’m very proud of the team’s efforts to realize the cost synergies associated with leveraging FORM’s existing resources that drove this material improvement. Depreciation in the second quarter was at a heightened rate due to units we closed for renovations. As a result of these renovations, the useful life for accounting purposes is shortened, therefore accelerating the remaining depreciation. Note that this is a non-cash charge. Going forward, however, we expect current quarterly operating expense run rates to further normalize in the third quarter, which will reflect a full quarter of cost savings following our second quarter initiatives and hold steady thereafter on an absolute basis through the balance of the year, safe for [ph] a couple additional hires that will join our field management ranks as we expand our platform. We generated the gross profit of $2.5 million, representing 19.6% of sales, which includes our store labor as a component of cost of sales and was consistent to the prior year period. Operating loss for the second quarter was $2 million, which increased $0.4 million on a sequential basis from the first quarter operating loss of $2.4 million. The second quarter operating income increased $2.3 million of non-cash depreciation related to leasehold improvements and additional $600,000 of amortization associated with intangible assets such as our brand and customer relationships and $200,000 of merger, acquisition and integration costs. With respect to future additional abnormal costs associated with the merger and integration of XpresSpa, we expect the remaining expense to be under $600,000, which will fall in the third quarter. To reiterate, we’ve taken considerable steps to optimize the cost structure within the Wellness segments and these initiatives are largely complete. With the expected accelerated unit growth that we laid out which adds a minimum of nine units in the second half of 2017 compared to our original forecast of two, we are on pace to achieving positive adjusted EBITDA for the full year 2017 for the Wellness segment. We recently established preliminary 2018 revenue guidance for Wellness segment of $60 million during our second quarter preannouncement, representing a 20% increase from our 2017 revenue guidance. This is a further acceleration of revenue growth we expect to achieve from 2017’s growth performance of approximately 15% and the prior three year CAGR of approximately 9% that was generated prior to FORM’s ownership of XpresSpa. We expect new units to perform at least as well as the existing units, and we will revisit our 2018 guidance prior to year-end and provide further insight into this and other targets. In the near-term, we expect the revenue cadence to deviate from historical seasonality patterns in the second half of the year due to the timing of renovations and new unit openings in our Wellness segment. Thus, a larger fourth quarter should be expected relative to the third quarter, but the company remains confident in achieving its $50 million revenue target for 2017. Now, I’d like to transition and speak about our technology segment for a moment. As a reminder, our technology reporting segment includes our primary asset Group Mobile as well as our developmental asset FLI Charge. However, you will see that our FLI Charge operation has been reclassified to a discontinued operation on the income statement and as assets held for disposal on the balance sheet in the second quarter of 2017, as a result of an offer from a third-party to finance its ongoing operations. Importantly, this transaction is the first in FORM’s strategic transition to a pure-play wellness company. We anticipate that this process will be concluded by the end of the first quarter 2018 and we’ll continue to update shareholders as appropriate. For the second quarter 2017, our technology segment which reflects Group Mobile’s operations, generated $3.5 million of revenue and represents an increase of 41% versus the prior year period. Gross profit was $800,000, representing 22% of sales which is double the prior year period’s margin of 11% and was the result of our services business driving an improved margin mix. We remain confident that our initial 2017 projection for Group Mobile to generate in excess of $20 million in revenue, given several major wins which I will highlight in a moment. Commensurate with its comprehensive platform, the company has been busy putting agreements and partnerships in place. Group Mobile was awarded a sales and services contract to outfit the Florida Marine Law Enforcement Agency with Getac Rugged PC Services and also received orders from large repeat customers such as VT Systems, Molly Corporation, Nissan, and Shaw, a division of Berkshire Hathaway. Subsequent to the quarter-end, Group Mobile was selected to supply mobile technologies and services to a large southeast utility company on a multi-year contract basis, secured a contract for the extensive deployment of mobile technology solutions for a large Texas county government agency, and executed on a multi-million dollar contract with Indianapolis based transportation and bus routing integrated software provider. FORM’s capital structure is in excellent condition following our recent equity offering which added $6.7 million in net proceeds to the Company’s balance sheet and will allow us to accelerate our growth strategy. Consistent with the second quarter expectations we provided during our first quarter call, we were successful in resolving all outstanding litigation that we inherited at XpresSpa, we right sized each business’s respective cost structure, and we are working towards identifying strategic solutions for our remaining technology assets. We continue to expect further improvements in cash flow in the second half of 2017 due to these changes and as we begin enjoying the resultant leverage of our smaller fixed cost based as revenues grow in concert with our accelerated opening plan. This will provide the foundation for expanding operating margins and ultimately consolidated profitability as we realize scale. In closing, I would like to reiterate how excited we are about the path that FORM is on. We are in a great position to build upon our leadership position in the fast-growing health and wellness industry with the highly productive store model. We will continue to pursue growth for our existing XpresSpa platform while seeking out new avenues that are complementary to our core competencies. In the near-term, our focus remains on growing XpresSpa while continuing to be conscious of costs and separately, the rationalization of our other assets. We look forward to updating FORM’s shareholders on our pursuit to enhance shareholder value. Operator, you can now open up the call for Q&A.

