OneSpaWorld Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

There are 9 speakers on the call.

Operator

Good day, and welcome to the 1 Spaw World Second Quarter Fiscal 20 24 Earnings Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms.

Operator

Allison Malkin of IPR. Please go ahead.

Speaker 1

Thank you. Good morning, and welcome to OneStyle World's Q2 2024 Earnings Conference 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.

Speaker 1

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 Q2 2024 earnings release, which was furnished to the SEC today on Form 8 ks. 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, Chief Executive Officer and President and Steven Lazarus, Chief Financial Officer and Chief Operating Officer.

Speaker 1

Leonard will begin with a review of our Q2 2024 performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and fiscal year 2024 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.

Speaker 2

Thank you, Alison. Good morning, and welcome to 1Star World's Q2 2024 Earnings Conference Call. It's a pleasure to speak to you all today to share another period of record performance. Our team delivered an outstanding second quarter capping off an excellent first half of the year. The consistent strong performance of our business evidences the power of our operating platform to provide unsurpassed guest experiences for our cruise line and destination resort partners.

Speaker 2

And driven by our our continued momentum and scaling impact of our growth drivers, we are once again increasing our annual guidance beyond the quarter's outperformance. With earnings today, we also announced that our Board of Directors adopted an annual cash dividend program, which recognizes our ability to leverage our industry leading operating platform, integrated growth initiatives and asset light business model to generate ongoing increasing off the tax free cash flow. Turning to the highlights of the quarter. Total revenues increased 12% to a record $224,900,000 compared to $200,500,000 in the Q2 of 2023. Income from operations increased 40% to a record $18,800,000 compared to $13,400,000 in the Q2 of 2023.

Speaker 2

Adjusted EBITDA increased 25% to $27,100,000 compared to $21,600,000 in the Q2 of 2023 and unlevered after tax free cash flow increased 18% to $23,800,000 compared to $20,100,000 in the Q2 of 2023. The unlevered after tax free cash flow conversion rate was 88% in the Q2 of 2024. The expansion in our ship count continued during the period. At quarter end, we had health and wellness centers on 197 ships with an average ship count of 188 ships for the quarter compared with 183 ships and an average ship count of 177 ships in the Q2 of 2023. At quarter end, we had 4,300 cruise ship personnel on vessels compared with 3,813 cruise ship personnel on vessels at the end of the Q2 of 2023.

Speaker 2

The quarter included continued progress towards our key strategic priorities. Let me share some highlights with you. 1st, we captured highly visible new ship growth with current cruise line partners and added new cruise line partnerships to our fold. To this end, in the Q2, we opened health and wellness centers on 2 new ship builds, 1 with Cunard and the other with Silver Sea Cruises. This follows the opening of our health and wellness centers on the Icon of the Seas and Sun Princess in the Q1, bringing our year to date new builds to 4.

Speaker 2

We continue to expect to end fiscal 2024 operating on board 198 vessels. 2nd, as it relates to our higher value services and products, as you recall, we introduced new cryotherapy body services and new cryotherapy and LED facial services to complement the new technology driven Elemis Biotech 2.0 facial and light skin therapy, which augments our acupuncture revenue. We will continue to ramp these new services to the entire fleet over the next few quarters. 3rd, we focused on enhancing health and wellness center productivity. We grew key maritime operating metrics with continued strong growth in revenue passenger per day, weekly revenue and revenue per staff per day.

Speaker 2

This is driven by growth in total cruise guests utilizing the spa and the number of treatments per guest, which benefits from the success of our technology enhancements, our expertise in staff training and the simplification of our service menu options and treatment blends. Additionally, we continue to attract and retain staff, which has led to an increasing percentage of experienced staff members working on board. We are pleased to see more of our staff members sign on for additional contracts, reflecting the compelling workplace environment we provide and their affinity towards our company. These more experienced staff members are also skilled at recommending product and service options, which combined with the simplification of our service menu and treatment length led to growth in higher priced products and services. Pre booking revenue as a percentage of services remained strong at 23 percent even as we phase in new partners that are just beginning to scale.

Speaker 2

We continue to see passengers that pre book services spend 30% more than those that do not prebook. And finally, we continue to expand productivity within our Medispas. The quarter saw same spa revenue overall up double digit year over year. We continue to increase 144 ships, up from 142 ships in the Q1 this year and up from 129 ships at the end of the Q2 of 2023. We remain on track to expand many spa offering to 148 ships this year.

