Q2 2021 OneSpaWorld Holdings Ltd Earnings Call
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Yeah.
Greetings and welcome to the 1 Bos second quarter 2021 earnings call.
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Thursday August 15.2021.
I would now like to turn the conference over to Allison Malkin Investor Relations. Please go ahead.
Thank you good morning, and welcome to 1 spot of world's second 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 of.
Significant impact on our operations cash flow and financial position the on certain and dynamic nature of current conditions, and it's ongoing and packed 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.
Just 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 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.
And our second quarter 2021 earnings release, which was furnished to the SEC 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 and explanation of these metrics can be found in our earnings release.
Issued earlier this morning, joining me today are at Leonard Flaxman, Executive Chairman, and CEO, and Stephen Lazarus CFO and C. O L. Leonard will begin with a review of our second quarter 2021 performance and provide an update on our operations and New York and our key priorities then Stephen.
And we'll provide more details on the financials and our liquidity I would now like to turn the call over to Leonard.
Thank you Alison and good morning, all and welcome to 1 Spa will at second quarter, 2020.1 results conference call.
The second quarter represented at terrific start to ones fall of world's resumption of service at sea and.
And continued positive momentum across our destination resort spas at have reopened.
While we continue to operate and of fluid environment sequential revenue improvement from the first quarter was significant.
In total at second quarter results, mainly reflect the performance of our destination resort spas.
Of the 14 shifts and service at the end of the quarter.
10 resumed operations in June.
That said, our intense focus and successful implementation of our actions to ready our staff and health and wellness centers to safety open led to a flawless execution of all of our new protocols and outstanding service.
At highly dedicated staff members.
I would like to thank got crews and destination resort spas staff and corporate teams.
And during endless hours of training among many other hardships to support our outstanding returned to service.
We expect to build upon our favorable momentum as more ships returned to service during the second half of the.
Turning to highlights of the quarter.
Total revenues were $9.2 million and mainly reflected destination resort spa revenues.
Adjusted EBITDA was a loss of $9.7 million.
Of note our destination resort spas generated positive EBITDA and the quota and we are increasing staff and all of US all locations to meet higher than expected demand.
And we ended the quarter with total liquidity of $54.8 million.
And as of yesterday, we operated on a total of 42 cruise ships 70 more 7 more than we estimated when we reported first quarter results and me.
Well occupancy and staffing up below historical levels.
And continuing to see strong customer demand and spend for our services.
To this end in the month of July customers spend exceeded July of 2019 levels on board the cruise ships that we sales.
This was accomplished despite lower than historical promotional activity.
We also are encouraged at recent pre booking statistics are up versus 2019.
And keeping with 1 spa worlds tradition of supporting our onboard staff at corporate team has already visited 30 of the 42 ships that have returned to service to ensure we generate the highest possible revenue while maintaining the highest standards.
Florida has returned to service is at top priority.
We successfully placed 779 and cruise ship personnel on vessels at the end of the second quarter for actual and anticipated voyages over.
Coming of the challenges of the pandemic, securing visas COVID-19 testing and other travel restrictions and.
Despite these hurdles of team members are ecstatic to be back at sea.
We are adjusting our plans on a daily basis. So that we are and are positioned to react immediately.
And he additional unplanned returned to service.
By the end of September we expect to have 1383 store re embarked on vessels.
We believe we are well positioned to continue at flawless execution as we welcome stuff back and prepare to resume operations at an additional 37 ships by the end of September.
We will also delighted to see and the U S government approved sailings, and Alaska, which represents an important market for us generating some of our best operating metrics.
We believe on initial return to service performance confirms that we are positioned properly to capitalize on the strength of our team operating platform and business model to drive long term profitable growth at cruise ships and destination resort and Spa operations.
Fully regime.
Overall, we will continue to execute with intense financial discipline, while implementing strategies and enable the company and to not only of return to peak levels of sales and profitability, but also a valid and elevate our brand and further expand our service offering and our ongoing efforts to increase.
Value for all of all ones Falwell stakeholders.