[Operator:]

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] And our first question comes from David Bain from ROTH Capital. Sir, please state your question.

[David Bain:]

Great. Thank you. First, Andrew, I’m sorry if I missed it. But, did you review same-store sale results for the quarter?

[Andrew Perlman:]

Yes. So, we touched on them. Of the 16% overall revenue growth, we grew on a same-store basis at 3.2% in the quarter.

[David Bain:]

And then, you discussed wellness costs subsiding further in 3Q from the moves taken in 2Q, which already had a very positive impact. Assuming the additional decline that’s going to come from the G&A costs like we saw in 2Q, can you give us an idea of how much further that line item can decrease quarter-over-quarter?

[Andrew Perlman:]

Yes, sure. So, obviously, there is a dramatic improvement from the first quarter to the second quarter. On a quarterly basis, we would estimate that as we move to the third quarter that that will be probably somewhere between $200,000 and $300,000 on a quarterly basis; and then as we grow the short footprint, we would not expect that to go up with the exception of some area management as we open up the next round of stores.

[David Bain:]

And then, it sounds like -- the airport spa RFP is there at an all-time high. But it really sounds like you have some visibility into potential out year acceleration. I mean, you mentioned the 100 stores within the next three years, I think that’s an average of 17 openings based on where you’re now. Can you speak to some of that visibility? Is that based on the RFP count that you’re seeing, now discussions with operators, just any kind of color on the opportunity that you are seeing for the out year, outside of what you have in place right now, would be great?

[Andrew Perlman:]

Yes, sure. So, the opportunities are coming from all those things that you mentioned. They coming from RFPs that we see coming down the pipe; they are coming from existing conversations with landlords, in some cases, which is the case of one of our 2017 opportunities; they are even coming from lease expirations of our competitors and the airports saying that they would prefer to have an XpresSpa versus one of our competitors. In terms of thinking about the sizing, as we discussed there are going to be at least nine new units this year, and we would expect it to be more than that with the nine additional locations that we are negotiating for, that we view as immediate opportunity. So, what I would say is over the course of the next 18 months, we know that there are 25 RFPs coming out. So, when we think about the out years, what I would think about is us winning probably 80% because that’s our historical win rate. Within the pipeline, we have these nine negotiations that are ongoing. So that probably leads to six or seven locations. And then, we know over the course of the next 18 months that there are 25 RFPs, most of which would fall at the tail end of 2018 into 2019. So that between end of 2018 and 2019 should lead to at least another 20 locations.

[David Bain:]

And then, I guess last one I promise. The most near-term gross margin opportunities, I mean, you spoke to retail changes in addition, new services, franchising. Can you speak to where we will see the impact first and maybe even what quarter we could begin to see some uplift in gross margins in wellness again?

[Andrew Perlman:]

Sure. So, there are a couple of different components that I think will positively impact the store level margins, even as we go throughout the rest of the year. One thing is something that we touched on in the call, which is we would expect to enhance the component of our business that’s retail that is a higher margin component of the business, and we expect to launch a skin care partnership and announce in the third quarter, launch in the fourth quarter. Another thing that the company has already been working on and is already actually visible in some locations but not all yet is our partnership with Essie, [ph] which is our exclusive nail care brand. So, the answer is you definitely will see some large improvement as we go through even the next few quarters. And then as we go into next year, we will start to see the benefits of having improved technology in the store which we think will also be a real boost.

