Q2 2020 OneSpaWorld Holdings Ltd Earnings Call
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Thank you for standing by this is the conference operator, welcome to the ones a word second quarter Twentytwenty earnings Conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
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I would now like to turn the conference over to Allison Malkin with I see our please go ahead.
Thank you good morning, and welcome to one style World second quarter fiscal 2020 earnings called webcast before we begin I'd like to remind you that certain statements and information made available on today's call and webcast maybe deemed to constitute forward looking statements. The Colgate 19 pandemic continues to habits.
Significant impact on our operations cash flow and financial protection, the uncertain and dynamic nature of the current conditions and its ongoing impact could materially alter our outlook. These forward looking statements reflect our judgment and analysis only as of today and actual results may differ materially concurrent.
Expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward looking statements form warfare discussion of the risks and uncertainties associated with the forward looking statements to be made in this coppins Cogs webcast. We refer you to the disclaimer regarding.
Forward looking statements that is included in our second quarter 2020 earnings release, which was furnished to the FCC today on form 8-K.
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 the earnings release filed earlier too.
Okay.
Joining me today I'd like to.
Executive Chairman, Glenn I feel Chief Executive Officer, and President and Steven Lazarus, Chief Financial Officer, and Chief Operating Officer lender will begin with a review of the actions we have taken a response to coping 19, including our key priorities and then provide he fitness and [laughter] then glad will discuss our.
Actions taken to return North back home and our service offering this will be followed by Steven you will provide more detail on the financials kinda liquidity and now I would like to turn the call over to letter.
Thank you Allison good morning, and welcome to one spot will second quarter fiscal 2020 results conference call.
Our second quarter results were significantly impacted by the global cobot merging pandemic.
One of our health and wellness sent to them cruise ships close to passengers on March 14.
And remain close pending resumption of watches.
In addition, one about health and Wellness center as a destination resorts, we closed on March 26.
And remain close to true up quota.
Given the uncertain durational dependent on April that's you know, maybe 75 million equity financing, which was approved by shareholders on June 10th.
As a result of this financing and I efforts to reduce expenses in capital expenditures.
We ended the quarter with $7 million to $9.6 million of liquidity, including cash on our balance sheet and borrowing capacity under our line of credit.
As we mentioned last quarter that focus since the onset of the crisis was on three key areas.
One cheapest stocks safe.
Liquidity.
<unk> said, they continue to innovate to collaborate with up off.
We are pleased to have made progress against each of these areas during the second quarter.
As it relates to out first two Archie you cheapest off safe I would like to personally think cruise line and resort partners.
It seems like corporate employees for their efforts to ensure the safety about shipboard <unk> personnel.
I'm equally gratified by the patients in support of about cruise ship stuff.
A lot of wagering safe passage home.
As a result of these efforts as of today, we have Apache aged 97% crude supposed to though.
I wasn't extremely proud of our entire changes that him.
On a teacher quickly adapt to the changing operation condition.
Moving to our second priority liquidity, we're very pleased that our shareholders approved 75 million equity outbreak in June.
Which we believe provides us with the resources to sustain our operational readiness.
And then likely that there are no cruise lines that sale with limited destination resorts operating.
We believe we have sufficient liquidity until December 2021.
We continue to prepare for the return of wages with the health and safety of on stop passengers are highest priority.
With this in mind, we are investing our resources in areas that we expect will add.
More than 90% marketshare, the operation health and wellness centers in C.
We expect our operation to be limited throughout 2020.
They will remain extremely disciplined manage expenses capital expenditures and working capital well continue to innovate our service populations far expenses. So that we are in a position to provide exceptional guest service in collaboration with that cruise line or destination resort partners when operations.
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As it relates to our destination resorts fahri openings.
Well, we have resumed operations. We are encouraged by the performance of us flaws and there was a tendency about offerings.
Well, we cannot predict the ultimate pot cope with 19.
