XWELL, Inc. Annual Report - How They Did This Year

I’ve put together this guide to help you understand XWELL’s performance over the past year. My goal is to translate complex financial filings into plain English so you can decide if this company fits your investment strategy.

1. What does this company do?

XWELL is currently undergoing a major identity shift. Once known only for airport spas (XpresSpa), they are transforming into a broader "wellness" brand. They now operate three segments: airport spas, diagnostic testing (XpresTest), and wax/skincare services (Naples Wax Center).

They are moving from being just an "airport stop" to a lifestyle brand serving people in airports and local neighborhoods. As of the last fiscal year, they operated 26 XpresSpa locations and 12 Naples Wax Center locations. This signals a shift toward steady, local revenue rather than relying solely on airport travelers.

2. Financial performance: The "Turnaround" struggle

XWELL is in a difficult financial spot. For the year ending December 30, 2023, they brought in $47.5 million in revenue, down from $62.1 million in 2022. The company lost $34.1 million in 2023. Instead of generating profit, they are burning through cash, reporting a cash outflow of $26.8 million. They are currently relying on restructuring debt and selling assets to fund operations.

3. Major wins and challenges

• The Challenge: The company is fighting to stay afloat. To pay for operations, XWELL has sold more shares and taken on debt. In 2023, the number of shares increased significantly. For you, this means more shares were issued, which reduces your ownership percentage to cover the company's losses.
• The Pivot: They are betting their future on the Naples Wax Center brand. While this is meant to provide stable, non-airport revenue, it currently makes up a small portion of total sales. The high costs of opening these new locations have kept the company from breaking even.

4. Financial health: A fragile position

The company’s filings include a "going concern" warning. This means management has serious doubts about the company's ability to stay in business for the next 12 months without raising more money. By the end of 2023, they held $24.7 million in cash, down from $53.5 million the year before. They also reported "material weaknesses" in their financial reporting, which increases the risk of accounting errors.

5. Key risks for investors

• Dilution: The company frequently sells new shares to raise cash. This directly suppresses the share price and creates a cycle of downward pressure on your investment.
• Survival Risk: With a cash burn rate of over $2 million per month, the company faces a liquidity crunch. If they cannot secure more funding, they may face bankruptcy or be forced to sell off assets.
• Market Sensitivity: Revenue depends heavily on airport passenger traffic. During economic downturns, people often cut back on wellness services, leaving XWELL vulnerable.

6. Future outlook

The company is in survival mode, focusing on saving cash and potentially selling non-core assets. Management is trying to keep their stock price above $1.00 to avoid being delisted from the Nasdaq, which has previously required reverse stock splits. The company’s long-term survival depends entirely on whether the Naples Wax Center expansion becomes profitable before their cash runs out.

Final thought for your strategy: XWELL is currently a high-risk turnaround play. Because the company is actively burning cash and warning about its ability to stay in business, it is important to weigh the potential of their new brand against the reality of their current financial instability. If you are considering an investment, keep a close eye on their quarterly cash flow reports to see if they are making progress toward profitability.