Q1 2021 OneSpaWorld Holdings Ltd Earnings Call
Thank you for standing by this is the conference operator, welcome to the one spa world's first quarter 'twenty or 'twenty One 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 to join the question queue you may <unk>.
Star then one on your telephone keypad share do you need assistance during the conference call you May signal, an operator by pressing star at Zero I would now like to turn the conference over to Allison Malkin of ICR for opening remarks. Please go ahead.
Thank you good morning, and welcome to one spot World first quarter 2021 earnings call and webcast before we begin I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward looking statements.
The COVID-19 pandemic continues to have a significant impact on our operations cash flow and financial position, 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.
At only as of today and actual results may differ materially from current expectations based on a number of factors.
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 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 first quarter 2021 earnings release, which was furnished to the SEC today on form.
Okay.
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 and explanation of these metrics can be found in.
The earnings release filed this morning join.
Joining me today are Leonard Flaxman, executive Chairman, and CEO, and Stephen Lazarus CFO and C. O L. Leonard will begin with a review of our first quarter 2021 performance and provide an update on our operations at our key priority then Steven will provide more details on the financials and liquidity.
I would now like to turn the call over to Leonard.
Thank you Alison good morning, and welcome to one Spa will first quarter 2020 one results conference call.
As of travel and tourism industry has begun to reopen we are ready we are eager and we are excited to welcome guests to our health and wellness centers and deliver our extraordinary ones Falwell guest experiences.
We have invested aggressively from 14 months in protecting our people sustaining our operations.
<unk> our competitive position.
Comprehensive protocols to ensure a safe and successful at tend to service will.
While taking actions to maintain strong liquidity.
The dedication of our team throughout this unprecedented pandemic positions us to flawlessly execute our assumption of operations aboard the first surgeries three expected ships scheduled to resume selling by the end of July.
Our onboard operating protocols are complete and our onboard staff is fully trained.
We are operating health and wellness centers aboard free of 160 cruise line vessels that have commenced voyages.
We have opened our spas at 47 of our 53 destination results realizing revenue that stores utilization in line with our expense.
Expectations end with operating metrics, increasing sequentially month over month.
These initial returns.
Confirm that we are positioned properly to capitalize on the strength of our team.
Operating platform and business model.
Drive long term profitable growth as cruise ships and destination resort operations.
All of your regime.
During the quarter, we prioritized activities to ensure a successful return to service.
And maintain strong liquidity with the first quarter, making strong progress on both fronts, including continuing to focus on elevating our practices, including previously mentioned digital training at the <unk>.
Implementation of guidelines for protection and standardization.
Culture and standards as well as expansion of our service offerings and technology.
We are implementing these initiatives with a focus on flawless delivery to the additional 31 ships expects to return by the end of July.
Importantly, our initiatives have shifted from creating at.
At the stress testing and anticipation of return to service to going live providing feedback and making enhancements to our processes.
Each of our initiatives Optimizes, our effectiveness focuses on cost efficiencies.
And then share a flawless returned to service.
Following the completion of return to service checklists, and utilizing manning strategies to align staffing to expected return dates and low taxes we.
We estimate approximately 640 staff members are required for the initial return of vessels.
Net and we have created digital content for new service requirements through virtual training, including twice daily Zoom training conducted by I ran out of London Wellness Academy.
Today to 130 staff members with trained.
Of our new contactless services, well re trading with the emphasis on COVID-19 safety protocols. So as managed on our E learning platform.
Along these lines I stock is eager to return to work we conducted a survey of 2800 staff members.
And 93% said they plan to return to work at 97% said they will get vaccinated for COVID-19, which we view as very encouraging.
As of today three vessels of our cruise line partners of selling in 47 of our destination resort spas are operating well.
While there remains uncertainty as to the timing for return to normal operations. We are confident in the advantages of our business model.
Notably we remain encouraged by the early strong demand in Spain, we are seeing where we are operating with destination resorts by revenue and staff utilization increasing sequentially month after month.
Overall, we believe we remain constantly positioned to capitalize on the strength of our operating platform and advantages.
Advantageous business model as operations resume and importantly achieve our goal to drive long term profitable growth for the benefit of <unk> shareholders.
With that I'll turn the call over to Stephen who will comment on our first quarter 2020, one results and liquidity position Steven.
Yes.
Sure.
Thank you Linda and good morning, ladies and gentlemen.
While the first quarter as you know continue to be impacted by the global pandemic impact on the travel and tourism industry.
We remained intently focused on preserving our liquidity as well as investing in innovation and training our stores as we prepare our operations for a return to service.