With that I'll turn the call over to Stephen who will comment on our second quarter 2021 results and liquidity position and Steven.
Yeah.
Yes.
Thank you Linda and good morning, ladies and gentlemen.
And as Linda mentioned, the second quarter total sales and operating performance accelerate from the first quarter of the year.
<unk> of our team's expertise ability to prepare and returns stores to surface and the extraordinary conditions.
I will now share at just a few of the second quarter 2021highlights.
For the second quarter.
Total revenues were $9.2 million compared to $1 billion and the second quarter last year.
Revenues were generated primarily from our destination resort spas.
14 of our health and wellness centers on board shirts, and resumed operations as of June 30th 2021 with the majority of those coming into service towards the end.
Okay.
Cost of service with $9.6 million compared to $12.6 million and the 'twenty 'twenty second quarter.
The decrease was attributable to significant costs incurred related to the repatriation of on both personnel and costs due to the COVID-19 related closure of all of our health and wellness centers and the 2020 second quarter.
Cost of products were 1 point and $5 million compared to $1.6 million in the 2020 second quarter cost of product in the second quarter. This year reflected increased freight expenses related to the resumption of service while cluster of products for the 2020 second quarter included the establishment.
Of the 500 thousands of all the inventory reserves.
Net income was $300000 compared to a loss of $20.7 million and the second quarter of 2020.
$21 billion improvement in the second quarter of fiscal 'twenty 'twenty..1 was primarily a result of a turn and a half a million of all the improvement you know of loss from operations.
Plus the $8.6 million on a positive change and the fair value of warrants.
The change and the fair value of Orange is the result of changes in the market prices deriving the value of these financial instruments.
Adjusted EBITDA was at a loss of $9.7 million as.
<unk> to a loss of $21 million and the second quarter of 2020.
We ended the quarter with total liquidity of $54.8 million.
Additionally at quarter end 19 point of $3 million remained available under the ATM program avail.
Availability under our line of credit of $13 billion at quarter end.
The cash burn rate for the quarter of pinpoint at 9 billion was approximately $4.1 billion below our expectations.
And by timing of payments and increased revenue.
We expect cash burn between 10, and $12 million and the third quarter as we increase activity and anticipation of increased Salix.
We expect resumption of a cruise ship operations to accelerate and the third quarter and thereafter and generate improved cash flow from operations.
Timothy leading to positive cash flow in December.
As it relates to our outlook for 2020.1.
Due to the ongoing business disruption and uncertainty surrounding the continued impact to our business from the COVID-19 pandemic, we will continue to not provide guidance.
Notwithstanding the foregoing for the third quarter and 2021 fiscal year, we expect to incur and net loss on a GAAP and adjusted basis and.
And with that we will open up the call for questions. Operator, if you could please take over.
Thank you very much we do welcome all questions or comments to register please press. The 1 followed by the 4 on your telephone you will hear of 3 ton prompted to acknowledge your request. If your question has been answered or you would like to withdraw of registration. Please press <unk>.
1.3 and again, we do welcome all questions or comments to register please press 1.4.
Our first question comes from the line of Steve Woods and ski of Stifel. Please proceed with your question.
Yeah, Hey, guys excuse me good morning.
So first of all obviously labor is.
The big pressure point out there for most companies at this point and I fully understand you guys are better positioned.
Versus most employers given your.
No of specialized labor fleet and the fact that you know for the most part they're pretty much commission, but if.
If you look at your land based operations can you give us any idea of what the labor availability has has looked like or if that's a pressure point for you guys.
Yeah look I mean, it's it's 2 complete different labor pool models, Steve you're correct.
And we certainly stuffing up where necessary with demand and extend of dollars being given to us by the different resorts and we operate and certain positions of proving a little tougher to get and there is increased competition on land for staff, but so.
So good and were managing to staff up when necessary and and stay abreast with the demand at its definitely a tight market no question about it.
Probably not as fluid as we were able to get staff from 85 different countries that we recruit from but.
