Q4 2020 OneSpaWorld Holdings Ltd Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the one store, where the fourth quarter and fiscal 'twenty 'twenty 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 ICR. Please go ahead.
Thank you good morning, and welcome to once the World fourth quarter and fiscal 2020 earnings call and webcast before we begin I'd like to remind you that the E statements and information made available on today's call and webcast may be deemed to constitute forward looking statements. The.
The COVID-19 pandemic continues to have a significant impact on our operations cash flow and financial prediction, the uncertain and dynamic nature of carrying condition 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 from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward looking statements.
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 fourth quarter and fiscal 'twenty 'twenty earnings release, which was furnished to the SEC.
Day 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 repurchase certain adjusted non-GAAP metrics on this call and explanation of these metrics can be found in the earnings release filed this morning.
Joining me today are Leonard Flaxman Executive Chairman, Glenn <unk>, Chief Executive Officer, and President and Stephen Lazarus, Chief Financial Officer, and Chief Operating Officer, Leonard will begin with the review of our fourth quarter and fiscal 2020 performance and provide an update on.
Our operations are key priorities and liquidity.
Then Glenn will discuss the initiatives taken to ensure a safe and welcome environment to get as our health and wellness centers reopen and review our service offering innovation then Steven will provide more details on the financial and liquidity I would now like to turn the call over to Leonard.
Thank you Alison good morning, and welcome to one spot well its fourth quarter and fiscal 2020 results conference call.
Before turning to our results I would like to personally thank.
The entire leadership team and team members around the globe.
The resiliency and agility this year.
You say that 2020.
Wasn't challenging would be an incredible understatement. It was with the opt out the most difficult and challenging.
Company has 50 plus year history.
After delivering strong performance in 2019.
After the reclaiming and being awarded the legacy ships of celebrity that's the last in 2013 as well as winning the luxury brands of.
Oceania and regent seven seas the.
For the foundation was well set for 2020 to be even more successfully than 2019.
Until the pandemic hit us in March of 2020.
The 2020 was unprecedented for us.
All of the efforts of our team has the passion and commitment.
From the ability to quickly adapt to the challenging environment.
With us to navigate this extraordinary share it.
As expected our fourth quarter results reflected the significant impact to operations driven by the COVID-19 pandemic.
We ended the year with the global pandemic shut shut at our operations.
In response to the pandemic, we remain focused on three key priorities throughout fiscal 2020, which served us well these priorities were.
One ensuring the safety of our staff.
To preserving liquidity.
And thirdly preparing for a successful resumption of our crews and destination resorts for operations.
Of sections of lift it through innovation and collaboration with our partners.
As it relates to our first priority is to keep our staff safe I wanted to extend my deep gratitude to our cruise line and resort partners in each of our corporate employees as they ensure the safety of our shipboard and resort personnel.
During the height of the pandemic.
As of today, one vessel of the cruise line partners of sailing and 44 of our destination resort spas.
Okay.
Regarding our second priority of preserving liquidity, we ended the year with $56 $4 million in liquidity.
US the ability to sustain the operations through March 'twenty 'twenty, two with no significant voyages.
The strong liquidity position is reflective.
Disciplined approach to managing the business throughout the.
The increased cash from equity financing and pulling back on expenses and working capital.
Turning to our third priority, which is preparing for success for a resumption of our crews and destination resorts for operations.
The restrictions are lifted.
We innovated a compelling range of services and guest experiences even further to.
To provide a safe and welcoming environment across our health and wellness centers.
As they resume operations during the year.
We are hopeful of at a higher percentage of the global population is vaccinated all cruise ships will return to service in the second half of 2021.
Looking ahead, our priorities in fiscal 2020, one remain focused on maintaining strong liquidity.
Also of the revolving our innovative service offering and the operating platform to allow once Paul well to be even more properly positioned as operations resume.
Overall, we remain very confident in our ability to continue to capitalize on the strength of the operating platform and advantageous business model to drive long term profitable growth for the benefit.
