OneSpaWorld Holdings Limited Q3 FY2025 earnings call

Leonard Fluxman highlighted record third quarter results with all-time highs in total revenues, income from operations, adjusted EBITDA, and net income. Key priorities included capturing new ship growth with current partners, expanding higher-value services like Medi-Spa, IV therapy, and Acupuncture with double-digit growth, enhancing health and wellness center productivity through improved staff retention and training, and maintaining a strong balance sheet to allocate capital for growth, shareholder returns, and debt reduction. Stephen Lazarus discussed AI initiatives to enhance revenue, operational efficiency, and automation, with revenue optimization projects on 40 vessels and operational efficiency tools on 180 vessels.

Total revenues for the third quarter of 2025 were $258.5 million, an increase of 7% compared to $241.7 million in the third quarter of 2024. Income from operations increased 5% to $26.3 million from $25 million in the same period last year. Net income rose 13% to $24.3 million from $21.6 million. Adjusted EBITDA grew 6% to $35 million from $33 million. Medi-Spa services were available on 150 ships at quarter end, up from 144 ships a year ago. The company operated health and wellness centers on 204 ships with an average of 199 ships for the quarter, compared to 196 ships and an average of 195 ships in Q3 2024. Cruise ship personnel were 4,466 at quarter end, up from 4,204 in Q3 2024.

For fiscal 2025, total revenue is expected to be in the range of $960 million to $965 million, representing an 8% increase at the midpoint compared to 2024. Adjusted EBITDA is projected to be between $122 million and $124 million, a 10% increase at the midpoint. The fourth quarter of 2025 is expected to have total revenue between $241 million and $246 million and adjusted EBITDA between $30 million and $32 million.

Risks include factors affecting forward-looking statements, potential impacts from global minimum taxes which the company expects to not be affected by successful implementation of reorganizational changes, and uncertainties related to the timing and impact of AI initiatives on margins.

Q: How should we think about the benefits from AI technology and margin cadence?

A: Stephen Lazarus said it's likely the second quarter of next year when specific improvements can be detailed, with current cadence tracking and improvements thereafter.

Q: Any changes in guest spending patterns?

A: Leonard Fluxman noted PPDs, spend, attachment rates, and pre-cruise revenue are positive with no material reduction in spend.

Q: Clarification on service margin mix?

A: Stephen Lazarus explained it's due to ship mix from cruise line agreements, not passenger shift to lower price points.

Q: Impact of global minimum tax?

A: Stephen Lazarus said the company expects not to be impacted with reorganizational changes.

Q: Attribution of guest count, frequency, and spend increase?

A: Leonard Fluxman attributed it to newer ships, increased penetration rate, and staff focus on facility utilization.

Q: Cash balance and capital allocation?

A: Stephen Lazarus discussed balanced capital allocation with focus on share repurchases, dividends, and debt repayment.

Q: Talent management changes?

A: Leonard Fluxman said focus is on using staff across different modalities to enhance facility utilization.

Q: AI implementation focus on operating efficiency vs revenue enhancement?

A: Stephen Lazarus said it's due to simplicity of rolling out, with operational efficiency apps easier to deploy.

Q: Hurricane impact and CapEx related to AI?

A: Stephen Lazarus said no tangible impact from hurricanes and CapEx related to AI initiatives.

Q: Prebooked services rate?

A: Leonard Fluxman said prebooked service revenue is about 22% of service revenue excluding Medi-Spa.