Q1 2022 Onespaworld Holdings Ltd Earnings Call
Good morning, and welcome to the one small world first quarter 2022 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Allison Malkin. Please go ahead.
Thank you good morning, and welcome to one style World first quarter fiscal 2022 earnings call and webcast before we begin I would 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 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 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 during this conference call and webcast. We refer you to the disclaimer regarding forward looking statements that is included in our first quarter 2022.
Earnings release, which was furnished to the S. E. T. 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.
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 Leonard Flaxman, Executive Chairman, and Chief Executive Officer, and Stephen Lazarus, Chief Financial Officer, and Chief Operating Officer, Leonard will begin with a review of our first quarter performance and provide an update on our operations and.
They are a key priority then Steven will provide more details on the financials and our liquidity I would now like to turn the call over to Leonard.
Thank you Alison good morning, and welcome to <unk> first quarter 2022 results conference call.
I'm pleased to report a very positive start to the year. Despite the COVID-19, I'm recalling variance negative impact on scheduled voyages occupancy rates and onboard stopping in the quarter.
I'm equally proud of our corporate team and our onboard and results for our leadership team.
Mitigated omnicom's impact on our stock and our operations, while always assuring our extraordinary standard of guest experience.
Financially the quarter included a significant increase in revenue compared to the fiscal 2021 first quarter.
King, marking our fifth consecutive quarter of sequential revenue growth.
Our reported positive adjusted EBITDA and adjusted net income with a better than expected cash burn rate.
Operationally, we saw continued growth across key operating metrics, while maintaining a Florida returned to service.
As we look ahead, we continue to expect our performance trends to accelerate quarterly and generate sequential revenue growth with our annual performance expected to deliver.
Positive adjusted EBITDA and positive adjusted net income.
Turning to highlights of the quarter.
Total revenues were $87 $7 million.
Up from $5 $6 million in the first quarter of 'twenty, 'twenty, one and improving sequentially from fourth quarter 2021.
The growth reflects contributions from health and wellness centers reopen.
Mm 120 ships 27 ships that cause in the operation and the contribution from 48 destination resort spas.
Adjusted EBITDA was positive $2 3 million with positive contribution from our health and wellness centers onboard cruise ships.
And in destination resort spas on land and we ended the quarter with total liquidity of approximately $44 million.
We had many accomplishments for the quarter, most notably Florida has returned to service continued.
So that's ready and trained staff to re embark on additional 15 cruise ships.
In addition, we commenced services about five new ships.
New ship builds as I mentioned at quarter end, we had health and wellness centers on a 127 ships that had resumed voyages and expect to resume services.
68 ships by the end of the second quarter and a 178 ships by the end of the.
During the remainder of 2022 we anticipate operating health and wellness centers on.
Seven additional new ship builds.
Be introduced into service by our cruise line partners.
We saw record demand by cruise ship guests for services.
While capacity on cruise ships remains below historical levels. We were very pleased to see continued high demand for our services key operating metrics during the first quarter of 2022.
Tad favorably with our first quarter 2019 performance. The most recent comparable period of normalized operations.
For example, pre booking percentage of service revenue was 4.5 percentage points about Q1, 2019 and average guest spend so improvement in the high teens over 2019.
So it is frequency to guests guests penetration and revenue per store per day.
Also a positive compared to the first quarter of 2019.
These improved operating metrics was driven by the continued innovation of the offering and focus on stopped training.
With this in mind during the quarter, we implemented five intensification initiatives to increase guest spend and utilization, which contributed to the growth in key operating metrics.
These included improving retail conversion to solution sales training where.
We reinforced our five step program increase.
Increased guest utilization through cross promotion and Rebooking tracking mechanisms and additional staff trainings.
Boeing guests spend with training of our skin led.
To convert more guests to biotech facials and by introducing special add on menus that add to the experience with no additional treatment time needed.
And lastly, increasing penetration by targeting families and teen audiences over the holiday period with the introduction of the spring break and teen menu.
