Executive Summary / Key Takeaways

• Market Leadership and Consistent Growth: OneSpaWorld Holdings Limited (OSW) maintains a pre-eminent position in the global cruise and resort wellness market, demonstrating 18 consecutive quarters of year-over-year growth in total revenues and adjusted EBITDA, culminating in record third-quarter 2025 results.
• Strategic Expansion and High-Value Services: The company is actively expanding its footprint with new ship builds and long-term partner agreements, while driving productivity through the rollout of high-value Medi-Spa, IV Therapy, and Acupuncture services, which show strong double-digit growth.
• Technological Edge and Operational Efficiency: OSW is leveraging emerging AI technologies to enhance revenue optimization, actively testing a machine learning-powered project on 40 vessels, and streamlining operations with an automated problem resolution tool deployed across 180 vessels. Measurable improvements from these AI initiatives are anticipated from the second quarter of 2026.
• Robust Financial Health and Shareholder Returns: An asset-light business model generates strong free cash flow, enabling significant debt reduction, opportunistic share repurchases, and a recently increased quarterly dividend, reflecting confidence in long-term prospects.
• Favorable Outlook Amidst Competitive Landscape: Despite a competitive environment with larger diversified players, OSW's specialized offerings, strong partnerships, and focus on guest experience position it for continued high single-digit revenue and adjusted EBITDA growth in fiscal 2025.

The Global Wellness Powerhouse: Setting the Scene

OneSpaWorld Holdings Limited stands as the pre-eminent global operator of health and wellness centers onboard cruise ships and a leading operator in destination resorts worldwide. With a history spanning over 50 years, the company has cultivated a dominant market position, boasting a scale "more than 18x the size of our closest maritime competitor." This leadership is built upon deep staff expertise, a broad and innovative service and product portfolio, an expansive global staff recruitment, training, and logistics platform, and decades-long relationships with its cruise line and destination resort partners.

OSW's asset-light business model is a cornerstone of its strategy, enabling consistent revenue streams and market dominance by integrating spa services with cruise lines and resorts. This model, coupled with its robust infrastructure and processes, creates a significant competitive advantage that is not economically feasible for rivals to replicate. While larger, diversified players like Royal Caribbean Cruises Ltd. , Carnival Corporation & plc , and Marriott International, Inc. offer broader travel and hospitality services, OSW differentiates itself through specialized, high-end wellness experiences and exclusive brand partnerships with names like ELEMIS and Kérastase. This focused approach allows OSW to cultivate deeper customer loyalty within its niche, potentially leading to superior margins through premium pricing.

Technological Differentiation: The AI-Powered Future of Wellness

OneSpaWorld's foundational strength lies in its proprietary global operating platform and sophisticated revenue management capabilities, honed over decades. This platform is now being significantly enhanced through strategic investments in cutting-edge technology, particularly artificial intelligence (AI), to further strengthen its competitive positioning.

The company's AI strategy is multifaceted, targeting both revenue enhancement and operational efficiency. For revenue enhancement, OSW has implemented a machine learning-powered project designed to optimize yield and revenue, which is "actively being tested on 40 vessels." This initiative leverages advanced recommendations and algorithmic optimization to unlock additional revenue by optimizing facility utilization and personalizing guest experiences. On the operational front, OSW is seeing early success with an automated problem resolution and inquiry tool "deployed across 180 vessels," which has led to "dramatic improvements in response times and reduce the need for help desk hours." Furthermore, the company is advancing initiatives in automation and streamlining, utilizing generative AI for tasks like email management, calendar scheduling, and presentation creation, aiming to "reduce manual labor by up to 30% in pilot departments" and enhance productivity and operational scalability.

For investors, these technological advancements are critical. They contribute to OSW's competitive moat by making its operations more efficient and its service offerings more personalized and profitable. While these AI initiatives are still in their early stages, management anticipates "measurable AI-driven EBITDA contributions will begin in Q2 2026," signaling a future pathway to enhanced financial performance and sustained market leadership.