[Operator:]

Thank you. And our next question comes from Alex Silverman from Special Situations Fund. Sir, please state your question.

[Alex Silverman:]

Hi, guys. Good quarter. Thanks for taking my question. So, Dave Bain asked a number of my questions. But, can you -- how many stores were closed this quarter in the second quarter for renovation?

[Andrew Perlman:]

During the second quarter, we did not -- we actually sorry, just prior to the end of the quarter, we closed our JFK location but that was only at the last two weeks. The bulk of renovations -- and again, they’re on a rolling basis and just to quantify it, that’s probably about $0.5 million shift. But again, because historically the third quarter has been 27% and the fourth quarter has been about 26% of revenue, we would expect those to be inverted with store -- some store openings or maybe even more dramatically shifted towards a bigger number in the fourth quarter. Our JFK location will reopen before the end of September. And again that’s just one of our JFK locations, and it’s our biggest one at T4. And we just reopened a location after a 45-day renovation in Orlando.

[Alex Silverman:]

And what are renovations costing you, roughly?

[Andrew Perlman:]

There is a little bit of a range. In some cases, they’re as nominal as $20,000; in some cases, they are $100,000 to $150,000.

[Alex Silverman:]

Given what the guidance would suggest on tech in the back half that should get you into positive EBITDA for that segment. No?

[Andrew Perlman:]

That’s correct.

[Alex Silverman:]

Okay. So, you’re just really covering the -- covering corporate?

[Andrew Perlman:]

You mean in terms of what we need to generate at the different units?

[Alex Silverman:]

Correct. So, wellness is positive, tech is positive; you just have the drag of corporate for the consolidated EBITDA.

[Andrew Perlman:]

Yes. That’s correct.

[Alex Silverman:]

And I think you said a couple of hundred thousand decline in corporate which would take you down to about one two, is that about right?

[Andrew Perlman:]

Over time, yes, we would be there; we were not there in the second quarter.

[Alex Silverman:]

Right. I’m just looking forward. And I think that’s it. Great. Thank you, guys. I appreciate it.

[Andrew Perlman:]

Sure, yes.

[Operator:]

[Operator Instructions] And our next question comes from Josh [indiscernible] from Defend [ph] Investor. Please state your question.

[Unidentified Analyst:]

Hey Andrew. Following up on a question that David and Alex both asked. I’m not sure I heard you answer to David’s question correctly. The G&A line in the Wellness segment, which was 1.599 for the quarter. Could you say that’s going to go down by 200,000 to 300,000 or that’s going to normalize at 200,000 to 300,000?

[Andrew Perlman:]

No, that would go down by that amount over the coming quarters, not that it would reach that level.

[Unidentified Analyst:]

So, we’re expecting something like 1.2 to 1.4 ongoing in other G&A for the Wellness segment?

[Andrew Perlman:]

That would be a fair range, yes.

[Unidentified Analyst:]

And similar reduction for the corporate segment, other G&A?

[Andrew Perlman:]

Yes. That’s over the coming quarters.

[Unidentified Analyst:]

Okay. More quick question, there is a note in here about the adjustment to the pref based on legal and professional costs from the acquisition related of XpresSpa. I just want to make sure those are costs and not potential -- there is no -- I think you said you’ve resolved the outside and legal issues, right? So, no increased potential legal liability that came out with that, right?

[Andrew Perlman:]

No, there, absolutely, isn’t. And when it comes to the reduction in the preferred shares, those are shares that were cancelled as a result of expenses that are raised from the merger. So, these are all things that are behind us.

[Operator:]

And our next question comes from Keith Goodman from Maxim Group. Sir, please state your question.

[Keith Goodman:]

Most of my questions are answered. But I had a quick question or reference to the FLI Charge division, obviously an outside investor. What does it look like? I am not sure I heard what it looks like going forward and what the potential is on that. Are you prepared to sort of give where that company is at and what the potential is there going forward?

