OneSpaWorld Holdings Limited (NASDAQ: OSW) ("OneSpaWorld," or the "Company"), the pre-eminent global provider of health and wellness services and products on-board cruise ships and in destination resorts around the world, today announced its financial results for its second quarter ended June 30, 2019.
Second Quarter 2019 Highlights:
Year-to-Date Second Quarter 2019 Highlights:
And Following Quarter End:
The Company's results are reported in this press release on a GAAP basis and as adjusted non-GAAP basis. A reconciliation of GAAP to Non-GAAP financial information is provided at the end of this press release. This release also refers to Adjusted EBITDA and Adjusted Net Income (non-GAAP financial measures), terms for which the definition and reconciliation are presented below.
Leonard Fluxman, Executive Chairman of OneSpaWorld, commented, "We are pleased to continue the positive momentum in our business in the second quarter ? highlighted by solid growth in sales, cash flow and adjusted earnings per share. Combined this led to a 92% conversion of adjusted EBITDA to unlevered after-tax free cash flow. We attribute our consistent positive performance to the strength of our competitive position, the success of our growth initiatives and the disciplined execution of our day-to-day operations. Among our accomplishments this year, both Norwegian Cruise Lines and P&O Cruises extended their agreements with us in addition to being named the exclusive health and wellness partner to Virgin Voyages' first-ever cruise offering. We look forward to continuing our outstanding service to our cruise line and resort partners and their guests. We believe our pre-eminent market position in a growing industry positions us well for continued success."
Second Quarter Ended June 30, 2019 Compared to June 30, 2018
Total revenues increased 4%, or $5.0 million, to $140.4 million compared with $135.4 million during the second quarter of fiscal 2018. The increase was driven primarily by (i) six incremental net new shipboard health and wellness centers added to the fleet of cruise line partners; (ii) a continued trend towards larger and enhanced shipboard health and wellness centers; and (iii) continued collaboration with cruise line partners. The split of revenue growth between service and product revenues was as follows:
Cost of services increased $2.6 million, or 3%, compared to the second quarter of fiscal 2018. The increase was primarily attributable to an increase in service revenues.
Cost of products increased $1.1 million, or 4%, compared to the second quarter of fiscal 2018. The increase was primarily attributable to an increase in product revenues and the non-cash impact of purchase price accounting adjustments related to inventory step-up in connection with the Business Combination.
Administrative expenses increased $1.5 million to $4.3 million, compared to $2.8 million in the second quarter of fiscal 2018, driven primarily by expenses incurred in support of our operations as a publicly-traded company.
Salary and payroll taxes increased $0.6 million to $4.3 million, compared to $3.7 million in the second quarter of fiscal 2018, as a result of increased headcount necessitated by being a publicly-traded company.
Amortization of intangible assets increased $3.6 million to $4.5 million, compared to $0.9 million in the second quarter of fiscal 2018, primarily due to the impact of purchase price accounting adjustments in connection with the Business Combination.
Other income (expense), net decreased $4.3 million to an expense of $4.3 million, compared to an expense of $8.6 million in the second quarter of fiscal 2018, primarily due to lower interest expense related to the new debt financing in connection with the Business Combination compared to the pre-existing debt in the second quarter of fiscal 2018.
(Benefit) Provision for income taxes decreased $0.9 million to a benefit of $0.7 million, compared to a provision of $0.1 million in the second quarter of fiscal 2018. The tax benefit in the second quarter of 2019 was attributable to applying a negative tax rate to a lower year-to-date book pre-tax loss.
Net income attributable to OneSpaWorld was $3.6 million in the second quarter of fiscal 2019 compared to net income of $2.7 million in the second quarter of fiscal 2018.
Balance Sheet and Cash Flow Highlights
Q3 2019 and Fiscal Year 2019 Guidance
For the full year, the Company is reaffirming revenue, raising slightly adjusted EBITDA and adjusted net income, updating diluted share count and reducing the outlook for capital expenditures. The Company is also introducing third quarter guidance.
For Q3 2019, OneSpaWorld expects the following:
For Fiscal Year 2019, OneSpaWorld expects the following:
Conference Call Details
A conference call to discuss the second quarter fiscal 2019 financial results is scheduled for Wednesday, August 7, 2019, at 10:00 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 855-327-6837 (international callers please dial 631-891-4304) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at https://onespaworld.com/investor-relations and by dialing 844-512-2921 and entering the access code 10007143. The conference call replay will be available from 1:00 p.m. Eastern Time on Wednesday, August 7, 2019 until 12:00 p.m. Eastern Time on Wednesday August 14, 2019. The Webcast replay will remain available for 90 days.
