OneSpaWorld Reports Strong Q2 Growth, Revises 2024 Outlook

In the second quarter of fiscal year 2024, OneSpaWorld Holdings Limited reported impressive financial results, achieving record revenues of $224.9 million, which represents a 12% increase compared to the same quarter of the previous year. The company’s operating income surged 40% to $18.8 million, while adjusted EBITDA rose by 25% to $27.1 million. Additionally, OneSpaWorld expanded its presence by establishing health and wellness centers on 197 ships and provided an optimistic increase in revenue and adjusted EBITDA guidance for fiscal year 2024.

### Key Takeaways
– Revenues reached $224.9 million in Q2, up 12% year-over-year.
– Income from operations grew by 40% to $18.8 million.
– Adjusted EBITDA increased by 25% to $27.1 million.
– Health and wellness centers now serve 197 ships.
– An annual cash dividend program was initiated.
– Fiscal 2024 revenue guidance was raised to between $870 million and $890 million.
– Adjusted EBITDA guidance for fiscal 2024 increased to a range of $102 million to $108 million.
– Debt was reduced to $123.8 million after repaying over $109 million since Q2 of fiscal 2022.
– Unlevered after-tax free cash flow for Q2 rose to $23.8 million.

### Company Outlook
– OneSpaWorld anticipates an 11% revenue increase and an 18% rise in adjusted EBITDA for fiscal 2024.
– The company is projected to operate on 198 cruise ships and 52 resorts by the end of fiscal 2024.
– Q3 revenue is expected to be between $235 million and $240 million, with adjusted EBITDA of $27 million to $29 million.
– The company expressed confidence in delivering increased value for shareholders through its operating platform, growth initiatives, and asset-light business model.

### Bearish Highlights
– Executives noted that higher occupancy rates on cruise ships often include children, which are not the company’s primary demographic focus.

### Bullish Highlights
– OneSpaWorld raised its revenue and adjusted EBITDA guidance for the fiscal year.
– The company is exploring potential e-commerce expansion.
– Launching new ships is intended to cater to diverse demographics, including families and younger adults, which presents new opportunities.

### Misses
– No significant financial misses were reported during the earnings call.

### Q&A Highlights
– Improvements in product margins are anticipated due to productivity enhancements and reduced discounting practices.
– A long-term supply agreement is in place with Elemis, despite the company no longer owning the brand.
– Pre-booking penetration stands at 23%, with expectations for growth as additional partners are integrated.
– Executive Chairman Leonard Fluxman discussed focusing on younger couples without children and enhancing the pre-booking experience.

OneSpaWorld’s solid growth in the second quarter underscores its strategic emphasis on expanding its fleet and enhancing product offerings and productivity at its wellness centers. The initiation of an annual cash dividend program highlights the company’s robust cash position and dedication to returning value to shareholders. With a strengthened balance sheet and increased after-tax free cash flow, OneSpaWorld is well-positioned for continued growth and profitability.

Management remains optimistic about their product range and current strategies, including potential expansion in the e-commerce sector. Their targeted approach to various demographics and improved pre-booking experiences indicates a proactive effort to enhance customer engagement and drive revenue growth.

Despite the challenges posed by non-target demographics aboard cruise ships, OneSpaWorld views the diversification of its target markets and the introduction of new ships as promising opportunities. Executive leadership expressed excitement for the upcoming results of 2024 as the company navigates the evolving landscape of travel and wellness.

Overall, OneSpaWorld’s strong financial performance and growth strategies position it favorably for the future, fostering confidence among investors and stakeholders alike.