Strategic Pillars: Expansion, High-Value Services, and Productivity

OSW's growth narrative is underpinned by a clear strategy centered on fleet expansion, the proliferation of high-value services, and continuous productivity enhancements. The company continues to capture highly visible new ship growth, with plans to introduce health and wellness centers on eight new ship builds in 2025. Notably, four of these new centers were introduced in Q3 2025 on vessels such as Royal Caribbean's Star of the Seas, Virgin's Brilliant Lady, Princess Cruises' Star Princess, and Celebrity Xcel, with two additional new ships commencing voyages in the fourth quarter.

A key driver of increased sales productivity is the expansion of higher-value services, including Medi-Spa, IV Therapy, and Acupuncture, which have demonstrated "strong double-digit increases in the quarter." The company is elevating its Medi-Spa offerings with next-generation technologies like Thermage FLX and CoolSculpting Elite, which offer "improved results and reduced treatment time by up to 50%." These new technologies generated "between 40% and 60% growth for these treatments in Q3 versus last year." Medi-Spa services were available on 150 ships at the end of Q3 2025, up from 144 ships in Q3 2024, with expectations to reach 151 ships by year-end.

Enhancing health and wellness center productivity is another core focus, largely driven by improved staff retention. The third quarter saw a "5-point increase in staff retention versus Q3 2024," with experienced team members generating "significantly higher revenue per day versus first contract staff." Investments in best-in-class training and redesigned talent management processes further support this productivity. Additionally, pre-booking revenue, excluding Medi-Spa, accounts for approximately 22% of service revenue, with passengers who pre-book generally spending "about 30% more than somebody who doesn't prebook."

Financial Performance: A Trajectory of Strength

OneSpaWorld's strategic execution translates into robust financial performance, marked by consistent growth and strong cash flow generation. The company delivered record third-quarter 2025 results, marking its 18th consecutive quarterly period of year-over-year growth in total revenues and adjusted EBITDA.

For the third quarter ended September 30, 2025, total revenues increased 7% to $258.5 million compared to $241.7 million in the prior year. This growth was primarily driven by a 4% increase in average guest spend, fleet expansion from 2025 new vessel builds, and a 1% increase in revenue days, contributing $7.8 million, $6.8 million, and $3.2 million, respectively. Increased pre-booked revenues further contributed $2.7 million to this volume and spend. Net income for Q3 2025 rose 13% to $24.3 million, compared to $21.6 million in Q3 2024, primarily due to a $1.3 million improvement in income from operations and a $1.1 million reduction in net interest expense. Adjusted EBITDA increased 6% to $35 million from $33 million in the third quarter of 2024.

For the nine months ended September 30, 2025, total revenues increased 6% to $718.9 million, compared to $677.8 million in the prior year. Net income for this period increased 2% to $59.6 million, compared to $58.5 million in the prior year. The service margin in Q3 2025 stood at a healthy 17.3%, an increase from both Q1 and Q2 2025, though marginally below Q3 2024 due to a shift in the mix of cruise lines generating revenue.

OneSpaWorld maintains a robust financial position, characterized by strong liquidity and a disciplined capital allocation strategy. As of September 30, 2025, the company held $30.8 million in cash and cash equivalents, with full availability of its $50 million revolving loan facility, providing total liquidity of $80.8 million. Total debt, net of deferred financing costs, was $85.2 million, down from $98.6 million at December 31, 2024. The company repaid $11.3 million on its term loan facility in Q3 2025, including a voluntary repayment of $10 million, which satisfied scheduled amortization payments through part of 2027.

This strong cash flow generation, fueled by its asset-light business model, supports significant shareholder returns.

The Board recently approved a 25% increase in the quarterly dividend payment to $0.05 per share. Additionally, OSW repurchased 816,028 common shares for $17.6 million in Q3 2025, and an additional 721,663 shares for $15 million subsequent to quarter-end, leaving $42.4 million remaining on its $75 million share repurchase program. Capital expenditures, which totaled $10 million for the nine months ended September 30, 2025, are currently elevated due to investments in AI initiatives and the rollout of additional Medi-Spa equipment.