I will now share just a few of the first quarter 2021 highlights rather than provide us with those of you all of our quarterly results given the continued significant impact of the global COVID-19 pandemic has had on our operations.
Well the first quarter total revenues were $5 $6 million compared to $114 3 billion in the first quarter last year.
Revenues generated in this years first quarter were primarily related to the 47 destination resort spas.
It will open during the quarter and e-commerce product sales through our kind to spa dot com website.
Cost of services was several points of $5 million compared to $86 million in the 'twenty 'twenty first quarter end cost of products, where at $1.3 billion compared to $22 $1 billion in the 2021st quarter and adjusted EBIT was a loss of $9 $4 million.
As compared to a positive of $5 $1 billion in the first quarter of 2020.
We ended the quarter with total liquidity of $65 7 billion $9 $3 million higher than where we ended the year, resulting from 18 and a half million dollars at <unk>.
Net cash proceeds from the sale of one 7 billion shares as part of our at the market equity offering program.
And a lower than forecast cash burn rate of $9.3 billion for the quarter.
The cash burn rate for the quarter of $9 $3 million was approximately $5 $7 billion below our original expectation.
Driven by lower expenses due to later than expected return to share with states and timing of payments.
The company expects cash burn to approximate $15 million you Miss second quarter, as we increase activity in anticipation of sailings being reviewed.
We expect resumption of our cruise ship and destination resort operations to accelerate commencing in the third quarter and generate increasing cash flow from operations. However, we will continue to manage our liquidity so as to sustain our operations in the event at unforeseen disruptions occur and Cigna.
He can cruise ships and destination resort operations do not pursue end scale is currently expected.
We are confident that we have the resources balance sheet strength and current liquidity to find out business with limited operations if necessary through June 'twenty 'twenty two.
As a result of the unforeseen guidance issued on April 12 by the ACC staff.
Applicable to accounting for warrants, we made the determination to restate the financial statements covered by the effect of periods, which we have done with the amending of out 'twenty 'twenty annual report on form 10-K, originally followup on March 12 2021.
With our remained at 2020 annual report on form 10-K, a follow up on May 10 2021.
The change to classify outstanding warrants to purchase common shares as liabilities versus equity does not impact you start Ricky reported cash and cash equivalents or adjusted EBIT for the effective periods.
Company had previously classified the words as equity consistent with common market practice, which existed prior to the store statement.
As it relates to our outlook for the remainder of 2021 due.
Due to the ongoing business disruption and uncertainty surrounding the continued impact of our business from the COVID-19 pandemic.
We will continue to not provide guidance notwithstanding the foregoing for the second quarter end 2021 fiscal year, we expect to incur of net loss on a GAAP and adjusted basis.
And with that we will open up the call for questions. Thank you operator.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear atone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press star.
And then two we will pause for a moment of callers join the queue.
The first question comes from Steven <unk> with Stifel. Please go ahead.
Yeah.
Yes, good morning, guys.
So.
Understand the cash burn is going to look something like 15 million for the second quarter.
And for the most part of you still don't have any type of material maritime operations in the second quarter as well, but.
As you look at to the third quarter, and let's say you get those thirtyish ships back in somewhat operation just just trying to understand what's your cash burn would look like under that type of scenario, meaning.
Would you guys actually be cash flow positive with that number of shifts in service or would you still need a oh.
At a higher level of of ships.
Steve Good morning.
We do not anticipate.
Currently with at <unk>.
Number of ships that you would be cash flow positive.
The third quarter, we do expect based upon what we are seeing and with regards to anticipated incremental sailings.
The fourth quarter that while at the end of the year, we would start to be cash positive.
At anticipating at this time, although we certainly don't check theater at a cash burn rate of $15 million, we do not expect to be cash flow positive in Q3.
Okay Gotcha.
And then second question would be around just maybe what you guys are seeing at this point in terms of spend levels.
Both of your land based spas and then the two ships that actually are in service today, just just trying to understand how their spend levels look and if there.
As strong as what we're seeing across other consumer verticals that we are that we do we track.
Yes, I mean, the demand is actually I mean, Thats, obviously limited data Steve So yeah. So it's.
Two ships.
Suddenly the ship.
One some of the seas.
We're seeing strong demand and highest spend despite the level of occupancies and thats happening in the results as well so we're actually starting to increase our stocking levels at some of the results right now because of the demand, which we couldn't keep up with.
We started with low staffing and some of the results at last week, taking a look at demand we.
We will be increasing at gradually.
