
Onespaworld Holdings Ltd
NASDAQ:OSW

Onespaworld Holdings Ltd
In the world of wellness and hospitality, OneSpaWorld Holdings Ltd. stands out as a unique frontrunner. This company has mastered the art of balancing luxury with leisure, primarily by providing premium wellness and beauty services at sea and on land. Its journey began by capitalizing on the untapped opportunities aboard cruise ships, transforming these floating cities into floating wellness retreats. OneSpaWorld partners with leading cruise lines, offering a range of services including spa treatments, fitness classes, beauty salons, and even health consultations, ensuring that passengers can indulge in self-care while sailing the open seas. This strategic alignment with major cruise operators ensures a steady stream of clientele, with their services seamlessly integrated into the cruise experience, crafting delight and devotion among travelers worldwide.
On land, OneSpaWorld extends its reach through an array of upscale resort spas and health centers. Here, it showcases its versatility by tailoring experiences that merge local cultural elements with high-end wellness trends. The company’s revenue model is as diverse as its service offerings. Through lease agreements and profit-sharing models with cruise lines and resorts, it capitalizes on both recurring and variable revenue streams. Furthermore, carefully curated product lines and wellness packages are crafted to enhance the customer experience while augmenting per-service revenue. OneSpaWorld’s ability to blend strategic partnerships with operational prowess underpins its sustained growth, carving out a distinctive niche in the ever-expanding global wellness economy.
Earnings Calls
In the first quarter of 2025, OneSpaWorld achieved a 4% revenue increase to $219.6 million, driven by higher service demand and prebooking revenues. Adjusted EBITDA rose 5% to $26.6 million. Despite a $1.5 million decline in land-based spa business, the company maintained profitability with a net income of $15.3 million. Looking ahead, they reaffirmed guidance, anticipating total revenue between $950 to $970 million and adjusted EBITDA of $115 to $125 million for the full year. The company is optimistic about adding wellness centers to eight new ships, expecting high single-digit growth in both revenue and adjusted EBITDA【4:1†source】【4:7†source】.
Good day, and welcome to the OneSpaWorld First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Allison Malkin of ICR. Please go ahead.
Thank you. Good morning, and welcome to OneSpaWorld's First Quarter 2025 Earnings Call and Webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements. These forward-looking statements reflect our judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter 2025 earnings release which was furnished to the SEC today on Form 8-K. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. An explanation of these metrics can be found in our earnings release issued earlier this morning.
Joining me today are Leonard Fluxman, Executive Chairman and Chief Executive Officer; and Stephen Lazarus, President, Chief Operating Officer and Chief Financial Officer. Leonard will begin with a review of our first quarter 2025 performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and guidance. Following our prepared remarks, we will turn the call over to the operator to begin the question-and-answer portion of the call.
I would now like to turn the call over to Leonard.
Thank you, Allison. Good morning, and welcome to OneSpaWorld's first quarter 2025 earnings conference call. It is a pleasure to speak to you today and share a strong start to the year, which continues the sustained positive momentum in our business into 2025. Our team delivered first quarter results at the high end of our guidance with our performance reflecting the impact of our mission to invest in our cruise line and destination resort partnerships, continuously innovate our guest experiences and enhance our productivity and profitability across our business. This led to increases across all key operating metrics during the quarter, the addition of new ships to our fold and new agreements with long-standing partners.
As outlined in our earnings release issued earlier this morning, based on our performance and with continued positive momentum, we remain confident in our ability to navigate the increasingly dynamic economic environment, which is reflected in our reaffirmation of our annual guidance. In addition to our strategic growth drivers, our cruise line partners continue to experience strong bookings and onboard spend and consumers continue to prioritize experiences with cruising a value alternative to other vacation choices.
Turning to the highlights of the quarter. Total revenues increased 4% to $219.6 million compared to $211.2 million in the first quarter of 2024. Income from operations of $16.8 million included $2.5 million of nonrecurring severance expense and compared to $17 million in the first quarter of 2024. And adjusted EBITDA increased 5% to $26.6 million, which included $1.1 million of nonrecurring cash severance expense and compared to $25.3 million in the first quarter of 2024.