Or what's the ball will stakeholders.
In addition to the 159 vessels that we expect to come back into service over the next 24 months.
Very excited by the prospects of having 24, new vessels being introduced into service by cruise line partners between now and year ended 2022.
And now I'll turn the call over to Glenn.
Thank you Linda.
Good morning, everyone.
I too would like to thank our staff for their hard work and dedication of this year. We are very pleased with our staff resiliency and ability to quickly adapt to the changing operating conditions and the.
They stand ready to return as soon as operations ramp back up.
During an unprecedented year of disruption we were keenly focused on the wellbeing of our staff, while investing in innovation and updating our operating procedures to position us to be ready to scale, our global operations as soon as the new sales orders are lifted.
Return to service remains our top priority and we are confident that of elevated practices that include digital training the implementation of our GPS guidelines for protection of incentive position, the new culture and standards.
Well as expansion of our service offering and technology enhancements position us for a successful return to service.
And we were focused on new innovation to meet and exceed all pre and post the COVID-19 guest needs as we resume operating.
Operations.
Including many strategies to align staffing to expected return data load factors stress testing key actions for shipboard readiness and creating digital content for new service requirements where necessary.
As we await returned to service.
Also identifying ongoing revenue opportunities and cost savings within our onboard offerings and have successfully engaged key partners for deeper and greater collaboration.
As we begin 2021 as Lindon mentioned as of today, one vessel of our cruise line partners of selling in 44 of our destination resort spas are operating well.
While there remains uncertainty as to.
For the timing for a return to normal operations. We are confident in the advantages of our business model and the ability to deliver on our long term performance objectives.
With that I will turn the call over to Stephen who will comment in the fourth quarter and fiscal 2020 results and liquidity position Steven.
Yeah.
Thank you Ken good morning, ladies and gentlemen.
2020 was indeed, a challenging year, given the difficult COVID-19 impacted operating environments.
We closed out of the year with no material revenue using the fourth quarter.
Given the limits of operations of course, our cruise line and resort squad entities.
Fortunately the votes.
Our intense focus on preserving our liquidity.
As well as investing in innovation and training our staff positions us well to the tune into our normal global operations as the cruise lines resume operations.
I will now share of just a few of the fourth quarter and fiscal 2020 highlights the other than providing the full overview of the quarterly and annual results given.
Given the continued significant negative impact of the global COVID-19 pandemic has had on our operations.
For the fourth quarter total revenues were $3 $8 million compared to $839 $4 million in the fourth quarter last year.
Revenues generated in this years fourth quarter were primarily related to the what are your fob destination resort spas that could be opened during the quarter and E. Commerce sales on our time to squad Dot com website.
Cost of services were $6 $9 million compared to $95 $6 million in the 2019 the fourth quarter.
Cost of products with $6 8 million and included a $4 9 billion or 6K, the charge for the write down of inventory that is expected to expire as a result of the extended closing operations caused by the COVID-19 pandemic.
Adjusted EBITDA was the loss of $15 4 million as compared to positive $13 million in Q4 of 2019.
And cash burn was consistent with our expectations for the quarter.
For fiscal 2020, total revenues were $129 million compared to $562 2 million in fiscal 2019, the year over year of decline reflects the decrease in operating capacity driven by the force closure of all of that health and wellness centers of boat cruise ships and the destination resort spas.
Revenues for the year of primary primarily reflect first quarter of wages and of the <unk>.
The <unk> 'twenty 'twenty CPUC those shallow water.
Destination resort spas back to open or reopen during the portion of the.
And ecommerce sales from the Companys current Dishwater I've called the website.
Adjusted EBITDA was the loss of $42 $7 million as compared to a positive profit of $58 7 billion the fiscal 2019.
We ended the year with cash and borrowing capacity under our line of credit of $56 $4 million as compared to $33 $9 billion at the end of the price.