About OneSpaWorld
Headquartered in Nassau, Bahamas, OneSpaWorld is one of the largest health and wellness services companies in the world. OneSpaWorld's distinguished spas offer guests a comprehensive suite of premium health, fitness, beauty and wellness services, treatments, and products currently onboard 164 cruise ships and at 69 destination resorts around the world. OneSpaWorld holds the leading market position within the fast-growing international leisure market and has been built upon its exceptional service standards, expansive global recruitment, training and logistics platforms, and a history of service and product innovation that has enhanced its guests' health, fitness, beauty, and wellness while vacationing for over 50 years.
On March 19, 2019, OneSpaWorld completed a series of mergers pursuant to which OSW Predecessor ("OSW"), comprised of direct and indirect subsidiaries of Steiner Leisure Ltd. ("Steiner"), and Haymaker Acquisition Corp. ("Haymaker"), a special purpose acquisition company, each became indirect wholly owned subsidiaries of OneSpaWorld (the "Business Combination"). Haymaker is the acquirer and OSW the predecessor, whose historical results have become the historical results of OneSpaWorld. The operating results presented for the current quarter and year-to-date period reflect the operating results of all the businesses acquired in the Business Combination.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The expectations, estimates, and projections of the Company may differ from its actual results and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "continue," or the negative or other variations thereof and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, expectations with respect to future performance of the Company, including projected financial information (which is not audited or reviewed by the Company's auditors), and the future plans, operations and opportunities for the Company and other statements that are not historical facts. These statements are based on the current expectations of the Company's management and are not predictions of actual performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Factors that may cause such differences include, but are not limited to: the demand for the Company's services together with the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors or changes in the business environment in which the Company operates; changes in consumer preferences or the market for the Company's services; changes in applicable laws or regulations; the availability or competition for opportunities for expansion of the Company's business; difficulties of managing growth profitably; the loss of one or more members of the Company's management team; loss of a major customer; and other risks and uncertainties included from time to time in the Company's reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission. The Company cautions that the foregoing list of factors is not exclusive. You should not place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law. These forward-looking statements should not be relied upon as representing the Company's assessments as of any date subsequent to the date of this communication.
Non-GAAP Financial Measures
We refer to certain financial measures that are not recognized under U.S. generally accepted accounting principles ("GAAP"). Please see "Note Regarding Non-GAAP Financial Information" and "Reconciliation of GAAP to Non-GAAP Financial Information" below for additional information and a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures.
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) |
|||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
$ |
% | $ |
% | ||||||||||||||||||||||||||||
|
2019 |
|
|
2018 |
|
Inc/(Dec) |
Inc/(Dec) |
|
2019 (1) |
|
2018 |
|
Inc/(Dec) |
Inc/(Dec) |
|||||||||||||||||
REVENUES: | |||||||||||||||||||||||||||||||
Service revenues | $ |
107,285 |
|
$ |
102,845 |
|
$ |
4,440 |
|
4 |
% |
$ |
213,278 |
|
$ |
200,891 |
|
$ |
12,387 |
|
6 |
% |
|||||||||
Product revenues |
|
33,145 |
|
|
32,550 |
|
|
595 |
|
2 |
% |
|
64,618 |
|
|
63,398 |
|
|
1,220 |
|
2 |
% |
|||||||||
Total revenues |
|
140,430 |
|
|
135,395 |
|
|