At quarter end, we operated health and wellness centers on 199 ships with an average ship count of 193 for the quarter. This compares with a total of 193 ships and an average ship count of 188 ships at the end of the first quarter of fiscal 2024. Also at quarter end, we had 4,240 cruise ship personnel on vessels compared with 4,082 cruise ship personnel on vessels at the end of first quarter of fiscal 2024. The quarter marked meaningful progress in our key priorities. Let me share some of those highlights with you. First, we captured highly visible new ship growth with current cruise line partners and added new cruise line partnerships to our fold. In support of this priority, we introduced a new health and wellness center on Norwegian Cruise Line's first Prima Plus class ship, Norwegian Aqua in the first quarter and remain on track to introduce health and wellness centers on an additional 8 new ships, commencing voyages later this year. In addition, following quarter end, we executed a new agreement to operate health and wellness centers on 11 ships for P&O cruise lines and Cunard, which recognizes our strong performance and continues our long-standing partnerships.
Second, we continue to expand high-value services and products. These higher-value services, including medi-spa, IV therapy and Acupuncture to name a few, helped to grow sales productivity as we introduce these services to more ships and expand offerings with latest innovations. To this end, the quarter saw us elevate the innovation in our medi-spa services with the continued rollout of next-generation technology with Thermage, FLX and CoolSculpting Elite, which offer improved results and reduced treatment time by up to 50%. These new technologies generated over 20% growth for these treatments in Q1 versus last year. In addition, Acupuncture remains a sought-after service with strong adoption of LED light therapy as a high-conversion add-on treatment. At quarter end, medi-spa services were available on 148 ships, up from 142 ships at the end of the 2024 first quarter. We continue to expect to have medi-spa offerings 151 ships this year.
Third, we focused on enhancing health and wellness center productivity. This is best reflected in the delivery across the board growth in key operating metrics, including revenue per passenger per day, weekly revenue, pre-cruise revenue and revenue per staff per day, which are driven by: one, staff retention, which remains a key contributor to our consistent gains in operating metrics as experienced team members are driving incremental revenue through more effective customer recommendations. We continue to invest in best-in-class training and have recently redesigned our talent management process to further support productivity and long-term growth in our operating metrics.
Our enhanced sales training continues to fuel increases in the number of guests using the spa, service frequency, service spend and retail and average spend per guest. Additionally, prebooking revenue as a percentage of revenues remained strong at 23%. During the quarter, we introduced prebooking on the Virgin Voyages fleet of 3 vessels. And fourth, we enhanced our capital structure and strengthened our balance sheet again. In recognition of our strong competitive and financial position and our consistent free cash flow generation, our Board of Directors approved a new $75 million share repurchase program, extending our prior $50 million share repurchase program that we substantially completed in the first quarter. Together with our quarterly cash dividend, this program demonstrates our commitment to enhance shareholder value through our enterprise growth and capital allocation strategies.
As we look ahead, we are experiencing favorable trends at the start of the second quarter and expect our proven operating strategies and strong competitive and financial position, further buoyed by decades of long experience and the resilience of our business across economic cycles to have us poised to achieve our annual guidance. Overall, we believe we are well-positioned to provide increasingly valuable services to our partners, experiences to our guests and results for our stakeholders and shareholders in fiscal 2025 and beyond.
With that, I'll turn the call over to Stephen, who will provide more details on our first quarter results and guidance. Stephen?