Speaker 2

Off, we further enhanced our financial position and flexibility. Our balance sheet strength was bolstered by our repayments of our 1st lien term loan this quarter. And first, as mentioned, our Board of Directors approved and reinstated an annual cash dividend program with the initial quarterly dividend payment of $0.04 per common share payable to shareholders on September 4, 2024 of record as of the close of business on August 21, 2024, reflecting the strength of our asset light business model and consistent record of growth. In summary, we are pleased to report an excellent second quarter and first half of the year and remain excited about our business outlook. Our Q3 is off to a strong start and we remain confident in our ability to deliver robust operating and financial performance, both in the near and long term.

Speaker 2

Overall, we continue to expect fiscal 2024 to represent another year of record growth

Speaker 1

to represent

Speaker 3

another year of

Speaker 2

record growth and increased value for our shareholders. With that, I'll

Speaker 3

turn the call over to Stephen, who will provide more details

Speaker 2

on our second quarter results and guidance.

Speaker 3

Steven? Thank you, Leonard. Good morning, everyone. We are pleased to report ongoing strength with the delivery of better than expected results across all key financial metrics in the 2nd quarter. We continue to drive shareholder value with the quarter generating record revenue, record net income and record adjusted EBITDA.

Speaker 3

And we ended the period with a stronger balance sheet and delivered positive cash flow. I am also pleased that our Board demonstrated confidence in our business outlook and our ongoing ability to generate strong cash flow with the initiation of an annual cash dividend program. Scary more detail on the Q2 we reported earlier this morning. Total revenues were $224,900,000 compared to $200,500,000 in the Q2 of 2023. The increase primarily was attributable to our average ship count increasing to 188 health and wellness centers onboard ships operating during the quarter compared with our average ship count of 177 health and wellness centers onboard ships operating during the prior quarter, together with our continued productivity gains across our operations.

Speaker 3

Cost of services were $150,800,000 compared to $137,200,000 in the Q2 of 2023, with the increase again being primarily attributable to costs associated with increased service revenues of $180,800,000 in the quarter compared with service revenue of $163,200,000 in the Q2 last year. Cost of products were $37,100,000 compared to $32,200,000 in the Q2 of 2023. The increase primarily attributable to costs associated with increased product revenue of $44,000,000 in the quarter compared to product revenue of $37,300,000 in the Q2 of 2023. Net income was $15,800,000 or net income per diluted share of 0.15p as compared to a net loss of $3,200,000 or net loss per diluted share of 0.03p in the Q2 of 2023. The improvement was primarily attributable to a $12,200,000 decline in other expense from the change in the fair value of the warrant liabilities and more importantly a $5,400,000 increase in income from operations.

Speaker 3

As you know, the change in fair value of warrant liabilities was the result of the re measurement to fair value of the warrants exercised during the Q2 of 2024, reflecting changes in the market price of our common stock and other observable inputs deriving the value of these financial instruments. Importantly though, there are no outstanding warrants as of quarter end. The $5,400,000 positive change in income from operations, primarily derived from the increase in the number of health and wellness centers onboard vessels and our continued productivity gains. Adjusted net income was $21,700,000 or adjusted net income per diluted share of $0.20 as compared to adjusted net income of $15,000,000 or adjusted net income per diluted share of $0.15 in the Q2 of last year. Adjusted EBITDA was $27,100,000 compared to adjusted EBITDA of 21.6 dollars in the same period of 2023.

Speaker 3

Moving on to the balance sheet. We ended the quarter with a stronger including total cash of $63,700,000 after repaying $15,000,000 of our 1st lien term loan during the quarter. Since the Q2 of fiscal 2022, we have repaid over $109,000,000 of indebtedness and we have reduced our debt now to $123,800,000 as of June 30, 2024. In the Q2, unlevered after tax free cash flow was $23,800,000 compared to $20,100,000 in the Q2 of 2023. Moving then on to the guidance.

Speaker 3

With our strong 2nd quarter performance and a positive outlook, for the 2nd time this year, we had increased our fiscal 2024 guidance beyond the outperformance in the first half. We now expect revenues to increase 11% and adjusted EBITDA to increase 18% at the midpoint of the guidance ranges from our fiscal 2023 actual results. For full year 2024, we now expect total revenue in the range of $870,000,000 to $890,000,000 versus our previous guidance of $860,000,000 to 880,000,000 dollars and adjusted EBITDA is now expected in the range of $102,000,000 to $108,000,000 up from our previous guidance of $95,000,000 to $105,000,000 We expect to end fiscal 2024 on 198 crew ships and at 52 resorts. For the Q3, we expect total revenue in the range of 235 $1,000,000 to $240,000,000 and adjusted EBITDA in the range of $27,000,000 to $29,000,000 Our Q3 guidance assumes an ending ship count of 197 and resort count of 52. In summary, we entered the 3rd quarter strongly positioned.

