OneSpaWorld Holdings Limited (OSW) 30 Oct 242024 Q3 Earnings call transcript

Good day, and welcome to the OneSpaWorld Third Quarter 2024 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 third quarter 2024 earnings call and webcast.

statements. like available you webcast on deemed constitute I'd and certain may begin, to made information today's forward-looking we to that remind statements be Before call and analysis These only results forward-looking differ current of a from based materially our business. factors statements judgment affecting may as today, our and reflect of actual on number expectations and Accordingly, statements. you should not place undue reliance on these forward-looking

webcast, third forward-looking result this do quarter of in more release, risks and that not of events and the or thorough new conference with furnished in made statements, discussion or was statements the refer X-K. We obligation SEC any the forward-looking to update statements information, a our to to future the be For associated to XXXX forward-looking you disclaimer earnings we call undertake uncertainties alter regarding included otherwise. Form a today as on any which is whether

to call. in these non-GAAP company the adjusted metrics certain addition, release earnings our can this on morning. metrics earlier issued may In this of explanation be refer An found

Joining of performance update Executive our will Executive the with and key review Then guidance. and President; provide Officer. quarter third Financial Chairman, Lazarus, an Chief begin Fluxman, me Chief are Officer Stephen Leonard Officer and will Stephen more a Chief and and today provide XXXX financials our Leonard Operating on priorities. on details

we question-and-answer remarks, the the call now call Leonard. turn prepared the will the portion to of the our call. I to to Following over over turn begin like to operator would

period pleasure today quarter It's Good to third earnings XXXX conference and of to and performance. to a welcome speak Allison. you, record you morning, share another Thank call. OneSpaWorld's

operations revenues, EBITDA achieving for total quarter and surpassed once delivered all-time again team income exceptional third expectations. our results, adjusted Our that records from

our sustained to us resort and line deliver achieve performance continue the for competitive outstanding model results operating to This guest partners. and strong company positions of well for outstanding partners. to cruise and strengths talent destination to continues our our team leverage experiences complex evidence Our our to our

earnings performance, this release have our third the momentum As guidance our business, issued outlined and based on annual year. morning, this our continued the earlier for increased in time positive outlook we across our

highlights XXXX. And quarter. compared to after-tax compared $XXX.X the XX% XXXX. Adjusted XX% after-tax EBITDA third million unlevered million million record record in XXXX. $XX.X flow XX% unlevered $XX million $XX to to of quarter increased to $XX.X the conversion $XXX.X Turning rate of of million XX% cash a operations free flow to to $XX quarter free the third the a revenues the record record cash to in million The Total of of quarter $XX quarter XXXX. a increased a to increased to third quarter the XXXX. Income compared from in to million million the XX% third in third in increased of was compared

toward of personnel ship third XXXX. At X,XXX ships with end grow to of the of XXX on with XXX and had progress vessels of the the we vessels ship on key for the quarter quarter continue our ships At personnel an our strategic XXX compared and we with ship XXXX. The quarter ship cruise count cruise continued included third ships at quarter quarter. We an ship X,XXX end, quarter XXX count priorities. a total centers of on operated end, for compares count average wellness This average health of year-over-year.

of you. share me with some Let those highlights

centers Seas. for on the year, health new health of With partners First, builds. and third Utopia we introduced partners ship and new our the highly current fold. wellness quarter, with first center this cruise added wellness cruise of ship a we have captured line the visible months growth To new the build we the end, line X and to opening ship during this X new on opened

to operating board on continue end we XXX vessels. XXXX expect ahead, fiscal Looking to

to as and our services Second, relates higher products. value it

As QX as you to introduced recall, which compared QX. saw growth in we revenue new services, strong in double-digit cryotherapy body

cryotherapy X.X LED that services very technology our new successful light complement facial revenue. LightStim acupuncture our a Additionally, and continues Elemis driven facial addition be and the facial and new to to therapy Biotec