5,035 |
|
4 |
% |
|
277,896 |
|
|
264,289 |
|
|
13,607 |
|
5 |
% |
|||||||||
COST OF REVENUES AND | |||||||||||||||||||||||||||||||
OPERATING EXPENSES: | |||||||||||||||||||||||||||||||
Cost of services |
|
90,642 |
|
|
88,092 |
|
|
2,550 |
|
3 |
% |
|
179,864 |
|
|
171,270 |
|
|
8,594 |
|
5 |
% |
|||||||||
Cost of products |
|
28,604 |
|
|
27,535 |
|
|
1,069 |
|
4 |
% |
|
56,151 |
|
|
54,601 |
|
|
1,550 |
|
3 |
% |
|||||||||
Administrative |
|
4,346 |
|
|
2,796 |
|
|
1,550 |
|
55 |
% |
|
9,361 |
|
|
5,081 |
|
|
4,280 |
|
84 |
% |
|||||||||
Salary and payroll taxes |
|
4,249 |
|
|
3,680 |
|
|
569 |
|
15 |
% |
|
54,813 |
|
|
7,507 |
|
|
47,306 |
|
630 |
% |
|||||||||
Amortization of intangible assets |
|
4,491 |
|
|
893 |
|
|
3,598 |
|
403 |
% |
|
5,828 |
|
|
1,760 |
|
|
4,068 |
|
231 |
% |
|||||||||
Total cost of revenues and operating expenses |
|
132,332 |
|
|
122,996 |
|
|
9,336 |
|
8 |
% |
|
306,017 |
|
|
240,219 |
|
|
65,798 |
|
27 |
% |
|||||||||
Income (loss) from operations |
|
8,098 |
|
|
12,399 |
|
|
(4,301 |
) |
-35 |
% |
|
(28,121 |
) |
|
24,070 |
|
|
(52,191 |
) |
-217 |
% |
|||||||||
OTHER INCOME (EXPENSE), NET: | |||||||||||||||||||||||||||||||
Interest expense |
|
(4,271 |
) |
|
(8,780 |
) |
|
4,509 |
|
-51 |
% |
|
(11,144 |
) |
|
(16,139 |
) |
|
4,995 |
|
-31 |
% |
|||||||||
Loss on extinguishment of debt |
|
- |
|
|
- |
|
|
- |
|
- |
|
|
(3,413 |
) |
|
- |
|
|
(3,413 |
) |
- |
|
|||||||||
Interest income |
|
- |
|
|
205 |
|
|
(205 |
) |
-100 |
% |
|
- |
|
|
205 |
|
|
(205 |
) |
-100 |
% |
|||||||||
Other income (expense) |
|
- |
|
|
14 |
|
|
(14 |
) |
-100 |
% |
|
- |
|
|
(17 |
) |
|
17 |
|
-100 |
% |
|||||||||
Total other income (expense), net |
|
(4,271 |
) |
|
(8,561 |
) |
|
4,290 |
|
-50 |
% |
|
(14,557 |
) |
|
(15,951 |
) |
|
1,394 |
|
-9 |
% |
|||||||||
Income (loss) before (benefit) provision for income taxes |
|
3,827 |
|
|
3,838 |
|
|
(11 |
) |
0 |
% |
|
(42,678 |
) |
|
8,119 |
|
|
(50,797 |
) |
-626 |
% |
|||||||||
(BENEFIT) PROVISION FOR INCOME TAXES |
|
(732 |
) |
|
141 |
|
|
(873 |
) |
-619 |
% |
|
123 |
|
|
639 |
|
|
(516 |
) |
-81 |
% |
|||||||||
Net income (loss) |
|
4,559 |
|
|
3,697 |
|
|
862 |
|
23 |
% |
|
(42,801 |
) |
|
7,480 |
|
|
(50,281 |
) |
-672 |
% |
|||||||||
Net income attributable to noncontrolling interest |
|
950 |
|
|
1,044 |
|
|
(94 |
) |
-9 |
% |
|
1,732 |
|
|
1,944 |
|
|
(212 |
) |
-11 |
% |
|||||||||
Net income (loss) attributable to OneSpaWorld | $ |
3,609 |
|
$ |
2,653 |
|
$ |
956 |
|
36 |
% |
$ |
(44,533 |
) |
$ |
5,536 |
|
$ |
(50,069 |
) |
-904 |
% |
|||||||||
Income (loss) per share: | |||||||||||||||||||||||||||||||
Basic | $ |
0.06 |
|
$ |
(0.31 |
) |
(2 |
) |
|||||||||||||||||||||||
Diluted | $ |
0.05 |
|
$ |
(0.31 |
) |
(2 |
) |
|||||||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||||||
Basic |
|
61,118 |
|
|
61,118 |
|
|||||||||||||||||||||||||
Diluted |
|
72,047 |
|
|
61,118 |
|
|||||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||
June 30, |
June 30, |
|||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||
Selected Statistics | ||||||||||||
Period End Ship Count |
|
164 |
|
160 |
|
164 |
|
160 |
||||
Average Ship Count (1) |
|
161 |
|
155 |
|
160 |
|
155 |
||||
Average Weekly Revenue Per Ship | $ |
61,317 |
$ |
61,150 |
$ |
60,888 |
$ |
60,104 |
||||
Average Revenue Per Shipboard Staff Per Day | $ |
479 |
$ |
479 |
$ |
474 |
$ |
473 |
||||
Period End Resort Count |
|
70 |
|
65 |
|
70 |
|
65 |
||||
Average Resort Count (2) |
|
68 |
|
61 |
|
68 |
|
58 |
||||
Average Weekly Revenue Per Resort | $ |
12,292 |
$ |
14,403 |
$ |
12,095 |
$ |
15,057 |
||||
Capital Expenditures ($ thousands) | $ |
1,243 |
$ |
1,581 |
$ |
1,760 |
$ |
2,936 |
Forecasted | ||||
Q3 2019 |
FY 2019 |
|||
Period End Ship Count | 163 |
170 |
||
Average Ship Count (1) | 162 |
161 |
||
Period End Resort Count | 69 |
67 |
||
Average Resort Count (2) | 69 |
68 |
||
Capital Expenditures ($ millions) | $0.6 - $1.0 | $3.0 - $5.0 | ||
__________ |
Note Regarding Non-GAAP Financial Information
This press release includes financial measures that are not calculated in accordance with GAAP, including Adjusted Net Income, Adjusted Net Income Per Diluted Share, Adjusted EBITDA and Unlevered After-Tax Free Cash Flow.