We remain confident that the advantages of our business model, that's significant market share hub is poised to achieve our long term performance objectives as business conditions normalize.
And now to the called out the two Glenn.
Thank you letter good morning, everyone.
We continue to navigate depending on where adapting quickly to the current operating environment with the health and safety of our staff our number one priority.
Along those lines as of today, we were pleased to have repatriated 97% of all cruise ship personnel.
From these 52%.
I would also like to think knows that insured the safe passage home of our crew ship stuff.
I'm grateful for their efforts.
Equally proud of the way onboard stuff that was handled this crisis their professionalism understanding your patience during some person that occurred is commendable.
Well the hotels are operating at reduced capacity, we were pleased with the willingness with guests to book appointment relaxing response, while they vacation during todays or personal arms.
We have also been pleased by the demand for spot appointments customer feedback has been overwhelmingly positive which will utilize your facilities, noting that we have made them feel very comfortable regarding safety protocols and are extremely satisfied with the level of service provider.
As we look ahead, we're continuing to focus on training our staff and investing in innovation. So that we are ready to scale, our global operations with several orders are lifted and more about destination resorts bonds will open.
We anticipate the most of our destination resorts, probably will be opened by the end of the third quarter.
Albeit at hotels with reduced occupancy and operating within the Coke, making guidelines.
The actions.
With that I will turn the call over to Steven who will comment on our second quarter results and liquidity position.
Thank you Dan.
Good morning, ladies and gentlemen.
We completed a quarter unlike any other in our history.
We know the total revenues due to the opposed to all of the health and wellness and to support cruise ships.
And you know land based resorts due to the cause of 19 endemic.
With limited operations, our teams remain focused on the same store and preserving liquidity.
Well I typically provided full overview of our second quarter results increasing productivity metrics.
Given the significant impacts October 19, when our operations I will unleash some pilots.
It's in line with the second quarter.
Total revenues were $1 billion compared to $140.4 million in the second quarter last year.
Revenues generated in this years second quarter were primarily related to you called missed sales are now Pinterest school dot com websites.
Adjusted EBITDA was a loss of $20.1 billion as compared to income up $15 million in the second quarter 2019.
We incurred significant and higher than expected costs in the quarter related to the housing and repatriation about teams onboard as well as cost incurred in preparation for you today ops.
Some of these costs continued into Q3.
And we ended the quarter with cash and borrowing capacity under our long as credit of $79.6 million as compared to $20.5 million at the end of this first quarter fiscal 2020.
As it relates to outlook given the uncertainty of the timing of the resumption of wages and the ultimate path that the global Pope at 19 pandemic will take we'll continue to not provide guidance. However, I would like to share some observations with you in order for you to assist our business.
We believe Q2 will be the low putting plus sales as we expect 36 destination resorts Boston will be open by the end of August we will continue to tightly manage expenses and identify additional cost savings. If there is a further extension all the cruise line industry Association announced no sales.
Hey, which is currency October 31st 2020.
Well the U.S.
Well, there's lots for operations have resumed we have seen strong receptivity to offerings and gas all comfortable with our intense safety and health protocols.
While we do not expect to generate material revenues from health and Wellness Center support cruise ships. This fiscal year. We believe we had good talent and capabilities to quickly bring back personnel and Scana operations when voyages rich was year.
We expect cruising to return on a gradual basis and even with <unk> passenger capacity limit. It to you could say onboard on all basis, we would expect to great either.
And we normalization of operations occurs which will occur at some point, we just don't know when we would expect to deliver revenue and EBITDA consistent with historical levels.
And with that we'd like to open up the cool Krish sense. What do you you could please go ahead of open local.
Thank you Sir we will now begin the question answer session to join the question Q. You Me Press Star then one on your telephone keypad, you will hear tone and knowledge in your request.
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Our first question is from Steph Wissink with Jefferies. Please go ahead.