As we look ahead, ensuring a flawless returned to service we will continue to be our top priority.
We have had a tremendous response from prior personnel are new applicants who'd be eager to come back.
And wellness centers.
At quarter end, we successfully placed 2369.
Cruise ship personnel on vessels for actual and anticipated voyages.
Becoming the challenges of the pandemic, securing visas COVID-19 testing and travel restrictions.
Despite these hurdles I team members remain ecstatic to be back at sea.
But at the end of the second quarter, we expect to have 3087 staff reimburse on 168 vessels.
Our London Wellness Academy continues to experience very strong demand from applicants with nearly 1300 students trained in the London Wellness Academy and that's our other global training facilities.
Its reopening.
This is further confirmation of one's falwell's leadership and training and certification.
Yeah.
We believe how we manage our relationships with our employees with the staff and guests about cruise and destination resort spas with the teams of our suppliers and the communities. We operate is fundamental to the success of our operations.
We expect to have over 80% of our pre pandemic stock returned to service on.
178 operating ships by year end.
Further evidence of our commitment to the welfare and well being of our people and its impact on our company's success and the value we deliver to our shareholders.
With the onset of yet another unforeseeable global crisis, we have mobilized our corporate onboard teams to support our staff impacted by the hostilities in Ukraine.
We've enabled our Ukrainian stuff have you changed your service to elect to remain onboard or to be repatriated to their homes at our cost through a gateway city of their choosing.
We have contacted all Ukrainian staff members of our staff, who have not yet changed your service offering to promptly transport them to the safety of our shipboard facilities.
Overall, we believe our first quarter performance continues to demonstrate the strength and resilience of our dedicated team and operating model.
We begin second quarter with even more confidence that our actions have made one spa will better position than ever before.
With a strong business model collaborative cruise line and destination resort partnerships and an extraordinary team.
We look forward to advancing our operational and financial performance throughout 2022 and ongoing to increase the value of all ones fall world stakeholders.
With that I'll turn the call over to Stephen who will comment on our first quarter results and liquidity position Steven.
Yes.
Thank you Linda good morning, everyone.
As Lynn had mentioned the first quarter for the focused execution of our team.
And returned to service drive significant growth in sales and a positive operating performance to spots.
Omnicom variances negatively impacting the quarter of approximately $17 billion to revenue.
We are very proud about team and staff for their commitment to one small world and their dedication to providing service excellence is exemplary.
Especially given the extraordinary circumstances of the pandemic and for our Eastern European Staff members, who are impacted by Russia's war in Ukraine.
I'll now share some of the highlights of the first quarter.
Total revenues were $87 $7 billion compared to $5 $6 million in the first quarter of 2022.
Up from $85 $7 billion compared to the fourth quarter of 2021.
Even with the impact of the omicron variance.
The three months ended March 31, 2022 revenues were derived primarily from a 127 health and wellness centers onboard ships, having resumed wages and all 48 open and operating destination resort health and wellness centers.
Cost of services was $62 $7 million compared to seven $5 million in the 2021 first quarter.
The increase was primarily attributable to costs associated with increased service revenues of $66 $6 million in the quarter from now operating health and wellness centers at sea and on land and increased costs related to the resumption of operations at our health and wellness centers at sea and on land.
Cost of products with $14 $7 million compared to $1.3 million in the 2021 this quarter.
The increase was primarily attributable to costs associated with increased direct revenues of $16 5 million in the quarter.
The operating health and wellness centers.
In Atlanta.
Our net loss was $6 $3 million compared to a net loss of $45.6 million in the first quarter of 2020.
This $39 $3 million improvement was primarily a result of a $12.5 million reduction in our loss from operations.
Plus the $26 $7 billion positive change in the fair value of our warrants.
The change in fair value of Orange is the result of changes in market prices deriving the value of the financial instruments.
Adjusted EBITDA was $2 $3 million as compared to an adjusted EBIT loss of $9 $4 million in the first quarter of 2021.