We define Adjusted Net Income as: net (loss) income, adjusted for non-controlling interest and the impact of certain other items, including: normalized interest expense; related party adjustments; increase in depreciation and amortization expense resulting from the Business Combination; non-cash stock-based compensation; normalized tax expense; non-cash prepaid expenses and non-recurring expenses incurred in connection with the Business Combination. Adjusted Net Income Per Diluted Share is defined as Adjusted Net Income divided by the weighted average diluted shares outstanding during the period, as if such shares had been outstanding during the entire three and six month periods ended June 30, 2019.
We define Adjusted EBITDA as income (loss) from continuing operations before interest expense, provision (benefit) for income taxes, depreciation and amortization and non-controlling interest, adjusted for the impact of certain other items, including: non-cash stock-based compensation expense; non-cash prepaid expenses; related party adjustments; and non-recurring expenses incurred in connection with the Business Combination. All of these other items are reported in administrative expenses in the condensed consolidated and combined statements of operations.
We define Unlevered After-Tax Free Cash Flow as Adjusted EBITDA minus capital expenditures and cash taxes paid.
We believe that these non-GAAP measures, when reviewed in conjunction with GAAP financial measures, and not in isolation or as substitutes for analysis of our results of operations under GAAP, are useful to investors as they are widely used measures of performance and the adjustments we make to these non-GAAP measures provide investors further insight into our profitability and additional perspectives in comparing our performance to other companies and in comparing our performance over time on a consistent basis. Adjusted Net Income, Adjusted Net Income Per Diluted Share, Adjusted EBITDA and Unlevered After-Tax Free Cash Flow have limitations as profitability measures in that they do not include total amounts for interest expense on our debt and provision for income taxes, and the effect of our expenditures for capital assets and certain intangible assets. In addition, all of these non-GAAP measures have limitations as profitability measures in that they do not include the effect of non-cash stock-based compensation expense and the impact of certain expenses related to items that are settled in cash. Because of these limitations, the Company relies primarily on its GAAP results.
In the future, we may incur expenses similar to those for which adjustments are made in calculating Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as a basis to infer that our future results will be unaffected by extraordinary, unusual or non-recurring items.
Reconciliation of GAAP to Non-GAAP Financial Information
The following table reconciles Net Income to Adjusted Net Income for the three and six months ended June 30, 2019 and 2018 and Adjusted Net Income Per Diluted Share for the three and six months ended June 30, 2019 (amounts in thousands, except share and per share amounts):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
Net Income (Loss) | $ |
4,559 |
|
$ |
3,697 |
|
$ |
(42,801 |
) |
$ |
7,480 |
|
||||
Non-controlling Interest (a) |
|
(950 |
) |
|
(1,044 |
) |
|
(1,732 |
) |
|
(1,944 |
) |
||||
Interest Expense (b) |
|
- |
|
|
4,508 |
|
|
2,947 |
|
|
7,941 |
|
||||
Loss on Extinguishment of Debt |
|
- |
|
|
- |
|
|
3,413 |
|
|
- |
|
||||