Speaker 3

We are confident in our outlook and our ability to continue to deliver increased value for our shareholders as we execute our proven strategy supported by our advantageous operating platform, robust growth initiatives and asset light business model. And with that, we will open up the call for questions. Chuck, if you could please open the call. Thank you.

Operator

Thank you. We will now begin the question and answer session. And the first question will come from Gregory Miller with Truist Securities. Please go ahead.

Speaker 4

Thank you very much. Good morning, Leonard and Stephen. My first question relates to product spend. I'm curious how product spend is trending post treatment today. The 2nd quarter revenues looked quite strong.

Speaker 4

Are you seeing any changing trends and what types of products or price points are resonating more with your guests today? Great, Eric. Can you hear me?

Speaker 3

We can, Greg. I thought Leonard would take the question. Maybe he just dropped off momentarily. So No, Leonard. Sorry, Greg.

Speaker 2

I was in mute. Yes, thanks. Product demand and service demand continues to be very strong. We see many benefits associated with some of the new services we've rolled out, the menu simplifications. And so we see retail attachment being just where we need it.

Speaker 2

I think there's room to improve it as we continue to simplify menu choices, which actually promotes good retail attachment. So demand is there and we're very happy with the progress on retail attachment.

Speaker 4

Thanks. And then in terms of my follow-up, this relates to spa menu pricing and it's maybe a little bit more of a hypothetical question, but I'm going to try to ask anyways. To my understanding, you look at United States high end resorts for benchmarking in terms of spa menu pricing. I'm curious how much is the U. S.

Speaker 4

Resort spa menu pricing potential ceiling for you in terms of your own spa menus? For example, if you're in the position where your demand is stronger than a U. S. Resort today, which is quite possible given many affluent Americans are traveling abroad this summer, including, of course, going on cruises. Do you expect to get much pushback if you raised pricing above an equivalent stateside alternative?

Speaker 2

Yes. So look, we always look at land based high end resorts. I mean, listen, not every single banner you would say is in that particular category. So we I mean, remember, Greg, we go across many, many different categories of demographic and consumer. So we look at a lot of different land based data as we determine where pricing should be.

Speaker 2

And if you compare us to luxury or high end, as you say, we're definitely still quite value oriented. We think there may still be an opportunity down the road, not right now. But certainly for 2025, we will, as part and parcel of our budgeting process, look at the opportunity where we can take further pricing.

Speaker 4

Okay, understood. Thank you very

Speaker 3

much. Yes, you're welcome.

Operator

The next question will come from Max Reaglia Mile with Cowen and Company. Please go ahead.

Speaker 5

Hey, thanks a lot guys and congrats on a really strong quarter. So first, curious, if you can provide some additional color on the implied 4th quarter revenue and margin guidance. Seems like it could be pretty conservative on both top and bottom line just given the run rates you're seeing as well as the implied 3rd quarter. So just how are you framing and sort of what's the thinking that's going into the Q4?

Speaker 3

Yes, Max. Good morning. As you know, the Q4 seasonally is a softer quarter for us and historically that has been the case. The free position and obviously we come out of the much more productive summer vacation period for North American school holidays. So it's not atypical to see a softer Q4 than the Q3.

Speaker 3

Our implied margin for the Q4 at the midpoint is 11.9% on an EBITDA basis. So it's not far short of where we've delivered in the 1st and second quarter and just gives us the opportunity to the extent that we would need to do any type of promotional activity because of those repositionings, etcetera, to do so. So I think the short of it is, it's what we would expect seasonally and also from a demand perspective based upon where the ships begin to sail during the first half of that quarter as they reposition.

Speaker 5

Got it. Okay, that's helpful. And then congratulations on announcing the dividend. So curious, what's the strategy around the growth profile of the dividend? How are you thinking about that?

Speaker 5

And then balancing it with continuing to pay down debt, is the strategy to pay down debt completely over the medium term? Or would you be okay continuing to carry some level even longer? So just curious about the balance of dividend versus the debt pay down.