This represents the second quarterly period that the company recorded positive adjusted EBITDA since the onset of the COVID-19 pandemic.
We ended the quarter with total liquidity of $43 $9 million at.
At quarter end $10 million remained available under the ATM program.
And with projected liquidity continuing to improve we do not intend to utilize the remainder of the ATM program.
Current availability under our line of credit was $13 million at March 31st 2022.
The cash burn rate for the quarter of $1 $9 million was better than our expectation of $2 million to $3 million.
We expect to generate positive cash flow beginning in the second quarter and continuing quarterly thereafter, as well as for the full fiscal year.
As it relates to our outlook for 2022 due to the ongoing business disruption and uncertainty surrounding the continued impact to our business from the COVID-19 pandemic.
We'll continue to not provide guidance or.
Notwithstanding the foregoing we continue to expect to incur a net loss in fiscal 2022 on a GAAP basis. However, we expect to achieve positive adjusted EBITDA and positive adjusted net income for the year.
With that we will open up the call for questions. Chad If you could take the line. Please certainly thank you. We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys if at anytime. Your question has been addressed in your life.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question will come from Steve was in ski with Stifel. Please go ahead.
Hey, guys good morning.
So you know I know Stephen called out the $17 million in revenue omicron impact in the first quarter, but I wanted to dig into that a little bit more and I guess the question would be could you help us think about the cadence of that the $2 million you posted an EBITDA in the quarter.
Just trying to understand what you guys think the actual impact from.
Let me comment on the EBITDA line.
Was and would you have seen sequential EBITDA growth over the fourth quarter.
So yes, Steve it it wasn't a big a big headwind are the omni calling it actually.
You know when we spoke about at ICR, you know we anticipated.
Somewhere in the region are as high as $10 million topline.
And based on our margin profile you can figure out what the EBITDA I mean, it typically falls down at about 10, 11% the impact. So when you have close to a 20 million dollar impact travel I'm recalling headwinds.
You know related to.
Yeah cruise cancellations.
And teams are nonstop services cancelled ships taken out of service load factors going down to almost as low as where in the cruise industry cut back into service in June July of last year, all of that impacted topline you know substantially.
As well EBITDA, probably close to <unk>.
Most of the number we almost reported it as positive EBITDA adjusted EBITDA. So you know I would say about a 2 million dollar headwind on EBITDA there.
Okay, Great and then I don't know if you can answer this question, but have you seen EBITDA accelerate sequentially from from March into or through April I should say.
So we are seeing substantially better load factors and they've been growing sort of kind of started to climb out of the trough.
They call them towards the end of February and now climbing some bad as have done an exceptional job.
And are getting load factor.
Well above you know even some of them are well above 80% others are close to 80%.
But yeah. Some of them are still getting there. So the load factors are improving and will continue to improve from what we've seen and similarly, our performance continues to improve alongside those load factors. So the outlook as the load factors improved ASP.
We move into Alaska, which is going to have more ships than any other season. We've seen before we're also going to see a pretty strong demand for the full for the Mediterraneans as well. So I think we're very encouraged about the next quarter or second quarter that we've already entered into and a lot of the repositioning as I've already said.
Got it even some of the Alaska cruises have just started to and some of the early reports look promising.
And my second question would just be wanted to make sure that you know through you know through April obviously, theres, a fear out there the consumer is slowing or potentially going to slow just wanted to make sure that you guys are.
You know you have not seen that at all on board any of your ships or even on the land based side of things.
No we have not.
Perfect. Okay. Thank you guys appreciate it.
Yes.
The next question is from Sharon Zackfia from William Blair. Please go ahead.
Hi, Good morning, I guess the question you know, it's pretty hard on the outside to understand all of the <unk>.
Excess costs that you have that are associated with this big ramp back in staffing as the ships have been trying to see.
With that in mind, you know in the back half of this year, you'll be kind of more.