We fleet will next the new services entire the quarters. continue to to ramp these over few

of health per operating enhancements, per we our key strong an increase metrics enhancing benefit driven productivity. focused on of wellness the was service staff grew menu passenger revenue simplification maritime growth revenue treatment lengths. day. expertise in This per and our of which by with of in total from and staff day, center Third, cruise both continued We in weekly and per the the treatments revenue success options training in spa the guest, utilizing technology and number guests our and growth

led Additionally, has board. which members we of attract continue staff to an retain to working on staff, and increasing experienced percentage

partners workplace staff compelling recommending the we staff. Prebooking of and growth led and sign experienced of additional Service affinity simplification for more our strong are beginning are at focused members revenue our members remains These to at We skilled contracts, as as continue also and our which we service services. of options, treatment remain their in the menu to even to on on initiatives new retain with higher see environment company. in just toward staff product provide and that service that our revenue more scale. a reflecting combined phase products price We XX%, best percentage

same The within double-digit up prebook more who services quarter continue our We not see we saw that do those continue than overall year-over-year. expand prebook. And revenue finally, passengers spend to med-spas. spa XX% to productivity

structure nurses and third to We capital and were service the our relates to end the services add number At end, have financial have quarter ships year. Fourth, to ships we and ships Medi-Spa to flexibility. further quarter offerings now of from increase on the to this Medi-Spa as offering. services XXXX. allocation, we We expect XXX of on enhanced it capital of doctors board available XXX the XXX continue at and up

During entered revolving X-year the X-year was term end. we interest credit our to at first refinanced facility at lien up a a which facility rate lower new into undrawn loan a $XX $XXX quarter million with quarter, million and

as Our ongoing cash paying to efficient flow this With mind, these asset-light activities. We quarter with model dividend down believe to million $XX.X our in continue million to in to positioned quarterly million while paying well return us dispersing of as and deliver after investing the the common quarterly us quarter growth will an robust in repurchase generation $XX each future remain capital of allows our invest to growth our debt in on million ended invest structure, to the cash quarter structure. and capital and business our support shares well $X.X in of We we evaluating support value optimize dividends. opportunities in and saw $XX.X of shareholders.

generate the to deliver after flow our guidance. path service and communities continued the team our about our and model impact with place, business growth, our platform, community clear who our strong asset-light to ongoing partners and First, to Social business strength continue to the we excited globe. With Stephen, I'll positions Stephen? shareholders. With responsible and our which of fiscal commitment record environment near-term stewardship key increasing our commitment you a guests, successful third of employees, over and earlier ongoing This we increased Sustainability strategies outstanding month, XXXX Report, initiatives leverage and this long-term pleased across issued expect care to of our turn year and and as of a inaugural details growth as highly Responsibility to our highlights exemplary more for cash financial represent will prospects. business our in ability that, we growth and performance. In another and to operating industry their on for are to results value quarter well summary, consistently integrated provide and leading tax to talented

Thank you, everybody. Good Leonard. morning,

with report delivery quarter. to are better-than-expected key financial across of We results pleased all the third metrics the strength in ongoing

quarter dividend. Sharing shares attributable income, million quarter to already today. unlevered We a health the with compared continued in to gains wellness sheet, XXXX quarter wellness ship third strong period revenue, the in record $XXX.X Service generating reduce flow. increased the our count and attributable compared and Service strong the prior third adjusted a across million to we repurchase was the compared $XXX the with XXX balance quarterly health the count cash our revenue increasing to primarily as And value third free EBITDA ships ending average operating we on of position quarter record debt, and continue were to drive to even productivity detail average cash quarter operations. Cost record we revenue together with revenues in Total of million our our of our ship million enhanced during cash associated onboard a centers shareholder million were earlier of centers net XXX $XXX.X with after-tax with third utilize primarily to quarter our the $XXX.X reported more compared of of that service million increase and increase of to pay costs was The XXXX. $XXX year. $XXX.X record and

