OneSpaWorld Holdings Limited (OSW) is the preeminent global operator of health and wellness centers onboard cruise ships and a leading operator of health and wellness centers at destination resorts worldwide. The company has built an unmatched global infrastructure to manage the complexity of its operations, serving a critical role for its cruise line and destination resort partners.

Business Overview

OneSpaWorld's business model is centered around providing a comprehensive suite of premium health, fitness, beauty and wellness services and products to guests onboard cruise ships and at destination resorts globally. The company's highly trained and experienced staff offer these services, which include traditional and alternative massage, body and skin treatments, fitness, acupuncture, and Medispa treatments. OneSpaWorld also sells premium quality health and wellness, fitness and beauty products at its facilities and through its timetospa.com website.

Financials

The company's financial performance has been impressive, with annual revenue reaching $794.0 million in 2023 and annual net income of -$2.9 million. OneSpaWorld generated annual operating cash flow of $63.4 million and annual free cash flow of $58.0 million. In the latest quarter (Q2 2024), the company reported revenue of $224.9 million, up 12% year-over-year, and net income of $15.8 million, a significant improvement from the net loss of $3.2 million in the prior year period.

Growth Drivers

OneSpaWorld's growth has been driven by several key factors, including the expansion of its health and wellness center footprint, the introduction of higher-value services and products, and enhancements to the productivity of its existing centers. At the end of Q2 2024, the company had health and wellness centers on 197 ships, up from 183 ships a year earlier, with an average ship count of 188 during the quarter compared to 177 in the prior year period.

The company has continued to innovate and expand its service offerings, introducing new cryotherapy body services, cryotherapy and LED facial services, and augmenting its acupuncture revenue with the new Elemis Biotec 2.0 facial and LightStim therapy. These higher-value services have driven growth in both service and product revenues. In Q2 2024, service revenues increased 11% to $180.8 million, while product revenues grew 18% to $44.0 million.

Productivity Enhancements

Productivity enhancements have also been a key driver of OneSpaWorld's performance. The company has seen growth in revenue per passenger per day, weekly revenue, and revenue per staff per day, driven by increased guest utilization of the spas, the success of its technology enhancements, and the simplification of its service menu options and treatment blends. Pre-booking revenue as a percentage of services remains strong at 23%, and guests that pre-book services spend 30% more than those that do not.

OneSpaWorld has also made progress in expanding its Medispa offerings, with services now available on 144 ships, up from 129 ships a year earlier. The company remains on track to expand its Medispa offering to 148 ships by the end of 2024.

Geographic Distribution

Geographically, the majority of OneSpaWorld's revenues are generated from its maritime operations, which accounted for 94% of total revenues in Q2 2024. The company's destination resort business contributed the remaining 6% of revenues. Revenues from the U.S. market represented 4% of total revenues, while other countries accounted for 6%, and the remaining 90% was not connected to a specific country.

Outlook

Looking ahead, OneSpaWorld has provided guidance for fiscal year 2024, expecting total revenue to increase 11% to a range of $870 million to $890 million, and adjusted EBITDA to increase 18% to a range of $102 million to $108 million. The company also recently announced the initiation of an annual cash dividend program, reflecting the strength of its asset-light business model and consistent record of growth.

Liquidity

OneSpaWorld's financial position has also been strengthened, with the company repaying $35 million of its first lien term loan during Q2 2024. As of June 30, 2024, OneSpaWorld had total cash of $63.7 million and long-term debt of $123.8 million.

Risks and Challenges

The company faces several risks, including the potential impact of weather events, such as hurricanes, on its cruise ship and destination resort operations, as well as competition for its services and products. However, OneSpaWorld's leading market position, innovative service offerings, and focus on productivity enhancements position the company well to continue delivering strong financial and operational performance.

Conclusion

Overall, OneSpaWorld's Q2 2024 results and updated guidance demonstrate the strength and resilience of its business model. The company's focus on expanding its footprint, enhancing its service and product mix, and driving productivity improvements have translated into impressive financial results. With a strengthened balance sheet and the initiation of a dividend program, OneSpaWorld appears well-positioned to continue creating value for its shareholders.