Thank you, Leonard. Good morning, everyone. We are indeed pleased with our first quarter results, realizing our expected growth in total revenues and adjusted EBITDA and generating predictably strong free cash flow. Our efficient capital structure and asset-light business model, combined with our strong cash flow generation funded the return of $42 million to our shareholders in the quarter through our quarterly dividend payment and repurchases of our common shares. I will now share further details on our first quarter results that we reported earlier this morning. Total revenues increased 4% to $219.6 million compared to $211.12 million in the first quarter of 2024. The increase in service revenue and product revenues were driven by a 2% increase in revenue days, which impacted revenue by $5.3 million and a 2% increase in guest spend, which positively impacted revenue by $4.7 million. Contributing to the increased volume and spend was $2.3 million in increased prebooking revenues at health and wellness centers included in our ship count as of quarter end. This was offset by a $1.5 million decrease in our land-based spa business, partially due to the closure of hotels where we had previously operated.
Cost of services were $148.2 million compared to $144 million for the first quarter of 2024, with the increase being primarily attributable to costs associated with increased service revenues of $178.5 million in the quarter from our health and wellness centers at sea and on land compared with service revenue of $172.2 million in the first quarter of 2024. Similarly, cost of products were $35.3 million compared to $33.5 million in the first quarter of 2024. The increase was primarily attributable to costs associated with increased product revenue of $41.1 million for the quarter from our health and wellness center at sea and land compared to product revenues of $39 million for the first quarter of 2024. Salary benefits and payroll taxes were $11 million compared to $8.5 million in the first quarter of 2024. The increase was primarily attributable to expenses associated with the termination of employment of the company's former Chief Commercial Officer, including $1.1 million of severance expense and $1.4 million of expense related to vesting treatment with respect to restricted stock units and performance stock units.
Net income was $15.3 million or net income per diluted share of $0.15 as compared to net income of $21.2 million or net income per diluted share of $0.21 for the first quarter of 2024. The change was primarily attributable to a $7.7 million benefit resulting from the change in the fair value of warrant liabilities in the first quarter of last year. The first quarter of 2025 benefited from a $1.8 million decrease in interest expense. As you know, the change in fair value of warrant liabilities was the result of the remeasurement to fair value of the warrants exercised during the first quarter of 2024, reflecting changes in market prices of our common shares and other observable inputs deriving the value of these financial instruments. The $1.8 million decrease in interest expense was primarily attributable to lower debt balances and a lower effective interest rate.
Adjusted net income was $22.6 million or adjusted net income per diluted share of $0.22 as compared to adjusted net income of $19.3 million or adjusted net income per diluted share of $0.19 for the first quarter of 2024. And adjusted EBITDA was $26.6 million, inclusive of that aforementioned $1.1 million cash termination expense compared to adjusted EBITDA of $25.3 million in the first quarter of 2024.
If we turn then to the balance sheet, we continue to possess a strong balance sheet at quarter-end with total cash of $23.8 million after repurchasing $37.9 million of our common shares and paying a $4.2 million dividend in the quarter. In addition, we had full availability on our $50 million revolving loan facility, giving us total liquidity of $73.8 million as of March 31, 2025. Total debt net of deferred financing costs was $97.4 million at March 2025 compared to $98.6 million at December 2024. As Leonard mentioned, reflecting our strong competitive and financial position and efficient capital structure and asset-light business model that delivers consistent strong cash flow generation, our Board of Directors approved a new share repurchase program. This program replaces the $50 million share repurchase program that we initiated in the first quarter of 2024, which is substantially complete. We expect to continue to invest our surplus cash after investing in our growth to support the payment of our quarterly cash dividends, repurchase our common shares and pay down debt. We expect the continued execution of our strategy and return of capital to shareholders to create long-term value for all of our stakeholders.
Before moving on to guidance, I would like to briefly comment on tariffs. As we are likely aware, the majority of our operations are not impacted by tariffs as products for distributions to cruise ships are held in a free trade zone. In addition, products for use in our many stores are purchased from U.S. suppliers. These suppliers have not noted any disruption in the supply chain nor any increases in current pricing. Moving then on to guidance, as we look ahead, we remain confident in our outlook and expect total revenue growth to increase as we move through the year, as we benefit from our strategic initiatives, and as we add health and wellness centers on 8 additional cruise ships during the remainder of the year, most of them being back-weighted. As such, we continue to expect to report high single-digit revenue and adjusted EBITDA growth rates at the mid-points of our guidance ranges in fiscal 2025 compared to fiscal 2024.