Thank you good morning, everyone, Oh, we have two questions and Steven these might be for you, but I'm wondering if you can help us break out within the quarter in the cost structure, what cost for a onetime in nature related to.
The repatriation of your stuff now that you're almost complete without exercise and then I think you mentioned a second cost that seemed a bit more onetime in nature. So if you could just help us qualify what the costs were in the Q2 piano that may not recur and then as we think about Q3 in Q4, how should we be modeling a b cell.
Flurry in payroll in the administrative costs on a go forward basis.
Hey, good morning, So [noise].
So the largest component of the onboard clause on this new relate to housing authority employees onboard otherwise known as Victualling and also the retainers [laughter] hates to some of the folks on board.
As you know the process 40 pets nation as being extremely difficult you to know coke about loans or a cruise line partners.
And well every if it had been made to get folks back to their homes as quickly and safety as possible. They were Maria her problems that were in concert with local governments, not allowing folks to get older vessels et cetera. So we incurred.
Approximately an additional six and a half billion dollars of costs relating to the.
Keeping folks on board and ultimately getting them home.
We would not have originally anticipated.
While in a normal circumstance I would tell you would not expect to see these go forward. We don't we did still have some folks onboard in the month of July and that has been significantly reduced to 87 people. Today. However, the number will not go to zero.
Because of situations for example, where they're all cruise lines in Italy, where we have been told they expect to begin sailing into the expired, which by the way that they just need three times already so we began to move stock back to put onto those vessels. Each time that they moved you had to house.
Let's talk locally and now we are putting those folks onto the vessels for TV carton Inc. area in the hope that those vessels will begin to say okay. So.
There will be additional costs going forward for some of those things, but we also hope they pool that there will be some revenue that comes in as those vessels begins to sale, but the point being that it is just a very very difficult situation to qualcast because of that you wouldn't see or what he is going on as you know.
I'm about launch a cruise lines have moved their return to sell age in excess of seven times already and real being good partners.
And to make sure that each time that happens we are ready to go other onetime costs in the quarter, we provided for an inventory reserve as you know.
Pullmantur Unfortunately filed for reorganization. So in addition to providing well that accounts receivable number which was looked at launch we're assuming that some of our inventory they may get damaged or lost in transit as we pets rates. There's also the cost associated with getting inventory also decommission vessels as better.
Yes and continues to occur so that's the bulk of the sort of onetime costs. We do expect it to diminish going forward exactly what it will be used that people to say because as I mentioned as criticize tell us a greater as you and sailing we prepare in gear up for that.
Okay. That's great and then one follow up question and that we're getting it's just understanding as vessel do return to the water.
So your contracts work in terms of flexibility around capacity utilization I think you had given us with that on the last call regarding of around 50% to 60% utilization you feel like you can break even if that's still what you anticipate or have any out of your partnerships I haven't had to open conversations around.
Yeah thinking about those contracts and what your your breakeven point might need to be.
We still do believe that with passenger.
Thanks, [laughter] into six because then we would breakeven on a whole basis on vessels.
Okay, great. Thank you very much.
Thank you.
Our next question is from Sharon Zackfia with William Blair. Please go ahead.
Hi, good morning.
I guess, you know given that you reopen and some of the land based fives and it was it was encouraging to hear some of your commentary there could you give or kind of triangulate bretts, what the occupancy looks like right now out those facility sorry, my three year old associated talking to the background, what the occupancy looks like.
How that's translating into the utilization of the pause just trying to think of you know if the cruise line start out a 40% to 50% you know what kinda capture rate you can get based on what you're seeing Atlanta based right now if that had it makes sense.
[laughter] CBER I'll jump in and take that so [laughter] crusher and good morning, So it's a little bit of a mixed bag.
Properties like what are you concerned appearing in Connecticut already so some cold towers and doing very well in that regard, albeit.
[noise] transient guests not necessarily.
Oh.
True what a good business necessarily so they're coming in into this bother injuring the spot.