The year end fiscal 2020 cash balance includes $11 $6 million the gross proceeds for.
From the sale of one 3 million shares in Q4 as part of our $15 billion at the market equity offering.
Thank you and $38 $4 million remained under that ATM program.
The availability under our line of credit was $13 million at the end of fiscal 2020, and we expect this liquidity to be sufficient to sustain operations with another significant wages through March of 'twenty 'twenty two.
As it relates to our outlook for 2021.
Each of the ongoing business the disruption and uncertainty surrounding the continued impact from.
From the COVID-19 pandemic.
We will continue to not provide guidance, however, I would like to share some brief insights into our business to take into consideration when thinking about fiscal 2021.
As of June 30 of 2021, do we expect the 53 of our destination resort spas will be open to the operating and we will continue throughout the period to tightly manage expenses and focus on liquidity.
The cash burn rate for Q1, 2021 is expected to be $12 million to $15 million.
We continue to expect vessels to return to service on the gradual basis of <unk> 'twenty 'twenty, one and remind that even with the passenger capacity limited protected the change on the four wall basis, we would expect to breakeven.
And with normalization of operations of cash, we expect to deliver revenue and EBITDA consistent with historical levels.
Notwithstanding the foregoing however for the first quarter and 2021 for school year, we do expect to incur a net loss on the GAAP and adjusted basis.
With the assay will open up the call for questions operating if you could go ahead. Please.
Thank you Sir we will now begin the question and answer session. The joined the question queue. You May Press Star then one on your telephone keypad, you will hear a tone of knowledge in Euro quest.
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We will pause for a moment of callers join the queue.
Our first question is from Stephen <unk> with Stifel. Please go ahead.
Hey, guys good morning.
So first question I want to ask about staffing levels moving forward ships come out of cold lay up and start to enter the test phase and I guess, what I'm getting at here is as you start or the the cruise operators start. These test cruises at some point whenever that is what you know what we'll staffing levels look like.
On a test cruise relative to what we would call a normal cruise and then the second part of that question is what you know what potentially with staffing levels look like under a under a capacity constrain model meeting the ships running at 50% capacity limits what does your staffing needs look like if that makes sense hopefully.
Sure Hi, Stephen it's Glenn So clearly our.
Staffing levels are commensurate with load factors.
So 50% of Invesco in our calculations would require about a 60% 65%.
Sure.
It's all based on modalities, so you'll have to staff from full modalities, where we have.
That's sort of a number of the team.
Team members for pain management staff for your Med Spa staff.
As opposed to even massage staff, where you'll have a much larger groups of we would reduce their your expectations and the like would be.
It would be.
The less folks who would be staffed accordingly, whereas you would be fully complemented in the med spa pay the management fitness, where you have it.
Typically less personnel regardless.
So the calculations work out could be at 50% of staff about 60% load.
And then the ramps up from there.
On the test cruises.
Similarly, there would be much less staff because of these vessels will not before even on the tests cruises sort of we're trying to do it just with simple representation for the moment for them.
And working and collaborating with the cruise lines based on their requirements.
Okay understood.
Second question I guess, this is probably going be for Glenn as well, but I mean, the conversations you have with your staff today is the.
The sit at home essentially.
What are those conversations like and again I guess, what I'm getting here as you know are they.
Anxious to get back to work are they willing to come back to work and it does seem like every cruise operator is going to the mandates some type of vaccination for the crew and I guess the the last part of that question is no.
Are they comfortable getting that vaccination.
So certainly so as you know we repatriated 3600 of staff last year of the 3600. We've confirmed about 2800 are raring to go ready to come back they would come back today, if we gave them an opportunity to return.
We also have just under a thousand for.
Through our new team members ready to join the <unk>.
So we have a full complement of a great team ready to just get back to get to work of all being digitally trained.
And the standards and has the et cetera.
As far as the vaccinations are concerned yes, we feel there is a willingness on the all Williams as soon as the as vaccinations are available to them. They will get vaccinated, we're working with our cruise partners.