More or less fully yeah, you know so how do we think about the gross margins either for a product or service as it relates to kind of 2019 levels. I mean, both of those of that I guess and that's quite a roughly 300 basis points. The latter 2019, you think you can get closer to parity.
With 2019 in the back half of this year or are there other things we need to think about that might continue to weigh on that for the remainder of this year.
Okay.
Okay.
Once we move into the final quarter of the year Sharon.
I do think we start getting back to parity.
Third quarter, you know, there's still a few ships coming back in and so it could be close but certainly as we approach the end of <unk> into the full complements back we expect occupancies on both have significantly improved we do you expect margins to have improved too.
Great. Thank you for that and then as we look past 2022 can you give us an update on what.
Your capacity growth looks like in the maritime segment in FY 'twenty, three and 'twenty four.
Yeah.
Yeah. So we've already taken as we mentioned five naval Charron.
Let's yeah right.
We're still expecting.
Some new builds coming on through the remainder of the year.
Should be during.
During 2022 there should be a total of.
12 O established ships. So another seven to be introduced studies on new builds.
Side of the total number which I mentioned, which is getting us up to the 178 by year end.
And then as you look out to 2020 three.
Approximately 10 O established ships niche new boats.
'twenty 'twenty four we're looking at about a five five or six hours 70 ships.
Great. Thank you.
Thank you and the next question will come from Steph Wissink from Jefferies. Please go ahead.
Hi, Good morning, everyone. We have a few questions, but we wanted to start with.
The ships that have returned to see are those proportionately larger is there anything within the portfolio of ships on the water versus those that are still in waiting to return that we should be conscious that when we're thinking about revenue per ship.
Yeah.
With all the new builds are.
A large ships.
And those generally as you know generates.
Substantial the larger revenue than the smaller ships. So those will obviously have a positive effect as we move in to introducing them later on this year and as you do recall ships that were required during the Covid period.
If we can keep smaller older and generated less revenues than the ones that are being introduced as we go through the next couple of years.
Okay. That's helpful. So as we think about pre pandemic versus maybe the next 12 to 24 months, we should be looking at the pre pandemic revenue per sub average as being somewhat discounted versus what the possibility is that somebody may hearing you correctly in terms of portfolio of ships post pandemic would be more favorable than revenue per ship.
Average.
Yeah, I mean generally you could say that the cruise ships that have been introduced and then introduce the best and largest ships first like wonder other fees.
Body Gras big ships that are coming into service blessed with encore.
The largest ships that are coming into service.
Flawless shifts they typically put into service in two I wouldn't say lesser important revenues, but Jay.
Jay geographies, but geographies where.
You know passenger size and load factors are going to be typically lower like as soon as Asia or Australia starts to get going and secondly, we've just heard Australia is now reopened for cruising which is good. So those typically are the smaller cruise lines.
Alright, very helpful. And then I wanted to just give you a chance to talk a little bit more about some of the kpis. The kid the pre book level being low to mid single digits higher your revenue per visit I can keep that up in the mid to high teen might've been hiking.
Let's talk a little bit about some of the productivity enhancements through training and menu design that you've been implementing and you give us a sense of maybe what more opportunity there might be there.
Are you thinking about kind of the post pandemic revenue per second connectivity.
Yeah, It's a it's one of our top and most important focus without business reviews that we do with that cruise line partners every single.
A month, which we do monthly now and we're really focusing particularly on the cruise lines that don't.
Perhaps utilize the pre booking engine as well as some of the others and where the opportunities exist and we will take them through.
Different geographies will take them through what's working what's not working across their favorite and platform and how we can help them and how they compare.
To the capabilities, where some of the other is the best in practice.
They got a better job and this list goes all the way through from dedicated emails called to action bookings guest segmentation targeting calendar or is that some of the cruise lines have flash cells.
The name that we got through it right and so each of the banners are being looked.
Looked at.
Analyzed and then we'll take the results back to them, obviously without showing who the competitor is that's doing better or worse, but we show them where the opportunities are.