Competitive Positioning: Dominance in a Niche

OneSpaWorld's competitive standing is defined by its specialized focus and deep integration within the cruise and resort wellness sectors. The company is not merely a participant but the "market leader" in its maritime segment, significantly outpacing its closest competitor. This dominance stems from its extensive global infrastructure, proprietary recruitment and training platforms, and long-standing relationships with major cruise lines, which collectively create formidable barriers to entry.

Compared to larger, diversified players like Royal Caribbean Cruises Ltd. (RCL) and Carnival Corporation & plc (CCL), OSW differentiates itself by offering a more specialized and high-end suite of wellness services. While RCL and CCL integrate spas as part of a broader entertainment offering, OSW's focus on exclusive brand partnerships and advanced treatments like Medi-Spa positions it as a premium wellness provider. This specialization fosters greater customer loyalty and allows for premium pricing, contributing to OSW's robust profitability metrics. For instance, OSW's net profit margin of 7.90% (TTM) compares favorably to some broader entertainment industry competitors. Against hospitality giants like Marriott International, Inc. (MAR), OSW's resort-based services compete directly, but OSW's emphasis on integrated wellness experiences with exclusive brands provides a distinct edge in innovation and specialized offerings.

Despite its strong niche position, OSW faces vulnerabilities inherent in its dependence on the cruise and travel industries, which can lead to revenue volatility during economic downturns or global health concerns. However, its asset-light business model and efficient operations help mitigate these risks by generating consistent free cash flow. The company's strategic response involves continuous innovation in services and technology, further solidifying its partnerships, and maintaining a disciplined capital allocation approach to enhance resilience.

Outlook and Risks: Sustained Momentum with Vigilance

OneSpaWorld's outlook for fiscal 2025 remains positive, reflecting strong year-to-date performance and continued favorable momentum. The company has increased its fiscal 2025 guidance, now expecting total revenue in the range of $960 million to $965 million, representing an 8% increase at the midpoint versus fiscal year 2024. Adjusted EBITDA is projected to be in the range of $122 million to $124 million, a 10% increase at the midpoint versus fiscal 2024. For the fourth quarter of 2025, the company anticipates total revenue between $241 million and $246 million, with adjusted EBITDA in the range of $30 million to $32 million.

This optimistic guidance is predicated on the assumption of continued strong consumer demand and no significant deterioration in guest spending or cruising activity. Management actively monitors consumer sentiment, noting no material reduction in spend or attachment rates, even for high-end Medi-Spa services. While the lower end of the guidance range accounts for a moderation in spending, a significant slowdown is not currently anticipated. The measurable impacts from the company's AI initiatives are expected to begin contributing to performance from the second quarter of 2026, indicating that current guidance does not heavily rely on immediate AI-driven margin expansion.

Key risks include the inherent dependence on the cruise and travel industries, which are susceptible to broader economic conditions such as inflation, interest rate fluctuations, and fuel price increases. Legal proceedings, such as a $1.9 million VAT assessment from a foreign tax authority, also represent a potential, though currently accrued for, risk. However, management does not expect to be materially impacted by global minimum income taxes due to ongoing reorganizational changes. The company's robust balance sheet and consistent cash flow generation provide a buffer against these potential headwinds.

Conclusion

OneSpaWorld Holdings Limited continues to demonstrate remarkable resilience and strategic acumen within the global health and wellness sector. Its 18 consecutive quarters of year-over-year growth in key financial metrics underscore the strength of its specialized business model, deep industry partnerships, and unwavering commitment to guest experience. The company's proactive investments in high-value services and cutting-edge AI technologies are not merely incremental improvements but foundational shifts designed to extend its competitive advantage and drive future profitability.

With a clear roadmap for expansion, a disciplined approach to capital allocation, and a robust financial position, OneSpaWorld is well-positioned to capitalize on the enduring consumer demand for wellness experiences. The increased fiscal 2025 guidance, coupled with an enhanced dividend and ongoing share repurchases, reflects management's confidence in the company's ability to deliver sustained value. While the broader economic landscape and industry-specific risks warrant ongoing vigilance, OSW's technological leadership and market dominance provide a compelling investment thesis for long-term growth.