As you know is Royal Caribbean as an example, the they would like to vaccinate. The staff. They are vaccinated. This debt, we will piggyback on their program with them to get out of staff vaccinated along with their crew as an example, as soon as we have opportunity to get our teams vaccinated, we will take advantage of that so we have not seen any.
Resilience of.
We're reticent to for staff members to be vaccinated you have to also remember where they are we recruit from 87 countries. These folks all need to go to work. They wanted to go to work. They are ready to go to work they love their jobs. They love their careers that we provided for them.
They take care of their families for generations.
One of them with the income that they make working for us, let's see so they're raring to go we just need to get the ships back on the water, but we do have thousands of thousands of the staff ready to go back to work.
Okay got you and then if I could ask one more I apologize for asking three questions, but Steven you talked about the cash burn in <unk> being in that 12 to 15 million range of and I assume that's basically assuming.
Not moving any type of your your crew around the world and I guess as we move into <unk> and obviously then <unk> as.
As you do start to put folks.
More into place.
The cash burn move outside of that range or would it move more on the high end of that range, meaning.
As you do start to move folks around does it does it move above 15 million over a quarter.
Yeah.
Good morning, Steve.
No we do not the lead so we believe that 15 would be at the high end, perhaps from the beginning as we start to move the folks I mean, obviously as you start to see some of these vessel sale it.
It would be income and cash flow of Cleveland generated from those vessels that could start to offset some of the subsequent newborns. So.
We're comfortable we think in that range for the <unk>.
The forward period.
Okay, great. Thanks, guys appreciate it.
Okay.
Our next question is from Sharon Zackfia with William Blair. Please go ahead.
Hi, good morning.
I guess the question just given your liquidity and how aggressive you've been making sure that you are viable can you talk about why the ATM out there and and kind of what the.
What the optionality of might be there if you look.
Look at that relative to your debt structure as well.
Yes, good morning, Sharon, it's Stephen I'll take that to start off with so.
As I mentioned, we did.
The text some activity on the ATM in the fourth quarter.
We had gross proceeds of 11 $6 million selling 126 million shares at an average prices.
'twenty one.
Which was pretty good for the time.
Having said that though we've really taken the view with regards to the ATM is trying to look at it opportunistically.
And.
One of two scenarios likely when the bulk like so the likely scenario we hoped.
Is that cruise lines gradually returned to service throughout 2021 in the beginning to start to generate close to the cash flow.
Net of Halston, and like Q4 of the.
Sure.
And it will start to build cash again and thankful of cash from the ATM would take effect of rigs.
Got it could be recorded as being sort of excess cash and therefore once you hit a point of time likely in 2022, when there's more visibility so back in the world of the cash flows coming in again net consideration would be given to using some of that cash to pay off.
A portion of the debt.
As you know, we have a $25 million second lien debt.
<unk> plus seven of the off the sandwiches.
The perhaps at a relatively high interest rate.
And so at the minimum paying debt down would certainly be accretive to the company and from an EPS standpoint, and youre going to take much more than that on the first lien basis paying off some of that as well would help so I.
I think that's really being opportunistic taking advantage of the sugar costs for that and then the appropriate point of time with the hope that ultimately it ends up being a.
Zero sum game from the company standpoint, the exchange debt for equity.
That's helpful. Thanks, and one more question I guess.
Kind of a very specific question administrative cost kind of ticked up a lot sequentially as well as year over year I don't know if there was anything unusual there and then.
For the stock has moved quite a bit I mean, I know of warrant clean up this is probably the.
The lesser of the things you're focused on but is there any thought process and as we go throughout 2021 of cleaning up the warm again.
Yeah, so yes.
There's always.
On the station and it was particularly.
We can take care of the board level around the capital structure of warrants et cetera.
The stock class continues to move that'll become more of the consideration.
So it could be something that happens with regards to that nothing definitive obviously at the moment kind of.