Speaker 3

Yes. I think the word that you use is most appropriate, the balance. As you obviously know, everybody knows, we do continue to have debt. We also do have a share repurchase program that is in place. And so we like the flexibility to be able to allocate between the share repurchases, the debt pay down and of course now there's also the dividend.

Speaker 3

Yes, we would be comfortable carrying some debt. I think we've already previously mentioned that the debt is at a very manageable level, net debt well below 1%. In terms of where we would want it to be, so I mean one turn rather. So yes, we're absolutely comfortable. And I think it will just come down to what makes the most sense, right?

Speaker 3

Opportunistically, the stock repurchases may come into play. Over time. There's certainly the opportunity to grow the dividend. And depending on what happens with interest rates, we'll drive how aggressive we are in paying down the debt.

Speaker 5

Got it. And just quick follow-up on that point. Your cash on the balance sheet continues to grow. So is that related to potentially just having some dry powder to buy back stock or what's the rationale for that?

Speaker 3

So it isn't a higher point than it traditionally has been. A driver of that is, as you know, our line of credit expired in March and we did not renew it. So it really is just to have some additional liquidity on the one hand. And yes, look to the extent that there's an opportunity on the stock repurchase side, it's always nice to have some cash to be able to pull the trigger on that.

Speaker 5

Got it. Thanks a lot. Best regards.

Operator

Okay. The next question will come from Sharon Zackfia with William Blair. Please go

Speaker 6

ahead. Hi, good morning. It was really impressive to see what it looks like spot productivity actually accelerate from where you have been, which is already at really good levels. And I know, Leonard, in your comments, you talked about treatments per guest improving and some tech enhancements that were helping drive that among other factors. Can you talk about what those tech enhancements are and kind of what you have coming down the pike?

Speaker 6

I think you have some investments in AI going on right now, but I'm not sure if they've manifested yet in any way in the back of house or front of house at the spas?

Speaker 2

Yes. Thanks, Sharon. These are good questions. We so let me just answer the simple one first. We have not rolled out any AI enhancements yet.

Speaker 2

They're still in development phase, I would say, sort of first innings. We're going through identification of opportunities, particularly on board and then certainly in supply chain and other areas in the back office of OneSmart World. But there's nothing in place right now nor anything that will in 2024 impact the ability to use AI to drive better productivity. So we're working on it. It's in its early stages of development and we certainly are very, very excited about some of the areas that we are going to tackle with respect to enhancing further productivity enhancements from start with the use of some of the AI technology.

Speaker 2

But once we have it fully developed, once we have it ready to roll out, we will certainly be happy to talk to everybody, the community, shareholders, etcetera, about what this AI will do for the operations. Obviously, it's going to take some testing, etcetera. So too early to comment, but certainly exciting to see what it may do for us once we roll it out. With respect to productivity gains, we saw definitely a pickup in the number of guests coming through our spas. I mean, it was close to about 500,000 more, but then the denominator of the new ships went up a lot more.

Speaker 2

So effectively, we're treating more people, the simplification of our menus, which is helping promote both service demand and retail attachment, all led to better productivity during the quarter. And certainly, that productivity continues as we started the Q3.

Speaker 6

Thanks for that. And then on product margin, it's kind of beating my model every quarter. And so Stephen, I don't can you talk about what the drivers are of product margin? And I know you don't own Elemis anymore, but where can product margin go? And are we seeing Medispa kind of help elevate this?

Speaker 6

I'm trying to figure out, we're in the mid teens now well above 2019. I mean, what's the line of sight on how high we can see product margin ultimately go?

Speaker 3

Sure. So Medispa, no, there's no real product attachment of note as it relates to Medispa services at this point in time. So that is not helping. As it relates to the cost of the product, and yes, we no longer own LMS, but as you know, we did enter into pre companies disaggregating a long term supply agreement. So the cost side of that is fixed in terms of go forward.

Speaker 3

And so where you see improvements there, it's around things that we're doing on board. And the biggest driver right now, frankly, is just the continued productivity improvements and the lack of discounting being required in order to promote those sales.

Speaker 7

Okay. Thank you.

Operator

The next question will come from Laura Champine with Loop Capital. Please go ahead.

Speaker 8

Hi. My question is also on that product side, which is beating our estimates. I'm wondering if you have looked at additional product lines you could add there. I know we've talked about ways to build an e commerce business so that your

Speaker 5

Is there M and A that could be done there that we would need to do

Speaker 8

to have sort of an e commerce side of the business or just share kind of your growth thoughts on products?