Just because we need we just need more of this there's so much demand out there we're actually seeing very decent.
Retail spend and resorts higher than we've seen historically, so theres a good attachment rates as well.
And last question are you at just a follow up on that for the land based operations that you have today are you are you guys capacity constrained.
Meaning net whatever jurisdiction you're operating in.
You can't operate at full capacity.
We are not presently.
Under those conditions anywhere right now and that's why we're starting to look at hiring back more and more of our staff in those locations.
Okay got you thanks, guys appreciate it.
The next question comes from Sharon Zackfia with William Blair. Please go ahead.
Hi, good morning, I want to apologize my cell phone drops or if I ask something that was in the prepared commentary it at that.
At the AT&T at fault not mine.
I guess of question on bookings.
Bookings are you seeing for the maritime operations any change in kind of pre booking levels, our customers kind of more eager than they were of pre pandemic.
At kind of get these things on the books for when they do eventually sale.
On the pre booking side, Chad, we still don't have visibility from the cruise lines yet.
Everything we're seeing is obviously high demand and pent up demand honestly from <unk>.
True ticket perspective, but the pre open.
King.
On the back end right now.
As they start to confirm.
Passenger counts for each of the savings that bookings will start to flow in.
We expect that to happen imminently.
Okay.
And then I think there was some conversation in the prepared commentary about metrics kind.
Of improving sequentially each month, I mean, how would you how does revenue per store for land based.
End of compare now versus pre pandemic.
So we really don't look at it on a revenue per store basis like we look at it at sea.
Andy looking at sort of revenue per occupied room.
In some cases better than it was pre pandemic.
But that's also a function of occupancies at the resorts themselves. So as of results start to fill up the revenue per occupied room will probably come back down a little bit but right now that metric in itself is at.
Pacey prepay.
Pre pandemic levels.
Okay, and then I know your you talked about the day.
The south of Europe, Youre going at the kind of getting ready to go on board state on what is what is staffing level is going to look like on an shifts relative to pre pandemic. I mean are you going to be fully staff. I know you mentioned at land Bank you started off a bit lower at now you're you're staffing up I'm just curious what the.
Staffing is going to look like at Ms Jeffs.
So I think if we take a look at what Sydney and Singapore, We started off obviously their occupancy occupancies have been sub 50.
Per cent.
So when I look at the size of the ship that's about a third of maybe even less of a third of our full team size.
But that too as we start to see Occupancies go up.
We'll start increasing the team size to probably at least half of them that ship.
With respect to the savings here of where before we thought they were going to be occupancies under 50% of it seems that they sidney will have occupancies greater than 50%. So we're probably staff up but not fully staffed up so we will stop at probably a minimum.
50% to 60% of our staff to start out with depending on the Occupancies that we have visibility to from the cruise lines.
That's helpful and then Steven I know you said that.
We are hopeful the day cash flow positive you had towards the end of the year end.
What is your line of sight right now on how many ships do you think will be selling by the fourth quarter.
We do have.
From the ongoing meetings constantly chimps honestly that we have with the cruise lines.
Some line of sight with regards to when they expect to launch day vessels.
I think it would probably be remiss of me to stay at that number at this point in time, because it's not definitive.
Suffice it to say that we certainly expect at the number of vessels sailing by year end to be significantly more than the number of vessels that we think will be selling at by the end of July.
Okay. Thank you.
The next question comes from Stephanie Wissink with Jefferies. Please go ahead.
Hi team at set by by of course step Wissink couple of questions from me. Please the first one at any learnings from the goods sold at spot that's influencing how you reshape your share of this menu onboard as you prepare to reopen.
Okay can you just repeat that I didnt hear the first part of it.
Okay.
Yeah.
Landings from the resorts boss.
It had been 47 of them now operating that's influencing how you reshape your.
Service menu onboard at U P paid to reopen.
Yes.
Yes.
They're very different models first of all.
In terms of the offerings that we have available.
Just I think we mentioned this before that.
It's interesting to see that even though we have contactless.
Services.
The demand for the.
Normal sort of basic facials and other services massage of Teng.
Most of bodies body services.
There is of much higher demand for just the legacy type services both online.
And certainly from what we've seen from from two ships, so even though we have.
At the same menus in terms of contactless type of services available of demand is still there from a traditional services.
And.
Any anticipated changes in share count from here into year end and any visibility into what the portfolio will look like from 2022.
Well I think if we take a look at what we're hearing from the cruise lines and what we've heard from some of the presentations made by management.
