OneSpaWorld Holdings Limited — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Amounts are in U.S. dollars; financial figures below are in millions unless stated otherwise.
Business context
OneSpaWorld operates health, wellness, fitness and beauty centers aboard cruise ships and at destination resorts, and sells related products. Its cruise business mainly uses revenue-sharing agreements with cruise-line partners. COVID-19 sharply curtailed operations beginning in March 2020. The company was gradually returning to service during 2021; at year-end, 118 partner ships and 48 destination resort spas were operating, compared with 170 ships and 52 resorts in its overall network.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $144.0 | $120.9 |
| Operating loss | ($52.1) | ($265.0) |
| Net loss | ($68.5) | ($288.0) |
| Adjusted EBITDA | ($18.9) | ($42.7) |
| Unlevered after-tax free cash flow | ($22.0) | ($45.0) |
| Cash used in operating activities | ($35.1) | ($36.6) |
| Capital expenditures | $2.9 | $2.1 |
Revenue rose about 19%, principally as cruise and resort operations resumed. Service revenue increased 24% to $115.9 million, while product revenue was nearly flat at $28.1 million. Operating loss improved substantially, largely because 2020 included $190.8 million of goodwill and trade-name impairment charges; the company nevertheless remained loss-making. FY2021 operating and net margins were approximately -36% and -48%, respectively.
At December 31, 2021, cash and cash equivalents were $30.9 million, plus $1.9 million of restricted cash. Current assets were $88.9 million and current liabilities $51.9 million. Total debt was $234.5 million before $4.0 million of unamortized issuance costs; $7.0 million was outstanding on the revolving facility, with $13.0 million available. The debt is secured and primarily variable-rate; the company reported covenant compliance. Warrant liabilities were $107.3 million.
Changes, outlook and risks
- Recovery remains incomplete: Revenue improved from 2020 but remained far below the company’s pre-pandemic 2019 revenue of $562.2 million. The filing says COVID-19 was expected to materially affect results and liquidity in 2022 and possibly thereafter; it does not provide a clear timeline for a return to profitability.
- Liquidity measures and outlook: The company raised $27.5 million net through its at-the-market share program in 2021, with approximately $10 million remaining available at year-end. It suspended its dividend program and deferred a previously declared dividend. Management said available resources were expected to cover obligations and covenant requirements for the next 12 months, subject to assumptions about reopening, operating performance and pandemic developments.
- Concentration: Carnival, Royal Caribbean and Norwegian Cruise Line accounted for 36.7%, 22.8% and 11.4% of 2021 revenue, respectively. The company’s results therefore depend heavily on a small number of cruise groups and the recovery of travel demand.
- Other exposures: Risks include renewed cruise suspensions, partner contract termination or nonrenewal, staffing and travel constraints, resort closures, minimum rent obligations, inflation and fuel costs, foreign exchange, and variable interest rates. Four resort agreements required minimum payments; guaranteed land-based venue payments for 2022 totaled approximately $2.9 million.
- Unusual accounting and controls: The company restated prior-period statements in 2021 to classify warrants as liabilities rather than equity; it said the restatement did not affect cash, liquidity or Adjusted EBITDA for those periods. Management reported remediation of the related material weakness and effective financial reporting controls as of year-end 2021. The independent auditor did not attest to internal control effectiveness.
- Contingencies: A foreign tax authority assessed $1.9 million related to VAT; the company disputes the assessment and had accrued $1.2 million. Total income-tax contingency liabilities were $4.1 million at year-end. The filing says other legal matters were not expected, based on current knowledge, to be material, but the ultimate outcomes could not be determined.
Key facts for investors to verify
- Whether cruise ship and resort reopenings continued after year-end, and how the reported 118 operating ships reconcile with the broader 170-ship network.
- Cash burn, available borrowing capacity, debt covenant headroom and the assumptions supporting management’s 12-month liquidity assessment.
- Revenue and margin recovery by service versus product, and performance as operating ship count increases.
- Exposure to major cruise-line partners, contract renewals, and the status of ships removed from service or sold.
- Resolution of the VAT assessment and other tax exposures, and continued effectiveness of the remediated financial reporting controls.
- Potential share dilution from ATM sales, warrants and equity awards; the dividend remains suspended.