Speaker 2

Yes. Thanks, Laura. No, we don't have a need. I mean, Elemas really we're involved in the R and D side. We certainly sit on the calls.

Speaker 2

We give them a lot of ideas about what's working in our particular world versus their land based and retail outlets. So whatever we think may be needed, I mean, we're still a pretty large customer of theirs. They listen and they provide us with the necessary development of product. In some cases, certainly in the luxury area, we do offer a smaller complementary range. I mean, we have some product on there.

Speaker 2

We've even added product that we don't own into those lineups when needed. But I have to tell you, Elemis' lineup across space and body is more than enough for us to continue to grow. And all of our services and protocols that we use, all our the architecture around those services are supported on the back bar and the retail side by the development of the elements product range. And so we are very excited about new things coming from Elemis next year. So there is really no need to look at this.

Speaker 2

And we get approached all the time to put product on board because we have such an incredible showcase and showroom and trial and test for our guest and consumer. But at the same time, we have a very good deal, long term deal, as Steven mentioned, with Elemis and we'll continue to keep that as our dominant range. With respect to the e commerce side, we do sell Elemis on e commerce, but then elements sells a lot of e commerce on its own website. So we don't we compete against them, but not in the same way because it's mostly our guests that are buying product to get brought on board. We continue to look at what we can do to expand the e commerce side.

Speaker 2

It's certainly doing better than it did in 2019. And to the extent that something looks like it might be worth adding to e commerce and the post guest experience and sale, we'll do that, but there's nothing right now.

Speaker 7

Understood. Thank you.

Speaker 3

You're welcome.

Operator

The next question will come from Assia Georgieva with Infinity Research. Please go ahead.

Speaker 7

Good morning, guys. I don't know where to start with my congratulatory remarks. Great Q2, great increase to the outlook. And the fact that you're raising the dividend is fantastic. And then, Stephen, you said that we don't have to deal with the warrants again.

Speaker 7

March 19 is the date that I remember quite clearly. Can I ask a question on occupancy because I think it's an opportunity and it can cut both ways? One of the major brands that you serve on has pretty much gotten to historical levels of occupancy. Another one who may have reported earlier today is still lagging behind the historical levels. So it seems that with greater occupancy opportunity, you might be able to continue to grow beyond what the ship count is.

Speaker 7

Is that a fair assessment?

Speaker 3

So, I would point out that, as you know, we only service a small proportion of guests onboard anyway. And generally speaking, occupancies have pretty much gone back to historical levels. Some of them maybe even are surpassing that. But when that happens, as you know, when they're getting above the 100%, it's typically because they're filling those cabins with kids. And so that's really not our target audience per se.

Speaker 3

So I'm not I don't really think from a cruise line occupancy perspective, there's still lots of opportunity for us. Obviously, we love the fact that they always fill their ships and they historically have done that and are now continuing to do that again. But when you start getting to 113 plus, 100 plus percent occupancy, the marginal increment for us is not that significant.

Speaker 7

Fair enough, Stephen. Thank you. And because you guys mentioned Silversea and I can and if I can add Utopia, 3 different types of demographics that would go on those ships even between Iken and Utopia. How do you view the product that Royal is presenting? Basically a shorter party type voyage on Utopia versus ICON overseas, a family type voyage versus Silversea, whether it's Ray or Nova, a much higher end customer without any family without any kids, I mean, longer voyages.

Speaker 7

How do you view these 3 different types of demographic target markets?

Speaker 2

Asiya, thanks. I think it's a very smart way that Royal Caribbean has approached the market. They're offering a family choice and the icon is an incredible layout for families and kids. And then I think by introducing Utopia, shorter cruises, more younger demographic, maybe a little bit more partying going on, I think it's also quite smart as well. And I think we've seen this kind of demographic across different banners and it's never been an issue for us.

Speaker 2

And look, our training and the way that we go to work on different types of length of itineraries, different types of demographics, caters to this. So I think it's very exciting that they are offering 2 identical ships catering to 2 different demographics and I think they'll do equally as well. Still the seas in the luxury markets, beautiful ships, longer itineraries, no kids as you say, we continue to excel on there as well and recent results on there have been outstanding.

Speaker 7

And so between Utopia, the party market, the younger demographic and ICON, the more family oriented, do you think that you may have a greater penetration rate at Utopia?