Wait to see what happens.
With regards to the admin expense.
The work as you know.
The incremental costs in the quarter a northern.
Northern Edmund opened up.
For the law as you pointed out as well, but the six kind of hits on on the inventory and that of minutes just some of the costs related to the actual ATM itself from expenses net of legal and professional fees and one time fees related to some of the legal expenses.
We would not expect to reoccur.
Thank you very much.
Once again, if you have a question. Please press Star then one on your telephone.
Our next question is from Stephanie Wissink with Jefferies. Please go ahead.
Hi, This is set by Bayer for stack of worsening.
Couple of questions for me. Please the first one is she guided for 'twenty for more ships by the end of 2022 relative to where you ended 2020.
I was wondering if you can help me bridge the gap between disposals cancellations and push outs relative to your initial outlook.
Two years ago for almost I think it was 211 ships.
Yes. Good morning, we have currently in the 160 non pressed for an equal vessel accounts that we provided by the end of 2022.
Not included.
Any of the 26, so I guess, it's 27 the outlet the additional princess' ship vessels that have been decommissioned by the cruise lines.
As we've mentioned before it's our understanding that all of those vessels. The vast majority will returned to service in some form or fashion with other cruise lines.
And or other operators.
The aim in active negotiations and all very positive or out of potentially getting back some of those cruise lines into our fleet, but at the moment. Our count does not include any of that because obviously, we wouldn't include that until we have definitive contracts signed.
Thanks for that.
Second question is yes.
The resorts spas have been reopened.
Yeah.
Anything that you can share in terms of yield.
Lending with regards to the safety protocols GAAP stress activity.
Any measures that you're taking that could eventually be implemented onboard cruise lines.
Well the few anecdotes, we can share our people our risk tolerance.
Our mix of services, if you're looking at of pre and post Covid environment are all leaning towards a pre COVID-19 world. So folks are buying or leaning towards selecting the same services that they use to choose pre COVID-19 back in let's call. It 2019 days.
So we find it very interesting, it's not even an 80% ratio of its virtually.
In the mid nineties.
Great.
Just really are not necessarily yearning for.
Desire and contactless or touchless technologies digital technologies, they want to go to the spa they want to relax they went to rejuvenate our they Wanna get touched and the spot is a safe Haven for this and they wanted to focus on their personal care within our spot so statistically the.
They are going to the traditional services at the same time, our retail numbers of good people of buying personal care products.
So those of the anecdotes I can give you from the.
Of the resort Division also understanding that Occupancies.
We are not at the historic levels yet.
Yet.
Okay.
The last one for me.
The business being largely Pos.
For 2020.
So on the issuance of stock comp in Q4.
Was that part of the multiyear program from prior year of grants or is that new and how should we think about that.
That line for 2021.
It's a combination of both of the things you mentioned the majority of it is a continuation of pilot programs.
And there was a portion of the new program that was put in place.
The normal annual I wouldn't say new program, rather than just typical annual program.
Equity is granted.
Two management team participants within the organization.
To ensure that people are compensated per day, and most importantly from a retention standpoint.
I will come back to you said with regards to how do you think about debt for 2021, we haven't put anything out of the three clubs of the 2021.
Okay. Thank you.
Once again, if you have a question. Please press Star then one on your telephone.
There are no further questions registered at this time I would like to turn the conference back over to Leon on Flaxman for any closing remarks.
Alright, Thanks, again, everybody for joining us.
I think.
All I can say of today, the better day than yesterday, we're looking at the two.
Two month acceleration of Vaccinating every adult in the United States based upon the president of items announcements yesterday.
<unk> working together of milk and Johnson <unk> Johnson I think all of the.
For the positive news and.
The acceleration in the numbers of people being vaccinated daily.
One small world and the industry.
To get back to business.
For some some real certainty now and that gives us a lot of confidence and we look forward to speaking with you all again on our first quarter call. Thank you very much.
Thank you everyone.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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