Our guidance does not assume a significant deterioration in guest spending on board or a significant slowdown in cruising activity. As a reminder, for the full year of fiscal 2025, we expect total revenue in the range of $950 to $970 million with adjusted EBITDA expected in the range of $115 million to $125 million. We introduced for the second quarter of 2025 total revenue in the range of $235 to $240 million with adjusted EBITDA expected in a range of $28 to $30 million.
In summary, our business continues to build momentum and we see significant opportunity ahead. With a clear growth strategy, a high-performing team, and strong execution across the board, we expect fiscal 2025 to deliver meaningful gains and drive substantial value for all of our shareholders.
With that, we will open up a call for questions. Debbie, if you could open the call, please.
[Operator Instructions] The first question is from Steven Wieczynski with Stifel.
So, Leonard, I want to understand spend patterns a little bit more on board. Maybe you could give us some more color around what you're seeing in kind of real time in terms of guest spending. And I think you mentioned in your prepared remarks that April trends were essentially the same as kind of what you guys witnessed in the first quarter. But I want to understand if you guys have seen any changes in whether it's attachment rates, whether there's a difference in terms of spending across what you've seen in your land-based assets versus maritime. Any change in demand for higher-end services versus traditional treatments. Just trying to dig in a little bit more in terms of if your guests are starting to change their behaviors at all.
Well, to be honest, we look at the same questions that you just asked, because those are all the indicators of pressure from the consumer or consumer competence or sentiment starting to decline. Fortunately, in our first month here in April, we have not seen a significant increase in discounting. We have seen spend continue to increase. Actually, this last week was a good week, too, and spend was up. We are still seeing high-end services, medi-spa services, and some of the upper-body services in high demand. We scraped through every single banner to take a look at where there was any kind of significant pressure, and we have not seen that. We will keep monitoring that, because for us, the first indicator of a reduction in consumer sentiment or demand would be, do we have to tweak any of our marketing tools that we use onboard each and every week? We have not had to do that. Your answer simply is, at this point, we have actually seen no decline. If anything, we have seen a slight improvement in April.
That is interesting. Thanks for that, Leonard. Second question, if we think about full-year guidance, Stephen I think mentioned that full-year guidance does not assume any material changes in spending patterns, but maybe help us think about what would get you guys more towards the low-end of that guidance range or even below the low-end. I guess what we are trying to figure out here to understand is maybe the sensitivity of how much of a deterioration or change in demand and spending would have to occur in order to get you guys at the low-end of that range or even below that range.
Good morning. I think I would answer the question simply as follows. The low-end of the range assumes a moderation in spending onboard, so some slowdown, but if it is going to be a significant slowdown, then perhaps it goes below that. There is nothing that we are looking at that tells us we should pause and be concerned about a significant deterioration in spending onboard. You know the cruise lines have generally come out and talked about their bookings, which have been very, very strong. They still continue to offer this tremendous value alternative to the guest. We then have a further layer of insulation where we are canvassing and bringing in on the ship a smaller percentage of those folks that want to spend money. So, we feel at this point in time really comfortable about delivering our number.
The next question is from Sharon Zackfia with William Blair.
I guess I wanted to kind of follow up with that on the pre-booking trends and whether you are seeing any difference in kind of willingness for consumers to pre-book ahead of time, or alternatively, if you are seeing the cruise lines use kind of onboard spend credit incrementally to bolster trends, which could actually benefit you. And a corollary to that would just be, I know that you don't control the pre-booking engines that the cruise companies have. Just given the uncertainty, do you or are you seeing any pullback in the cruise company's kind of willingness to invest to continue to reduce friction in those prebooking engines?