[Andrew Perlman:]

Sure. So, as we discussed, we made a decision that the investment profile for something like FLI Charge is very different than our core assets. We have not quantified what the potential upside may be, but nor do we disclose terms because again this is all in the financials and also in the press release. We received the financing offer. It’s not completed as of yet. Although we believe it is close to complete. And our goal is to retain as much upside from that asset while not being responsible for continuing to finance operations.

[Operator:]

[Operator Instructions] And we do have some other questions that came in. And our first question is, when do you think that FH will become profitable, what is the expected EPS of the next year?

[Andrew Perlman:]

So, we’re not giving EPS guidance, but what I would say is our expectation is on an adjusted EBITDA basis that we will, as a consolidated unit, be EBITDA positive in the fourth quarter of this year. And stay tuned for additional guidance.

[Operator:]

Thank you. Our next question is, can you please recap your statement regarding the 300,000 buildout expense for new XpresSpa units? Is this a reduction from previously stated CapEx per unit of 500,000?

[Unidentified Company Representative:]

I can take that, Andrew. We developed a kiosk system last November and installed into Charlotte, and it was tremendously well received by the airport community for three reasons. Number one, we can react very, very quickly to any vacant space that they have and set up this kiosk; number two, it’s very -- it reduces the cost of build out from an in line by half; and we can be very, very agile in getting this up and running. The one in Charlotte has been tremendously successful and will do $1 million in the first 12 months. So, the kiosk is very important part of our go forward build out strategy.

[Operator:]

[Operator Instructions] And our next question comes from Jamie Mendola from Pacific Grove Capital. Please state your question.

[Jamie Mendola:]

Hi, Andrew. I was wondering if you could give us your outlook on capital spending for the 2017 and 2018 new store openings and just give us a sense of what your liquidity will look like, especially post the equity raise?

[Andrew Perlman:]

Yes, sure. So, for -- if we think for a second that out of the nine signed leases and nine additional locations that we are scouting that we end up opening a collective 15 out of those, between that and the renovations that we’ve been doing, the CapEx for that will be approximately $5 million, and that’s our expectation. In terms of 2018 between the RFPs that are coming down the pipe and the locations that we’re in dialogue with landlords on, we do not have a forecast that I would give publicly, at this point. In terms of liquidity, our expectation, as we’ve discussed is that we’re in a position where we become a pure-play by the end of the first quarter last year and as we go through that process, we would expect to create some additional liquidity through our other assets.

[Jamie Mendola:]

And do you think that most likely takes a form of sale of the technology business or how would you get to that point?

[Andrew Perlman:]

Right now, I believe all of the options are on the table and all I would say is that we’re having a lot of conversations as to the thing that we believe creates the most value.

[Jamie Mendola:]

And then, lastly, you briefly mentioned the franchise opportunity. How does that fit in, in terms of total addressable market size, both domestically and international? And at what point is that going to start being relevant for your business?

[Andrew Perlman:]

So, it’s something we expect to launch before the end of the year. And we already have a handful of franchisees that are interested in the concept. It’s actually something that Ed was approached about by a number of smaller airports, where the dialogue became more an airport that really wants and XpresSpa that we know that were too small for you, will you please franchise and we’ll find you the franchisee. In terms of the addressable market, the way I would think about the addressable market is for company-owned, the U.S. addressable market we believe is approximately 170 units and we usually just within airport could get to a 100 franchisees at the secondary markets. But, this is something that we’re obviously starting from scratch in the fourth quarter. In terms of the international market, we think that there is an opportunity for 150 locations either through company’s owned or through franchising or joint ventures. Right now, we only have four international locations, and we’re examining all of our options in different markets very carefully. And we’re constantly having dialogue, much of which is inbound potential interest for the international markets.

[Operator:]

And there appear to be no further questions at this time. Andrew, do you have any closing remarks?

[Andrew Perlman:]

I’d just like to thank our shareholders for their ongoing support. And thank you for taking the time to join the call.

[Operator:]

Thank you. This does conclude today’s teleconference. We thank you for your participation. You may now disconnect your lines at this time. And have a great day.