OneSpaWorld Holdings Limited Q2 FY2025 earnings call

• Captured new ship growth with current and new cruise line partners, renewed partnership with Windstar Cruises and introduced a new health and wellness center on Oceania Allura, with 7 new health and wellness centers to be introduced in the second half of 2025.
• Expanded higher-value services like medi-spa, with new technologies like Thermage FLX and CoolSculpting Elite driving over 20% growth in related treatments in Q2 2025, medi-spa services available on 147 ships at quarter end, expected on 151 ships this year.
• Enhanced health and wellness center productivity with across-the-board growth in operating metrics, supported by staff retention, training, and redesigned talent management process, prebooking revenue as a percentage of services remained strong at 23% and prebooking was introduced on Azamara Cruises.
• Ended the quarter with a strong balance sheet, allowing investment in growth and quarterly dividend payment, and developing AI initiatives to enhance guest experiences.
• Affirmed annual revenue guidance and increased 2025 adjusted EBITDA guidance.

Total revenues increased 7% to a record $240.7 million compared to $224.9 million in the second quarter of 2024. Income from operations increased 17% to a record $22.1 million compared to $18.8 million in the second quarter of 2024. Net income increased 27% to $19.9 million compared to $15.8 million in the second quarter of 2024 and adjusted EBITDA increased 13% to a record $30.5 million compared to $27.1 million in the second quarter of 2024. At quarter end, operated health and wellness centers on 200 ships with an average ship count of 191 for the quarter, compared to 197 ships and an average ship count of 188 at the end of the second quarter of fiscal 2024. Also, had 4,365 cruise ship personnel on vessels compared with 4,300 cruise ship personnel on vessels at the end of the second quarter of fiscal 2024.

• Affirmed annual revenue guidance.
• Increased 2025 adjusted EBITDA guidance.
• Full fiscal year 2025 total revenue expected in the range of $950 million to $970 million, and adjusted EBITDA expected in the range of $117 million to $127 million.
• Third quarter 2025 total revenue expected in the range of $255 million to $260 million, and adjusted EBITDA expected in the range of $33 million to $35 million.

Q: Steve Wieczynski asked about strategies to enhance profitability and the materiality of AI impact over time.

A: Stephen B. Lazarus said AI initiatives are in two categories, yield improvement and efficiency automation, with initial results optimistic and impact likely more seen from 2026.

Q: Steve Wieczynski asked about revenue guidance maintenance.

A: Stephen B. Lazarus said it's due to timing of new vessel introductions.

Q: Maksim Rakhlenko asked about capital allocation and dividend.

A: Stephen B. Lazarus said focus on stock buyback, dividend, and debt repurchase, with dividend likely to increase next quarter.

Q: Tania Anderson asked about gross margin.

A: Stephen B. Lazarus said gross margin flat due to product/service mix, but EBITDA margin expected to improve.

Q: Gregory Miller asked about Thermal Suites and Aroya/Mitsui.

A: Leonard I. Fluxman discussed Thermal Suites demand and Aroya/Mitsui early-stage trends.

Q: Assia Georgieva asked about AI impact on EBITDA and pre-cruise.

A: Leonard I. Fluxman said AI impact on EBITDA margin to be seen from next year, and pre-cruise has opportunity for improvement.