Speaker 2

It's too early to tell. I think a 3, 4 day mix makes people make quicker choices because they got a shorter period of time on the 3 day and 4 day, they got one extra day because they're deciding when they're going to participate in some of the amenities, including SPA. But listen, I think the shift is outstanding. I think the itinerary that it's chosen from 3, 4 day, I think will complement competitiveness against their other vessels. So no, I don't see any challenges, certainly nothing that we can't adapt to.

Speaker 2

And this is not the first time we're handling 3 and 4 day party cruises. We've done this for decades.

Speaker 7

I was actually going the other way. I was thinking this was more of an opportunity than a challenge. You're a couple who don't have kids can spend time at the spa, you know, as opposed to, you know, the playing with with their kids. And I sound like so, yeah, my kid. I'm sorry, I'm not.

Speaker 2

No, no, no.

Speaker 7

The Etopia type product is actually better for you.

Speaker 2

It could well be, but remember, whether you're on the family ship or the party ship with no kids or if you're on the family ship, the icon with kids, The way in which the itinerary is laid out on the icon, the ability to put different kids at different ages in different types of programs doesn't impede the married couple from participating and enjoying many things that adults like to do on board. So now I look, is there an opportunity to better do better with the younger crowd? Possibly. But then again, we'll have to see, as a consumer group, how they behave. So yes, it could be an opportunity, but I certainly don't think the icon is disadvantaged by it.

Speaker 7

All right. Fair enough. And if I may ask one last question. We know that pre bookings tend to be a multiplier terms of what gets spent onboard. And you mentioned in your prepared remarks that having brands that are onboarding with you, they may not be quite as attuned to or not have the pre booking engine that would actually feed booking stock.

Speaker 7

So what is the opportunity in 2025 do you think in terms of pre booking penetration versus what we have had this year?

Speaker 2

So look, as I mentioned, we were still onboarding different banners and continue to onboard them to get to scale. We think pre booking will continue to move upwards. There are some good banners still to get on to the pre booking platform at scale. We think there is a lot of work to be done with our cruise line partners with respect to enhancing the pre booking experience and journey. We continue to provide content.

Speaker 2

We continue to provide different types of views of what is available on board and we will continue to augment that so that they adapt to it and continue to improve the pre booking journey. I think if they utilize everything that we're giving them, we will certainly see pre bookings start to move northwards.

Speaker 7

And currently, we're at about a 30% rate, correct?

Speaker 3

Sorry, you broke up there.

Speaker 2

What was the question?

Speaker 7

Re bookings. We're currently about 30% penetration in terms of pre bookings.

Speaker 3

It's 23%.

Speaker 2

Pre bookings are at 23% right now as we reported.

Speaker 7

Okay. I'm sorry.

Speaker 2

The 30 percent you mentioned is a pre booked guest on average spends 30% or slightly more than that, than guests that do not pre book.

Speaker 7

Okay, perfect. Thank you so much guys. And again, great quarter and thank you for the great news this morning.

Speaker 3

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back to Mr. Leonard Fluxmann, Executive Chairman, for any closing remarks. Please go ahead, sir.

Speaker 2

All right. Thanks, Chuck. Once again, thank you all for joining us today. We're very excited about the results for the first half of twenty twenty four. And we look forward to speaking with you when we report Q3 results and seeing many of you during our upcoming investor meetings.

Speaker 2

Thank you very much.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • OneSpaWorld delivered a record Q2 with revenues of $224.9 million (+12% YoY), income from operations of $18.8 million (+40%), and adjusted EBITDA of $27.1 million (+25%), while unlevered after-tax free cash flow rose 18% to $23.8 million.
  • The company expanded its onboard footprint to 197 ships (up from 183 a year ago) and increased cruise ship personnel to 4,300, adding two new ship builds with Cunard and Silversea and targeting 198 vessels by fiscal 2024 end.
  • Key growth initiatives include rolling out new high-value services like cryotherapy and LED facials, simplifying spa menus to boost productivity, and ramping up pre-booking (now 23% of services), which drives 30% higher spend per guest.
  • Building on its asset-light model and robust cash flow, OneSpaWorld’s Board adopted an annual cash dividend program, initiating a quarterly payout of $0.04 per share payable September 4, 2024.
  • With Q2 outperformance, full-year 2024 guidance was raised to $870–890 million in revenues (+11%) and $102–108 million in adjusted EBITDA (+18%), while Q3 is guided to $235–240 million in revenues and $27–29 million in adjusted EBITDA.
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Earnings Conference Call
OneSpaWorld Q2 2024
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