million million income costs associated expected, of net of million million $X.X from the share quarter XXXX, value $XX.X expense to in year. of attributable $X.XX, $X.X quarter the net share in $XX decline as the of or third million income be other QX $XX.X compared compared a increase diluted $XX.X attributable cost in million million in to third to liabilities to of revenue Product increase in was $XX.X quarter The in income with net and quarter the reflected Product to per a $XX.X to XXXX in of diluted of of was with the million warrant income in primarily operations. fair prior of compared the As products, $X.XX income net XXXX. Net primarily of of increased revenue income third per change or in

of fair of of know, you liabilities of value financial result instruments. our during was in the changes market observable remeasurement in the warrant value deriving fair common the prices reflecting to of quarter the the value these change stock inputs exercised of third warrants other the XXXX, and As

income increase the across our reminder, health prior onboard The from of $XX compared share have year. quarter per was or diluted third of per million million quarter and million or adjusted to million EBITDA adjusted net change wellness compared of income adjusted during our from in the $X.XX of $X.X warrants number centers an gains the we XXXX adjusted income no third income net quarter as As share in $X.XX a EBITDA adjusted productivity income the $XX.X the in to million operating XXXX. And end. outstanding as $XX.X net and quarter operations. Adjusted primarily ships $XX of operations of diluted was net of of derived the in

$XX.X the ended after over our for balance $XX $XXX current sheet repaid $XX.X We our sheet. of and to repaying term total had million cash balance million. share $XX.X and total fiscal quarter with $XX X.XX XXXX, the quarter the remaining dividend million million million the to of shares also XXX,XXX our for lien a service loan, Since to of in million million repurchasing debt have Turning paying repurchased during $X.X stronger million shares including $XX we on returning therefore million end, common quarter. At reducing have repurchase a total we on authorization. indebtedness, in first

facility, third called lien free to after-tax term our million loan the million record was Also $XX.X refinanced the a $XXX to new $XX our so quarter, reducing flow with million quarter of compared we maturity addition, third plus in expense cash and in X-year X.X%. our interest first unlevered a ongoing In XXXX. lengthening

of ranges Moving our With increased we quarter our year, now positive strong We a XX% actual outlook from XXXX continued this now fiscal and fiscal revenue guidance. EBITDA the third guidance for to the to XX% time mid-point at year increase and guidance. adjusted XXXX have increase third results. performance onto expect the

$XXX million million of $XXX For $XXX now range revenues EBITDA of the guidance million to the fiscal and million XXXX, million in $XXX million is our total previous versus previous $XXX the of our $XXX $XXX year to in range $XXX versus guidance adjusted expected to we full million. expect of of million

to cruise ships expect fiscal on XX We and land-based XXXX resorts. at end operating XXX

the million. to $XX range million For adjusted the fourth to of $XX in $XXX quarter, $XXX million in range total we revenue EBITDA of million the and expect

So enter quarter positioned. the in we summary, fourth strongly

our platform, model. With our outlook operating as deliver to our you We are for execute robust to initiatives our on business could increased our please and in questions? supported value growth continue by that, shareholders the confident for Betty, strategy ability open and we proven call asset-light advantageous

comes Stifel. today Wieczynski question first from The Instructions] with [Operator Steven

to want were I about side, about what service I we of the better line points. And look points. kind those quarter if expanded top mean, margins, ask or much down Leonard was probably the margin that by we expecting. that, So the then Stephen, at expansion of than your XXX expense the in basis basis salary actually XXX about operating on on much, was

that basis XXX put move all you point together, So got kind in EBITDA plus massive of you've this margin.

if to just about benefits, in maybe forward? much? maybe So think there should of how question anything a And just one-time about we is margin were able how wondering or margins you to those push moving so expansion need was we think better terms