Probably I would say letters.
75%.
Throughput versus prior years at that particular property in the Caribbean ERM Ocean from for example has a 20% an occupancy Sir you see it to complete a mixed bag. We just opened up her life <unk> Oh, So Cherokee Oh, there's about a 50% alert keep in supers. So.
You know we have a mixed bag.
Oh go to occupancy I guess are coming to this bar or what do you have to say you capture rate that we had this time last year those properties not necessarily but certainly.
So we weren't some of the properties up in the northeast where he get as another example, we care to pay show so it's a regulation.
For the probably the street. So we're not doing officials yet that's got a permit on decision. It's ongoing discussion. So when they are able to capture that business again, we look forward to that.
But the hotels cream that they're going to be ready growing occupancy is period over period, where he's going to get into its leading with occupancy level at this point, but overall it's it's.
Pretty much low occupancy compared to what we certainly expect.
That's helpful and I guess, it's good to hear that 50%.
Occupancy on the chefs is where you can break even but I'm curious and I know this is a tough question and answer you know how many.
Do you estimate need to be failing to breakeven.
[noise] well you know, it's a difficult questions that so many dimensions because you also need during this period, where the ships the selling them.
Although the other complexities.
Around that.
That's because the business.
Oh.
You know you know brokered Stephen if you want us to commit to a number of number of vessels, but do it really depends on the mix of ships and the mix. The regular isn't the mix of revenue days bond that we [laughter] within their fleets are out of outages every two ships it depends on which of those ships would actually hit the water and how many revenue days, we can actually compiled from.
Grainger.
So it's a code.
<unk> answer just black and white context.
Yeah, sure unlocking blends exactly right because as the intricacies around the size of vessel and watch in a number. She this except that it does become challenging to commit ourselves to how many vessels will actually be sailing.
We kind of look rather than say, obviously, depending on our cost structure, but generally speaking.
At around 50, or so maybe 60% depending on.
Which not only look at until you're in payroll with regards to.
Except Oh prior your revenue I.
The company basis, we would breakeven.
Okay. Thank you [noise].
Our next question is from Stephen with Zinski with Stifel. Please go ahead.
Hey, guys good morning.
So I want to go back to the the the kind of the the cash burn in.
The the monthly expenses and I I think we went back to the May you guys, but kind of in the mid threes.
In terms of of cash burn and now you know if our math is correct and we look out to the end of 2021 that numbers kind of more in the mid fours and I understand there was some cost into Q. So I guess the question really is.
Oh.
Is that are you kind of when you base your liquidity until you can get through the end of 21 is that based on that mid fours number or can that get back into the mid threes and also because youve, obviously got some land based spas commencing operation and that you not to small benefit do you guys. It it's gonna be some cash in the door.
Sure Steve Good morning, so.
On this either the pure math tells you there to get to December it is sort of hopefully.
You know coke went to corporate $4 million and cash going which is quite a 3.6.
And we had originally talked about and.
Part of the reason for that is the reality of the situation some of which I talked about earlier, which is there will be situations, where we know we're going to has to encourage fences as we all right. Now for example, getting folks on two vessels Quarantining, then et cetera. So.
Can it get lower than that yes, perhaps if somebody said to me definitively there is definitely going to be no sailing until June mixture example varies action that you could take to reduce our expenses.
But that situation doesn't seem like you're right because we have ships preparing to sales in Europe. Shortly we may have ships sailing in the U.S. Later this year hopefully early next year. So that it really is such a good situation that I think we're being as realistic as we can lock.
Now with the number in saying based upon everything we know and being able to proceed and ready to though when the cruise ship sale that he is our best estimate of our expand shot though.
Okay got it and then.
Your your liquidity position no matter, what's what are you want to look out in terms of cash burn is still pretty strong had no. Let's say 17 months right now but.
You know Steven are you satisfied with where that's at right now or do you continue to explore other options to improve that position.