Yeah, it's definitely a title model at this point, but so far so good.
Okay Gotcha and then.
You guys mentioned the spend levels on board.
You know have been very strong and above 2019, and can you help us think about what.
Passengers are spending on meeting at that there was at more.
Spending on certain of our products. After services are complete or is it folks just wanting more complex or expense of services and none of it.
I don't know if theres any way you can kind of talk.
Through this but you know as most of the spend coming from those at a cash paying customer or are these from.
Onboard credits hopefully that all makes sense.
Yeah. So look we've got July under wraps we've had a good look at at and I can tell you right. Now every single metric has been positive and above.
Where we were at July 2019, and which is very encouraging with sugar occupancy only being about 39% over all of them on all of the ships that we were at so and as well all ship Occupancies at down frequencies up spend is up.
Spend is up despite onboard credits and while we don't have enough data right now to be able to pool to what extent that's factoring into the total spend and I can tell you that people are spending more on our pre book basis on the first day of hip location and we've ever seen before I mean, some of the amounts.
And we've seen spent on the first day is mind blowing and.
Encouraging.
Which is a testament to us getting up on pre book system with a shorter lead times on changing itineraries. So overall, if I look at a summary of that snapshot of what we're seeing for July and every single category frequency and spend.
And it's ticket total it's up versus 19, so it's a good indication thus far of pent up demand for just legacy services and obviously with that comes from retail attachment. So we're excited about what we're seeing so far and the execution from our team has really been.
Incredible.
Yeah.
Okay that sounds great. Thanks, and if I could sneak 1 more and your liquidity position, what kind of hovering at that.
Mid fifties to 65, if you include the.
The ATM component.
I guess, obviously theres the fear out there around variance and what that could do to the operators themselves you know what that is.
And I'd be to eventually canceled cruises or adjusted itineraries and stuff like that so well.
And with where your liquidity position us to dilute your cash.
Cash burn so to speak.
And feel pretty comfortable that even if there is some kind of slight disruption you guys are still pretty well positioned.
Yeah.
The short answer to that is yes, with a slight disruption I think we would be okay. Clearly the cruise line and so taking increased.
The initiatives right now of just in the last day of Southern in fact, I'm on Carnival for example.
With requiring.
Oh at doors testing at the spot vaccination status and order to board of vessel will be narrow required so.
We think the cruise lines, though of doing a great job in terms of mitigating any potential exposure on borden and while it will certainly happen and we've also seen in cases, where it does at the actions that they're taking and the protocols at kind of in place of very good width containing and at the end to flying very quickly potentially exposure.
So.
It's pretty much of wait and see situation for us, but based upon everything that we see on those 2 day, we feel comfortable.
Okay, great. Thanks, guys appreciate it.
Yeah.
And again as a reminder to register of questions. Please press 1.4.
Our next question comes from the line of Stephanie Wissink.
Of Jefferies. Please proceed with your question.
Hey, everyone. It's Chris me of on and that's on the line for stuff just a couple of quick ones from me and how should we be thinking about modeling of revenue per ship and you ramp up from 14 to 79 and they're of general framework for volume per ship or is there really kind of a percentage of pre pandemic levels.
And that we should be thinking about here.
Okay.
It's probably a little too soon and honestly to get that.
General because different cruise lines of starting out with different occupancy levels on board.
Depending on on Cinryze, depending on occupancy levels, depending on winning a quarter of those ships coming to service well all influenced the type of revenue generation. So.
Honestly at this stage and so fluid and there's so many changes there.
Overarching assumptions with regards to revenue generation or just too soon to be.
Talked about for us.
Fair enough and then I also wanted to dig deeper on cash burn of specifically around staffing dynamic and so how early do you need to bring back staffing and pre voyage and then how do you really balance that staffing.
Given the uncertainty around Covid variance.
Yeah, It's a great question and it's something that our team has just done an incredible job of London Wellness Academy of all of our recruiting staff around the world I mean, they all sit and countries, obviously that I'll, just silly and red and were not going to those countries. Each banner that we serve has different requirements and <unk>.