Steve. Yes,

prior a relates same the and of taxes higher Let performance-based as me quarter related question start the down really the is of expense prior second And just with incremental to salary it of year. year in part timing off of the versus compensation. to your function payroll being that

been the the year quarters year so reflected throughout quarter in this third so current third evenly it And the more than that now of quarter being of less spread prior and year. itself has

the which As lines relates we things, particularly demand X to robust. that we're So strong. that reported I have spend do, service heard as delighted for translates date, from to and promotional cruise to encouraged obviously into remains remains it Guest the us number onboard minimal about. right? That need would say X, activity you've already margin,

on extent you we out, to absolute to very, we so And focus continue we preach, very that as dollars. the to continue right, those also play just will continually good. I'd remind that feel

then order point in a in there we about time, we out. feel would seen at promotional is now, softening activity we dollars. right really But the any, things and stand have any are if we good drive not do So to playing how absolute where

that might Stephen, going I'm maybe question, your a reading kind if the side? the proposition. seeing now value you, seeing X on into right But just your on production that's I lot sure too difference is to second to is but of doing due you Obviously, be massive and not think production, we're of Leonard you're between look this generation -- at of the meeting this. those quite if any But spas land-based there's and weekly maritime or weekly them. industry a there then, we aren't revenue the And we the mean, much for -- relative big if well just of idea have cruise type I land-based so why or maritime wondering same

has hotels A that bigger actually, and some at undergoing the of Steve, number of are of the renovation projects, the impacted some the particularly locations. negatively in performance resorts, so land-based

or year year, We Yes. this Steve. X had like last versus X

and challenged occupancy been biggest because spas, had the where per as of impacted, occupancy. resorts. a not the has the the Caribbean, had mentioned getting not at last We've Asia also mean, just they have they people opened certainly of not that softness some revenue So on construction. have across because And week in Asia little Stephen some down many the overall average same room is I year. had as business as the is

come kind close that fair? renovations those as think start land-based grow about and business to as spa we a we side think of about of Is of again. 'XX, should starting the So kind that to to

and penetrating -- the think on capture I harder work we've fair to assume. I it's resorts. got to in rate

our We have marketing to all play. tools sure that of make are in

should doing better. different think And a be energy some I right a of to producing we're and little so more life those into And things put now number results. XXXX

Appreciate quarter. on congrats it and the solid

you. Thank

Cowen. from comes Rakhlenko with question next TD Max The

nice quarter. Congrats on really a

quarter just thinking how service a side acceptance about how to to and the may first, have Are you consumer room for XXXX? you both points? fourth seeing are further? that pricing on price higher you how you And bit little thinking are So much push about

about have the took some add Max, to obviously those demand comments also very treatments. we and So new services, taken lines -- have we Stephen this upon based took innovate robust. will except spoken lineup year, deploy the incremental pricing or demand some But higher. spend continuing to I in of last mean both be cruise the in we the onboard -- incrementally year, Med-Spa cases, an still We've or pricing think for I I little be made, as

to Look, To We we that transformation the services the we demand, will we of get more look we've in some and continue, some in can moving have. there's process services at board pricing will higher people to the never some also right taken. within some we ourselves. But the 'XX if services which think that services now, continue simplification pricing from and is points. et increases the to We of of think still shorter smaller cetera, price longer with don't believe the 'XX. across of be look and that done, firmly have extent want menu, I ahead see to opportunities

helpful. small outperformance to can Obviously, jumping on correct EBITDA of provided XXXX as there medium think where this off out? the XXXX we view potentially to point initial longer-term? levels margin versus the then expansion Or That's about you margins. with earlier just really should over on we just nice go company the touched Do just the versus how switch And over guide as year.

third very, relates then fixed with and revenue saw it margins. covering scale those very the your some like, nature we I through such improvements with significant Obviously, business, you cost outsized incremental of think that costs. phrased difficult a so over them to to as jumping is with flow to helps drive nicely you quarter it it in off high know, as of in time, appropriately a terms speak, more point, variable

know, as -- process at we to year, now we remain playing right? out. through optimistic more that is pause this outlook specifically with XXXX. at go way, we I you the gives talk But our our There now, formally today in about But yet. you of obviously, this right those as around for just numbers and XXXX. point we We as relates at early think expectations and next the I see budget to would We looking where So we're of XXXX. with how come then process up don't us put it would we're as nothing of

Zackfia next The Sharon from Blair. with question comes William

week, the have, election next given was the along as that could land-based go risk just lines? guys or I in products those maritime resort acquisition either relates over anything your tariff that's or you might coming to it up hoping any business you of

an election There's next So... week?

