OneSpaWorld Holdings Limited — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. OneSpaWorld operates health, wellness, fitness and beauty centers on cruise ships and at destination resorts, and sells related products online. Unless stated otherwise, amounts below are in U.S. dollars.
Financial results and liquidity
- Revenue: $87.7 million, comprising $71.2 million of services and $16.5 million of products. Service revenue was 81% of the total.
- Profitability: Operating loss was $6.4 million (7.3% operating margin); net loss was $6.3 million (7.2% net margin), or $0.07 per share. The filing does not provide EBITDA.
- Cash flow: Operating cash outflow was $0.6 million; capital expenditures were $0.9 million. Cash and restricted cash declined $1.9 million to $31.0 million, including $29.1 million unrestricted cash.
- Debt: Face-value debt was $234.2 million ($230.5 million net of unamortized issuance costs); cash-adjusted debt was approximately $205.2 million using unrestricted cash. Debt included $7.0 million drawn on a $20.0 million revolving facility, leaving $13.0 million available. The company reported compliance with its debt covenants.
- Balance sheet: Total assets were $686.0 million and shareholders’ equity was $294.3 million at March 31, 2022. Current liabilities were $52.5 million and current assets were $88.8 million.
Changes versus the prior comparable period
- Revenue rose from $5.6 million in Q1 2021 to $87.7 million, primarily as cruise operations resumed. At March 31, 2022, centers were operating on 127 ships and at 48 destination resorts; Q1 2021 revenue was mainly from 47 resort spas and online sales.
- Operating loss narrowed from $18.9 million to $6.4 million, while net loss narrowed from $45.6 million to $6.3 million. These comparisons are heavily affected by pandemic-related shutdowns in the prior-year quarter and are not representative of ordinary growth.
- The prior-year quarter included a $23.3 million warrant fair-value loss; Q1 2022 included a $3.4 million fair-value gain. This noncash valuation change materially affected the year-over-year net-loss comparison.
- Operating cash outflow improved from $9.1 million to $0.6 million. Q1 2021 included $18.6 million of financing proceeds, mainly from an at-the-market share offering; Q1 2022 had no ATM proceeds.
Outlook, commentary and risks
- Management said the pandemic was expected to continue adversely affecting 2022 performance, while travel and cruise operations were gradually recovering. It did not provide numerical earnings or revenue guidance.
- Management concluded that available resources and expected operations should provide sufficient liquidity for obligations over the next 12 months and covenant compliance. This assessment depends on assumptions about the pandemic, cruise-ship sailing and resort operations; management cautioned that further adverse developments could affect results and liquidity.
- Principal risks cited include renewed or persistent COVID-19 effects, travel demand and economic weakness, consumer preferences, competition, hurricanes, and currency movements. The company noted that inflation had not materially harmed results to date, but economic softness or higher fuel prices could weigh on demand.
- The company disputed a foreign tax authority’s $1.9 million VAT assessment and had accrued $1.2 million for it. A separate balance-sheet income-tax contingency was $4.1 million; restricted cash of $1.9 million was held in escrow in connection with a tax-assessment legal proceeding. The filing states routine legal matters were not expected to be material; no legal proceedings were listed in Part II.
- Adoption of the lease accounting standard was expected to materially increase balance-sheet lease assets and liabilities, primarily for resort agreements and office space; the impact was still under assessment.
Important facts for investors to verify
- Whether cruise and resort operations continued to recover after March 31, 2022, and how that translated into revenue, operating losses and cash flow.
- Liquidity assumptions and covenant compliance, including the availability of the $13.0 million undrawn revolver and the effect of any renewed operating disruption.
- Developments in the disputed VAT assessment and other tax contingencies, including the status of escrowed restricted cash.
- The effect of floating-rate debt and interest-rate hedging, as well as the eventual balance-sheet impact of lease-standard adoption.