I think there is going to be of much cost of scaling into the fourth quarter of ships all over the world on a global basis.
So we're anticipating that most of the 160 ships that we will be at it will be in service by the first quarter of 2022.
Okay and of your.
You're selling specifically about your portfolio.
Q1 of $1 59.
How should we think that we'll look at the end.
Of of.
<unk> 2021, and then any visibility to how that will look in 2022.
So we do expect that call at the end of 2022 there.
There will be an additional 24, new vessels that will edits to.
Through the various fleets.
At with regards to how it is going to look at the end of 2021 at a.
A little premature price to be at certainty around that number because of the day and it's highly dependent upon when coupons with terms of service and particularly when they return to service.
With with.
With North American savings, because you don't have a progression of the CDC.
Okay. Thank you.
Once again, we have a question. Please press Star then one.
The next question comes from.
Georgie ever of Infiniti Research. Please go ahead.
Good morning, guys.
I was trying to get into the queue earlier.
Couple of quick questions first of all different crews.
And the corporate entities are tackling the vaccination requirement somewhat differently.
Would you expect to ask your crude to be fully vaccinated and you mentioned at 97% of your existing crew, we're totally willing to be vaccinated is that something of that you envision will be at requirement for your crude.
Okay.
So certainly if you look at the Cdc's requirements for 98% of the crude to be vaccinated at 95 percentage of the passengers to be vaccinated.
We have seen extensive amount of work already being done by the cruise lines, who have announced savings.
And they've started to vaccinate the CRU already.
So a lot of the banners are doing the vaccinations right now.
At we suddenly saw the W. H O approved from one of the Chinese vaccinations for folks in the Philippines, So there'll be using that so to the extent that they can show proof of vaccination that is satisfactory.
The cruise line.
And they will certainly not have to be re vaccinated, but.
We see just an enormous.
<unk>.
Tent up demand from our staff to return in most of them will get back from David weighted down by the cruise line of whether they'll accept vaccination from because they're all at different vaccines out there obviously that are per foot.
No by banner, but most of the cruise lines right now that we have been talking to our are doing the vaccinations themselves for the crew so that they can all of Pos.
UTC requirements and threshold.
And then I do would that include you accrue.
Yes, absolutely so the cruise lines would actually be willing to provide vaccinations I know in port Canaveral, they've actually opened up of <unk>.
I think he's a great idea.
We didn't deploy at the vaccination site for crew members.
So of that would cover of your crew you would not have the responsibility and jurgens nation of issues relating to that.
Well most of them certainly of the big banners here.
Thus far of doing the vaccinations.
Your line of a case of one of the ban of the even bring the ship back to Miami. So they can get everybody vaccinated because of that.
That particular jurisdiction.
Have access to the vaccines.
Given given the way the U S government has controlled vaccination distribution not every single.
At all of that all of the.
At the ports that ships are going to sell from the Caribbean have access to two vaccine. So.
That is not available those ships will come back at least we've seen one of two of them already.
We have undertaken at the same.
The extent of vaccination of that Theyre doing and put it in half or so.
They are moving rapidly.
Low faster than others, but those are the ones that are going first.
Sometimes I wish I was at couldn't crew member.
Because I've been fighting ticket of legacy I didn't get the first shot at.
Good day.
And completely separate question, maybe Stephen you can help me out on this one.
In terms of Lam base of resorts. So, yes, 47 at pretty much the vast majority are open.
We are the low breakeven at this point because of occupancy or.
What is the model going forward, let's say between tween too.
So while it's a reputation.
In the towards the end of the first quarter that division was actually not losing money at was EBIT.
EBIT deposits huh.
So theyre already at a point, where we're starting to see positive cash flow generation from those.
Okay.
That's great news. Thank you Stephen Thank you guys.
You're welcome thanks, Thank you.
This concludes the question and answer session I would like to turn the conference back over to Larry Nerd Flaxman Executive Chairman for any closing remarks.
Thank you all for joining us on this call.
At this point of mentioned that we which.
Which we Didnt mentioned was we actually had some very successful contract extensions. During this first quarter, which we didn't put in the press release, one because we just can't but that Disney contract was renewed for an additional eight years and we were successfully awarded the new Cunard contracts. Although we don't have an executed contracts right now we did get that.
Awarded a net that's actually.
Market share edition end will be awarded of three year contracts. So we're very excited about market expansion in the first quarter and we continue to look at some other opportunities as well so.
The future looks brighter than they ever did before and hopefully we will have more to share with you and talk with you on our second quarter call. Thank you for joining us today.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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