Sorry to remind you.

The Yes. the of physically it and onto majority then although international bonded into States, waters. into come ships United enters does technically straight not into a back and our product out the warehouse goes

And activities, we vast for not any anticipating any of from majority tariffs. our so are the impact

I revenue Sorry, know kind wanted with as bit of also and obviously of and talked I'm up the given of your can I quarter happening getting that that than specifically fourth algorithm single-digit about you is ask, prebooking above in think long-term in choked think a implied all pandemic I both something better space this Do post kind for the what's the long-term XX% And your business? cruise momentum that election. that sustain think, for is just entire range. you for you've doing to the algorithm, timeframe. I high growth kind I been revenue

what typically certainly year we'd We service feel of single-digit to. we've is be initiatives new the growth very think next don't with up in builds that revenue that talked all But we with XX metrics I and and to can just yet certainly high comfortable taking we've better achievable. we point comfortable time, above we be that. into the coming to in Obviously, I place continually previously change this as that do think algorithm than will at to communicated. the out the don't want that, do we go will strive delighted, extent long-term in

debt to this time like seems mean, on at the if balance you sheet? do debt I it free you want And, next Stephen, any you want be could year keep to.

Yes.

interesting. it's So

shield. it the quantum actually portion debt is debt, some we large only U.S. get also debt, divided. we So now of the a restructure but will the not And put interest in the in in the of did where where we

increasing all we talked the and, we to return Why? been repurchase, the rather on. we dividend. So focus you capital I keep Why do do over the will as we on I the benefit will or has we've if that the for all pay stock slight along, that due now very when again, want with X a that the that to else all and personally, less on somebody a on of and pay buyback maturity, with debt strategy ask strategy something just me And though continue tell is not something rate. The as allocation remain will year a incremental that response our of down debt, down the as some the And said past. be gives would doing a so, employ any you at shares, money better will and with of allocation interest entered nature, least with no. it? we can to think debt would very, opportunistic. debt next it is us the balanced about refinancing, high get interest It's Leonard, debt. pay focus of likely we there more is down focused but elsewhere, conservative is paying an we've And we in hedge and that be into to where focus that the shorter-term, which balance pay perhaps things,

anything that. or programmed. a So when amount per It's like with weakness, not there's go we'll ahead it. certain not It's quarter

next from Truist with Miller Gregory Securities. The comes question

related couple the private cruise a questions have line of islands. to I

port or you increasingly to as be itineraries, would relative of they're First become anticipate the generation off, Western revenue call? Caribbean worse Caribbean part of or Central islands do better a that these your American

are more developed, some The different see started islands, others. to lot when a to them first being of we

will. some massage sort offer some of don't, Some treatment,

estate the services. We real the on exploring develop cruise to opportunities lines continue to work island more the with on do to more

forward a think hopefully, the I some people we'll to of the that are that they're think the happening certainly be able I we as developments think good would I lines, onboard addition. with that. are with cruise move smart. that be new offering listening. of And, improve X But

they're they they one to with to number islands depending go day, who's blend. going hours of the know So a x will either them, of and

a in and as our it's of will addition but not So see be time and of accretive negative, think by we think itself, the goes to it net waterpark more I services I to being us. offered in stuff,

as a And what follow-up, add a operational? becomes private a your line services cruise just makes brief determined to island after

repeat Can What that? them you makes just what?

have if time? that private once an OSW in what operation, add So cruise you determination would make at to services line existing already make island later a a that's --

they ships usually things they to feedback which which from board Well, see census see the they'd lot they'd which it's see, on amenities didn't a island. to like see. that they like of do passengers, I on to like, the mean,

