Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

OneSpaWorld Holdings Ltd (NASDAQ:OSW) reported a 4% increase in total revenues to $219.6 million compared to the first quarter of 2024. The company experienced a 5% increase in adjusted EBITDA to $26.6 million, despite non-recurring severance expenses. OSW expanded its operations by adding new ships and agreements with long-standing partners, including a new health and wellness center on Norwegian Cruise Line's first Prima Plus class ship. The company continues to innovate with high-value services such as Medi-spa, IV therapy, and acupuncture, contributing to a 20% growth in these treatments. OSW's board approved a new $75 million share repurchase program, demonstrating a commitment to enhancing shareholder value.

Negative Points

Income from operations slightly decreased to $16.8 million, impacted by $2.5 million in non-recurring severance expenses. Net income decreased to $15.3 million from $21.2 million in the first quarter of 2024, primarily due to changes in the fair value of warrant liabilities. The company experienced a $1.5 million decrease in its land-based spa business, partly due to hotel closures. Salary, benefits, and payroll taxes increased to $11 million from $8.5 million, driven by severance expenses and stock unit vesting. Despite strong performance, the company remains cautious about potential economic downturns affecting consumer spending and cruise activity.

Q & A Highlights

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Q: Can you provide more details on guest spending patterns on board and any changes in demand for higher-end services? A: Leonard Fluxman, CEO, stated that they have not seen a significant increase in discounting or a decline in spending. High-end services, such as Medi-spa, remain in high demand, and there has been a slight improvement in spending in April.

Q: What factors could lead to OneSpaWorld reaching the low end of its full-year guidance? A: Stephen Lazarus, CFO, explained that the low end of the guidance assumes a moderation in spending on board. However, there is no current indication of a significant slowdown. Cruise lines report strong bookings, and OneSpaWorld feels comfortable about delivering their numbers.

Q: Are there any changes in pre-booking trends or cruise lines' willingness to invest in pre-booking engines? A: Leonard Fluxman noted a slight pickup in pre-booking trends, with no decline in cruise lines' focus on pre-booking. They have not materially adjusted pricing, and pre-booking remains a crucial part of their strategy.

Story Continues

Q: How did the business perform during the Global Financial Crisis (GFC), and what can be expected in a potential downturn? A: Leonard Fluxman mentioned that during the GFC, the business fared better than most. They adjusted marketing and discounting strategies, and while retail attachment was impacted, service demand remained stable. They do not expect a similar contraction now.

Q: How sensitive is the share buyback program to potential business softening? A: Stephen Lazarus stated that the decision to buy back shares is more about the stock's value rather than business softening. Even in downturns, the company generates strong free cash flow and would likely continue share repurchases if there is a value dislocation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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