From the early onset of what we've been doing with them, we're starting to see that this huge buy in.
How they can improve with.
With their pre booking performance versus that of companies.
Our service revenue utilization frequency penetration guest spend and all the factors that we focus on so we are utilizing the data that we've been talking about for some time now.
I'll be able to dissect what's happening on the pre booking and see where the opportunities are to do more.
Alright very helpful. As always thank you.
Yeah.
And once again, if you have a question. Please press Star then one.
The next question will come from Asia, Georgia user from Infiniti Research. Please go ahead.
Hi, Good morning, guys, congratulations on yet another quarter of improving results.
I wonder if he's going to walk you wanted us to the next two quarters.
That's really assume that EBITDA could possibly be in there.
In the $15 million range.
Yeah.
Huh.
Sure.
So.
Hi, It's Steven I guess are you, saying is it possible that for each of the next three quarters. It could be a few million dollar range and then now we could get above $15 million cumulative are quite easily for them.
For the remainder of the year I'm, sorry, Steve you relatively yes cumulatively absolutely.
The answer is cumulatively, yes.
And separately.
I think glad this maybe more for you you touched on some of the geographies, including Alaska in the med doing well should we expect.
Our standard a number of European passengers, we have in the past or are we more reliant do you think on the U S sourced passenger base because as you.
No travel vaccination rates and similar hurdles.
I think there's a lot of pent up demand for both Alaska, and maybe even more southern med.
Obviously, there's been some I T.
Generally shift given what's going on in Ukraine, but none of which has impacted bookings, thus far because they're able to shift those itineraries pretty fast.
I think the pent up demand for travelers to go overseas honest ships safely.
Get to see five or six different ports.
Having being locked up for you know two years or two and a half years.
I'm I feel very confident about.
The fact that you're going to see more.
U S content in the Mediterranean than maybe you saw pre pandemic.
Great and then one last question we tend to discuss this pretty much every call a in terms of future uses of cash.
Yes, given the fact that you would be turning cash flow positive.
In the current quarter could you remind us what your thinking is and whether you.
You have made any decisions or changes to your thinking.
We have not made any changes to our thinking Oh, yeah, that's our prioritization with a use of cash in the near term remains the same specifically.
Pay down to $6 million, that's drawn on the revolver.
How are you down to $25 million second lien.
Which is a high interest rate as you know a blah blah plus seven and then it has to St.
And thereafter look at a combination of perhaps doing something with the first lien and ore and none of us has to be mutually exclusive.
Buying back some of the company's stock or reintroducing the dividend program.
He's given any chance to be able to refinance that or it would be net net more expensive to do so then just hard thing paying it down.
Yeah.
In terms of the second lien, yes, we were.
We would prefer to reduce overall debt that's being carried by the organization.
So that's.
So future disruptions that may or may not occur there's less of a burden on the company. So we are not planning at this point in time on refinancing that $25 million, we actually wanted to get rid of it in its entirety.
Sure that makes a lot of sense. Thank you. So much. Thank you both.
Yeah, you're welcome.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Leonard Flaxman for any closing remarks.
Thank you before I close the call I'd, just like to reiterate that we're excited about our business outlook for the rest of 'twenty to 'twenty two.
We believe our competitive advantages is the preeminent leader in the operation.
Our health and wellness centers at sea and at destination as well, it's a land combined with the benefits of our asset light business model.
And the resiliency of the beauty health category to serve us well.
And in tough economic times, our business has proven resilient even in times of recession.
We only require a small percentage of shipboard passengers to book out services in order to achieve our operating targets.
We look forward to operating on an increasing percentage of contracted ships during the second quarter.
And the increasing potential added from the new ship holds that will take delivery of three of the remaining part of the air innovation in our product and service offering and increasing utilization rates from our effective training tools. Thank you again, all for joining us today and we look forward to speaking with you when we report our second quarter results.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
Right.
Okay.
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Yes.
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