And cruise so I to feedback and move extent forward. think from as as the get can they collectively the they all they passengers the and there's well demand us take

comes Infinity Research. The Assia with Georgieva next question from

continued sailings much into record basically smooth XXXX. this half my on quarter first Gregory Congratulations the of asked and question. hopefully pretty

pricing the private services onboard offering you islands a a same you if private would sort you're would ship of your to economics the island? port at are what get Or sea of on during day? type So similar be with onboard the those competing

it's same similar, accordingly. be To complete it's the Assia. to going similar. obviously, we that, priced they're of speaking, service, length very than Generally But other the extent can't

Okay. And a second unrelated question. somewhat

You I understand them? new XX%. you opportunity that higher they think cruise have mentioned an see max would opportunity the for partners? and packages. they're the more the still different at it's we've certainly partners, And the is that I given point And at you the say the for from looking so say from heard where Do that that penetration at have onboard, grow? much you an are XX% this cruise to established still beverage far prebooked fact companies, rate. you is you what WiFi what prebooked with do mix looking Let's the see And rate

Yes.

my and mentioned call, not to improve and that's really continued banner I that. in folks We've of scale. with marketing at function have as think yet their allocating. we It's shoreside I particular revenue work one a to try larger

actually resources, folks own have it. in Some that marketing allocate some more it, some understand

a move we think the have because on for and they higher. to -- the the focus to XXXX more more and prebooking real a of how spend frequency strong tend big I have better in is services needle or it's opportunity because they

of then allocate We go demonstrate really show to it's So to And room we our quarterly more it's meetings. look, some improvement. the because, more metrics up them money for for where them. there's We them resources to to everybody.

at but just improvement So room do they overall. to strong I allocate, to have there for think comes It resources it. time to the the there's a understanding and they're down receptive is

I each they to the and you by each percentage directly. XX% that you the possible -- move whether do that they're management think Do again, and of XX months meaning or probably X that XX% on it's so? course think depend provide needle will team marketing team on from understand that and focused points, over And it more to services

Look, we'd certainly it love move XX%. see to above

we're efficiently internally the what function dependency the But XX%. management. Our not of definitely very back manage and -- the because of is doing we're prebooking really that yield not target -- on it's end capable we is above

is to above cruise more XX% give to there the attention we much it, to can particularly lines potential more spend the is certainly if of I our think for because higher, future. so the get go then think I

Capital. Laura comes with Loop Champine The from next question

has progress to this you if share passengers? lines offer so personalized Sorry can already cruise any to more on getting up, more come data but discounts that the

have, no. going I unlikely -- ways No. need, have but than it's data very protective think I mean, granularity They Laura, don't to they're more to. share we try They're we ever about on will. more and the the data. never honestly, they don't like they different to get they

Understood.

move higher? number that the you the guys? that needle to things can the are what what pre-bookings use tools drive you Like are even So for on

to land way with of that, it website adding improve videos, visual, offering, the when all to offered. to showing different looks the that, line, on navigation, the they we working that the So a extent just you know we're cruise from people that firstly, didn't which end all the the lot banners imagery, front of improve things the the the

that get is the view where and people they of to All things which in capability can services improve our book certainly way them.

the the we more of they I booking be out. inefficiencies what But how point side think if importantly, are certainly those navigation, prebooked. can market on there it's

they're marketing if and excursions, having of service. there marketing prebook, what shore not them are focus love don't days if they're as more get around just of if spa certain prebooking a the where they're see point would to you out, part going So that we you're meals, to

that really think in with out So more a drive folks marketing I their it's us. the way for a will collaborating result meaningful prebooking much better of

conference Fluxman closing over to like session. concludes for Leonard question-and-answer to the remarks. would This back our any turn I

report that joining at Right. year of many upcoming today. results forward us in Thanks today. joining we'll look and our the Thanks and for care. everybody investor We you conferences February. thank with when be we Take attending you for to fiscal speaking

Thank concluded. now today's is conference The attending presentation. for you

You may now disconnect.