Sharon, it's Leonard. Look, we actually saw a slight pickup. I mean, although it's pretty much comparable at 23%. We're very encouraged thus far. We just rolled it out on Virgin for the first time, as I mentioned. We have not seen a decline in the focus on energy, although we're focusing on it much more with the cruise lines because it's important to keep the focus there and the pressure on the importance of prebooking. But we have not materially in any way adjusted pricing on prebooking. It's a very important part of setting the cruise up as 23% of services are prebooked. So, it continues to remain constant, if not slightly up. We expect with prebooking on Virgin, it will improve. There are other initiatives in place to improve it as well. So, the cruise lines are being as receptive as they can, and they're not pulling back in any significant way, Sharon. So, we still focus on that. We still focus on that as a material and important part of setting the table for each cruise and how we yield manage through that cruise.
And Leonard, on the bundling, are you seeing the cruise companies use onboard credits more aggressively at all?
Not yet, Sharon. I mean, they only really use that lever when they see a significant decline in booking trends. And I don't think we've seen that reported yet. Whilst -- I mean, Royal Caribbean's commentary yesterday was very positive about 2025. I mean, the visibility to 2026 is comparable with historical trends. NCLH continues to say it's decent, although they said there's some softening. So clearly, each cruise line is going to have a slightly different view of bookings. But look, we focus always on the top, top suites first. In order to get our 11% penetration, we focus on the best guests and then we go everywhere else, obviously, to fill the column. So, we're not seeing the use of that magic onboard credit yet. I think when you see them start doing that, clearly then there are signs of some softening, but we haven't seen it yet in any material shape.
The next question is from Max Rakhlenko with TD Cowen.
Congrats on a very nice quarter. So, first question, did you guys mention what the comps were for the medi-spas? I've missed that. I think you provided that in the past couple of quarters. And then just how should we think about the potential slowdown in usage for medi-spas if the backdrop were to soften a little bit just given the significantly higher ticket?
So medi-spa continues to grow as a percentage of service. It's still max under 10%. It's still 8% or 9%. But we do see as we roll out more on to some of the newer ships as we continue to improve the offering on existing ships where maybe the full platform is not rolled out. And there are ships that will still get some of the new services that are not there. We've not seen a reduction in demand thus far. So yes, it's a high-end ticket. But clearly, the demand for it right now continues through April from what we've seen and was very decent in the first quarter. So, we're not seeing the early signs of deterioration even in the high-end medi-spa services.
And then if you can just take us back a little bit going to GFC. Can you remind us how the business held in both on top line as well as margins, as we are obviously starting to get more and more questions around what the downside can look like. So, if you could just take us back and remind how the business held in at the time?
Yes. So, the GFC was obviously the worst time, but it was a very small protracted period of time in which there was major emotional and stress to the financial systems. And so, people pretty much shut down. But that didn't last for a very long period of time. It pretty much kicked in at the end of '08 and then lasted for about 4 months into '09 and then started to improve. We do not expect that type of contraction. And our business actually fared better than most, as you can imagine. We were able to adjust marketing, maybe some discounting. The only thing that was impacted in any significant way was the retail attachment, which thus far continues, in fact, if anything, it's improved in the first quarter. So, we've not seen that. And where we did have contraction or less demand for the retail attachment, we wanted to get the people in for services or 2 services, which is normal. But on the retail side, we maybe had to discount or bundle slightly differently. We've not done that thus far.
The next question is from Laura Champine with Loop Capital.
I note that you were pretty heavy in the market to buy your own stock in Q1 and that you've re-upped the authorization this quarter. How sensitive is your buyback to any potential sign of softening in your business? Meaning, should we expect those buybacks to be contingent upon growth staying as strong as it is today?
Not necessarily, Laura. Even if you go back to -- we're just talking about the last significant downturn in the economy, the company still continue to generate nice free cash flow. So should we see a softening in the business, which, again, I'll stress and emphasize we have not so far. And I'm not -- by saying so far, I'm not implying that we're going to. We would likely still continue to buy back shares. The decision to buy back shares is more around the value, where is the stock? Is there a dislocation between the value of the stock and what we -- where we think it should be. So, I would expect us to continue to be in the market buying back shares at the right opportunities.