We will always continue to explore other auctions, Steve we did take additional steps just recently by the way with regards to salaries and cannot tell you that.
Barring smallest at our open 100% of the company's on some sort of the juice salary portfolio wide. So im pleased to either solo terminates at all they've taken different levels of salary reduction.
The entire organization from lenders and Glenn overlay down.
We've put some things seem to play so.
I wouldn't say were ever satisfied and we'll continue to look at opportunities as we plan on to the extent that we learn more about delays. We may has to be more aggressive in some of the steps that you take to reduce expenses, but for right now im still.
Claim square.
We can continue to manage the business and be ready to go as the cruise lunch or just showed especially for what they're telling us.
Okay got you kind of one more quick when it's it's actually for Gladden, Glenn what does the conversations been like with your employee base, you know as to their willingness or you know when things do commence again to go back to work.
So magic are doing better shipboard employee base.
Correct first of all right.
They are it should get ready to come back to work. So I see the venture merely a crew sitting around on board with regards to vessels in acquiring peak periods of these folks are you willing to they have to go into a seven day isolation period at home before as an example, right. This is.
An obligation to just get back to work seven day isolation period at home.
In addition to of course, there kogan testing they may have to travel with all sorts of requirements. Then they have to get to a vessel and sit there for 10 to 14 days in isolation quarantine. So you can imagine all these these birds are living they still want to come to work in the will it be to have all of these pre jory repayment obligations I commend them and then.
Go to work in the reduced environment. Good passengers. They don't know what the income will be we're showing them that they're going to do just fine with the 50% occupancy [laughter].
We have.
Created a database of their experience crew, we understand who the veterans are either productive stuff or at least Steve you heard as mentioned that before so we're bringing back the veterans are bringing back to productive stuff first well. These guys are dedicated to the cars a dedicated towards by world or the dedicated to leadership in their upwards by management.
I really love their life at sea so.
We have a great pool, we're just waiting for logistics could fall into place. So we know what to do other movies poor guys and girls or you know the shuffled all about as Steven mentioned 70 different you know returned to service dates changes caused a push back their first crews three different times and this is with crude moving along with these folks [laughter] so like.
Give me a lot of credit for hanging in there but.
We're good with our Labor force and don't forget as ships have reduced occupancy is we're just perspective, we also have reduced mandate. So it's not like we're staffing up full well for each vessel.
He said either.
Okay, great. Thanks, guys appreciate it.
Once again, if you have a question. Please press Star then one on your telephone.
Our next question is from I see a georgieva with Infinity Research. Please go ahead.
Good morning, given Pullmantur right as you mentioned the Steven.
We have lost these those ships.
I'm does that change so, especially at the carnival.
Corporation entity do you assume a proportionate reduction.
In your projected revenues relative to the decline in the number of vessels that will be selling went on.
Constant basis, let's assume you know beginning tweet tween too we shouldn't be back to normal.
Yeah, Good morning Us Yeah [laughter].
Yeah. That's a that's a good points, we are not assuming that pullmantur or any of the vessels that have been announced for decommission will return to the fleet that once for will operates although we do know that it's likely that some of those vessels all potentially sold to other partners.
With whom we have relations that we may operate upon then I will tell you as a point of reference that's taking into account pullmantur under such that we're aware of being removed 20 Commission on service it is less than 5% about revenue.
And so while it's not a tiny number certainly not that significant.
Okay. That's helpful. So oh from a capacity percentage basis, it actually would have less of an impact to your revenue.
Thanks, Steve.
Yeah.
This concludes the question answer session I would like to turn the conference back over to lay around flat Smith for any closing remarks.
Right, Thanks, everyone for joining us today.
Appreciate it.
Your comments and questions and we look forward to speaking with you on our third quarter cool. Thanks, so much.
This concludes today's conference call.
You may disconnect your lines. Thank you for participation everybody bye bye.
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