Terms of the quarantine and the vaccination et cetera.
And you know at some cases, we're bringing in store of 45 days ahead of the actual voyage going either 4 of tests crews both her and actual revenue crews to give us adequate time to quarantine and have them go through both of their vaccination protocols and so you know what that does is it puts a lot of pressure.
Sure and.
Stress on all of the recruiting and training, but this is something that we have done historically at very well clearly we have never put so many shifts back and the water with staff. So yeah, it's a herculean task, but at the same time.
To date, we've been managing very well there are obviously.
Days, where you have some blips of somebody at all and he's.
And put back into quarantine, but we have enough stuff on the bench right now to cope with all of the demand that we're projecting through the end of the.
That's very helpful. Thank you yep.
Yes.
And thank you.
Our next question comes from the line of Athens, Georgia of of Infiniti Research. Please proceed with your question.
And good morning, guys and I think the industry in general and you guys from particular have done a really great job under these circumstances. So you know.
And my fingers crossed at everything continues to.
Go ahead smoothly in terms of the.
The good spend that you have seen what did you achieve at some of that to the quality of passengers at Youre seeing I imagine a decent why experienced cruisers. There is coming back on first on board in.
In the past and it seems that first time cruisers and they are.
And offer and better spend for you and Mike correct.
Yes.
And I think it's hard to delineate between you know first time is and experience cruises and tons of the total spend on board and it's just not something that we're able to.
Dig into right now, but I will say at this.
Definitely a higher percentage of experience cruises, but.
Given that the more experienced crews is typically don't spend as much as first time as weird simply encouraged by the pent up demand that we're seeing so it seems like the exuberance of getting out there on the sea again, all of that's playing well into the pre book and the span and demand for our services right now.
And do at 50.
These are at you shouldn't buy the cruise companies directly help or is it difficult to delineate a.
How much spend is coming from that portion.
And that's something we're going to try and get you more visibility on as we end the end of third quarter of fourth quarter and there. It's a tough break out in and sort of of the recap of every single cruise, it's not something that we necessarily track on end of the individual P. O S is when we when we send it back to the.
The state of and folio, but we'll try and get you better visibility I will say that it's at is helping but I think the standard above and beyond the SEC's is definitely encouraging because people on not only having 1 service they having more than 1 service and they spending on more of the expensive service.
And so.
That's a good indication not only of the quality of the gas but of the pent up demand for these type of legacy services.
Well that sounds great.
We all are aware of the inherent uncertainties surrounding whether it's our the delta there you enter at possibly Lambda if we exclude that for a moment what are some of the potential risks that you see over the next let's say 6 to 12 months is there anything else at the cause.
As you are concerned at this point.
So what I'm, saying.
And so I'm not concerned about our team our operation of our ability to execute them and I think.
You know we've done an amazing job of recruiting on to so many ships that is quickly with you know August September being big months as well.
The only thing that sort of keeps me up a little bit at night, obviously is at.
And the continued ability to contain the delta variant of spreading.
Anywhere on to the ships I will say that from everything that we've seen from even the increased level of protocols that a lot of the banners are putting out there and the last couple of weeks with the increase and surgeon at the very end, it's encouraging to see a few outbreaks of being on board so their protocols.
And definitely working and I think there's a heightened awareness of what they need to do going forward to keep the ships at sea.
Well I think of the industry should deserve some credit for it and sort of being indirect are advocates for vaccination and you know from getting people to get vaccinated at the faster rate. So again I think you guys are doing a great job so I'll keep it up.
Thank you.
Yeah.
Okay.
And there are no further questions at this time I'll turn the call back to you panelists. Please continue.
Alright, Thanks again, everyone for joining us today.
And we look forward to speaking with you and updating you on our progress and report our third quarter results in early November Thanks, again for joining us today.
And that does conclude today's presentation. We do thank you for your participation and ask that you. Please disconnect. Your lines have a great rest of the day everyone.
Yeah.
Uh huh.
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