The next question is from Gregory Miller with Truist Securities.
I'd like to ask a question similar to some of my peers as it relates to how you're seeing trends in second quarter quarter-to-date. Did you see any weaknesses in spend immediately or the couple of days after the tariffs were formally announced or where there were more material stock market declines immediately following the tariffs?
No, we didn't.
Playing devil's advocate, are you surprised that you did not see any changes in spend activity or behavior?
Immediately after the tariffs were announced, I mean, people were out there cruising. They had probably set in their minds what their budget was for spend or additional experiences. Did they get back home and start reevaluating what that incremental or discretionary spend needs to be? Probably, but we didn't see it whilst they were cruising during the tariff announcement.
Greg, I would echo that. What Leonard says is not dissimilar to what we've seen before in these short-term blips in the economy or incidents that affect the cruise lines where you're on vacation, you're going to spend money, but certainly potentially the minute you get home, the wallet shuts. But while you're on board, you're there, you spend the money, you might well have a good time, and that's how we see people behaving in our business.
Our next questioner is Assia Georgieva with Infinity Research.
Congratulations on a very strong quarter. I had a couple of questions. In terms of the prebooked revenue, the increase was $2.3 million, so about 1/4 of the overall increase. How would you characterize what you have prebooked for Q2 and Q3? I imagine you have some pretty nice visibility at this point.
It's not something that we would provide a forward-looking metric on that. It's still in development. We only have 1 quarter underway. As we mentioned, the month -- at least we have 1 month into the quarter. We've not seen any change to that number. So as Stephen said, yes, it's too early for us to comment. And historically, we wouldn't comment on the forward-looking prebooking number.
Unfortunately, but I understand. And Stephen, you had mentioned that the provider of your municipal products has not seen any price increases yet. Is that the keyword?
Not necessarily. So, there are many providers of those items. And to be completely clear, they may have seen certain input prices go up, but they have, at this point in time, indicated to us that they do not expect any increases from them to OneSpaWorld. So, our anticipation at this point in time is irrespective of what's going out in the tariff world, we would not see medi-spa price increases.
So does it make sense to build inventory to possibly carry you through, let's say, a few months long period of tariff impact?
Some of the medi-spa has expirations. It has an expiration date, so you've got to be really careful.
It's refrigerated, and there's obviously limitations on the size of the refrigeration capabilities on board. But at the same time, we keep sufficient inventory even for high demand or busy ships with medi-spa demand. But to keep in excess of that, beyond what we can store safely, we don't do that.
Makes perfect sense. And just 2 very quick housekeeping questions. In terms of land-based closings, should we anticipate anything significant going forward in the rest of the year?
Can you repeat the question?
Because you had mentioned in your press release that land-based revenues were slightly down because of the closings or the end of the relationship with some hotels and closing of some of those paths. Do you anticipate any significant changes in the number of paths to be operated going forward? I imagine not. And this is purely land-based.
Yes. Look, I mean, look, I think every type of vacation option out there competing with cruise lines potentially might not do as well as the cruise industry itself because it's still an incredibly differentiated experience, but also great value and the delta between land and sea is still pretty significant. I imagine that, that's still going to be your first call if you want to take a family, and we're moving into the second quarter, vacations, school kids coming out. So, this is a quarter where a lot of people do go on to the ships and go to Alaska, go to the Mediterranean. So, it's going to be an interesting second quarter, but I think pretty much every itinerary out there, the load factors are going to be consistently good and comparable with last year, if not better.
And again, my very, very last question. The EBITDA number, if I were to exclude the cash severance amount, it would have actually come above guidance and would have been $27.7 million. Is that correct, Steve?
Yes.
All right. Thank you, everybody, and thanks for joining us today. We look forward to speaking with many of you at upcoming investor meetings and when we report our second quarter results in July. Thank you for joining us today. Bye-bye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.