Related Party Adjustments (c) |
|
- |
|
|
(96 |
) |
|
538 |
|
|
270 |
|
||||
Depreciation and Amortization(d) |
|
4,251 |
|
|
- |
|
|
4,806 |
|
|
- |
|
||||
Change in Control Payments (e) |
|
- |
|
|
- |
|
|
26,284 |
|
|
- |
|
||||
Stock-Based Compensation |
|
- |
|
|
- |
|
|
20,371 |
|
|
- |
|
||||
Tax Expense (f) |
|
(708 |
) |
|
- |
|
|
- |
|
|
- |
|
||||
Business Combination Costs (g) |
|
1,285 |
|
|
- |
|
|
3,312 |
|
|
- |
|
||||
Addback for Non-Cash Prepaid Expenses (h) |
|
- |
|
|
267 |
|
|
276 |
|
|
528 |
|
||||
Adjusted Net Income | $ |
8,437 |
|
$ |
7,332 |
|
$ |
17,414 |
|
$ |
14,275 |
|
||||
Adjusted Net Income Per Diluted Share | $ |
0.12 |
|
$ |
0.24 |
|
||||||||||
Diluted Weighted Average Shares Outstanding |
|
72,047 |
|
|
71,796 |
|
||||||||||
The following table reconciles Net Income to Adjusted EBITDA and Unlevered After-Tax Free Cash Flow for the second quarter and year-to-date periods ended June 30, 2019 and 2018 (amounts in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
Net Income (Loss) | $ |
4,559 |
|
$ |
3,697 |
|
$ |
(42,801 |
) |
$ |
7,480 |
|
||||
(Benefit) Provision for Income Taxes |
|
(732 |
) |
|
141 |
|
|
123 |
|
|
639 |
|
||||
Interest income |
|
- |
|
|
(205 |
) |
|
- |
|
|
(205 |
) |
||||
Other Expense |
|
- |
|
|
(14 |
) |
|
- |
|
|
17 |
|
||||
Non-controlling Interest (a) |
|
(950 |
) |
|
(1,044 |
) |
|
(1,732 |
) |
|
(1,944 |
) |
||||
Interest Expense |
|
4,271 |
|
|
8,780 |
|
|
11,144 |
|
|
16,139 |
|
||||
Loss on Extinguishment of Debt |
|
- |
|
|
- |
|
|
3,413 |
|
|
- |
|
||||
Related Party Adjustments (c) |
|
- |
|
|
(96 |
) |
|
538 |
|
|
270 |
|
||||
Depreciation and Amortization(d) |
|
6,531 |
|
|
3,042 |
|
|
9,362 |
|
|
5,566 |
|
||||
Change in Control Payments (e) |
|
- |
|
|
- |
|
|
26,284 |
|
|
- |
|
||||
Stock-based Compensation |
|
- |
|
|
- |
|
|
20,371 |
|
|
- |
|
||||
Business Combination Costs (g) |
|
1,285 |
|
|
- |
|
|
3,312 |
|
|
- |
|
||||
Addback for Non-Cash Prepaid Expenses (h) |
|
- |
|
|
267 |
|
|
276 |
|
|
528 |
|
||||
Non-GAAP Management Adjustments (j) |
|
- |
|
|
27 |
|
|
- |
|
|
27 |
|
||||
Adjusted EBITDA | $ |
14,964 |
|
$ |
14,595 |
|
$ |
30,290 |
|
$ |
28,517 |
|
||||
Capital Expenditures |
|
(1,243 |
) |
|
(1,581 |
) |
|
(1,760 |
) |
|
(2,936 |
) |
||||
Cash Taxes |
|
- |
|
|
(249 |
) |
|
(73 |
) |
|
(300 |
) |
||||
Unlevered After-Tax Free Cash Flow | $ |
13,721 |
|
$ |
12,765 |
|
$ |
28,457 |
|
$ |
25,281 |
|
||||
The following table reconciles expected earnings per diluted share of $0.04 to $0.06 to expected adjusted net income per diluted share of $0.11 to $0.13 for Q3 2019:
Earnings Per Diluted Share | $0.04 - $0.06 | |
Depreciation and Amortization (d) | 0.06 |
|
Business Combination Costs (g) | 0.01 |
|
Adjusted Net Income Per Diluted Share | $0.11 - $0.13 | |
The following table reconciles expected loss per basic and diluted share of $(0.65) to $(0.60) to expected adjusted net income per diluted share of $0.45 to $0.50 for fiscal year 2019:
Loss Per Basic Share | $(0.65) - $(0.60) | |
Interest Expense | 0.04 |
|
Loss On Extinguishment of Debt | 0.05 |
|
Related Party Adjustments (c) | 0.01 |
|
Depreciation and Amortization (d) | 0.18 |
|
Stock-based Compensation | 0.29 |
|
Change in Control Payments (e) | 0.37 |
|
Business Combination Costs (g) | 0.07 |
|
Diluted Shares / Basic Shares Differential (i) | 0.09 |
|
Adjusted Net Income Per Diluted Share | $0.45 - $0.50 | |
Follow OneSpaWorld:
Instagram: @onespaworld
Twitter: @onespaworld
LinkedIn: OneSpaWorld
Facebook: @onespaworld
These press releases may also interest you
|