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ONESPAWORLD HOLDINGS Ltd 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

ONESPAWORLD HOLDINGS Ltd

Filing date:

02/21/2025

TLDR:

OneSpaWorld Holdings Limited’s 10-K filing for the fiscal year ended December 31, 2024, shows revenue growth and improved profitability. The company is focused on new ship growth and service innovation but faces risks related to the cruise industry and potential economic downturns.

ELI5:

OneSpaWorld, a company that provides spa and wellness services on cruise ships, made more money and profit this year. They’re growing by adding services to new ships, but their business could be hurt if the cruise industry struggles or the economy gets worse.

Accession #:

0000950170-25-024552

Published on

Analyst Summary

  • Total revenues increased by 13% from $794.0 million in 2023 to $895.0 million in 2024.
  • Net income improved significantly from a loss of $2.97 million in 2023 to a profit of $72.9 million in 2024.
  • Adjusted EBITDA increased from $89.2 million in 2023 to $112.1 million in 2024.
  • Average Weekly Revenue Per Ship increased from $80,013 in 2023 to $86,213 in 2024, indicating improved productivity per ship.
  • Total Liabilities decreased from $272.1 million in 2023 to $191.9 million in 2024, indicating improved financial stability.

Opportunities and Risks

  • Risk: The company’s performance is heavily reliant on the cruise industry, making it vulnerable to economic downturns, outbreaks of illnesses, and other disruptions.
  • Risk: A significant portion of revenue is derived from a few major cruise lines, increasing the risk of contract termination or renegotiation.
  • Risk: Potential changes in U.S. or foreign tax laws could increase the company’s tax burden.
  • Opportunity: The company is well-positioned to capture new ship growth with existing cruise line partners.
  • Opportunity: The company has a strong track record of introducing innovative new services and products, such as medi-spa treatments.
  • Opportunity: The company is focused on enhancing health and wellness center productivity through pre-booking, targeted marketing, and technology.

Potential Implications

Company Performance

  • The company’s focus on new ship growth and service innovation positions it well for continued success.
  • Investors should carefully consider the risks associated with the cruise industry, tax law changes, and potential economic downturns.

ONESPAWORLD HOLDINGS Ltd (CIK: 0001758488) – 10-K Filing Analysis

Executive Summary

This report analyzes OneSpaWorld Holdings Limited’s 10-K filing for the fiscal year ended December 31, 2024. The company operates in the hospitality-based health and wellness industry, primarily through cruise ship and destination resort partnerships. Key findings include revenue growth, improved profitability, and a focus on new ship growth and service innovation. However, risks related to the cruise industry, tax law changes, and potential economic downturns need to be considered. Overall, the company appears to be well-positioned for continued growth, but careful monitoring of risk factors is essential.

Company Overview

OneSpaWorld is a global leader in providing health and wellness services and products on cruise ships and in destination resorts. The company has long-term agreements with major cruise lines and destination resort operators. Their business model focuses on providing a comprehensive suite of services, including spa treatments, fitness programs, and medi-spa services. Recent developments include renewed agreements with existing cruise line partners and agreements with new cruise line partners.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management expresses optimism about the company’s future, highlighting revenue growth, new ship growth, and service innovation. They emphasize the company’s strong relationships with cruise line partners and their ability to capture new ship growth. However, they also acknowledge the risks associated with the cruise industry, including potential economic downturns and outbreaks of illnesses.

Financial Statement Analysis

Key Ratios and Trends

  • Revenue Growth: Total revenues increased by 13% from $794.0 million in 2023 to $895.0 million in 2024.
  • Net Income: Net income improved significantly from a loss of $2.97 million in 2023 to a profit of $72.9 million in 2024.
  • Adjusted EBITDA: Adjusted EBITDA increased from $89.2 million in 2023 to $112.1 million in 2024.
  • Customer Concentration: A significant portion of revenue is derived from Carnival, Royal Caribbean, and Norwegian Cruise Line.

Balance Sheet Highlights

  • Total Assets: Increased from $706.1 million in 2023 to $746.4 million in 2024.
  • Total Liabilities: Decreased from $272.1 million in 2023 to $191.9 million in 2024, indicating improved financial stability.
  • Shareholders’ Equity: Increased from $434.1 million in 2023 to $554.5 million in 2024.

Cash Flow Analysis

  • Operating Activities: Net cash provided by operating activities increased from $63.4 million in 2023 to $78.8 million in 2024.
  • Investing Activities: Net cash used in investing activities remained relatively stable at approximately $6 million.
  • Financing Activities: Net cash used in financing activities decreased from $62.7 million in 2023 to $42.2 million in 2024, reflecting debt repayments and share repurchases.

Uncommon Metrics

  • Average Weekly Revenue Per Ship: Increased from $80,013 in 2023 to $86,213 in 2024, indicating improved productivity per ship.
  • Average Revenue Per Shipboard Staff Per Day: Increased from $555 in 2023 to $572 in 2024, reflecting improved staff efficiency.

Risk and Opportunity Assessment

Risks

  • Cruise Industry Dependence: The company’s performance is heavily reliant on the cruise industry, making it vulnerable to economic downturns, outbreaks of illnesses, and other disruptions.
  • Customer Concentration: A significant portion of revenue is derived from a few major cruise lines, increasing the risk of contract termination or renegotiation.
  • Tax Law Changes: Potential changes in U.S. or foreign tax laws could increase the company’s tax burden.
  • Competition: The company faces competition from other providers of health and wellness services, as well as from alternative passenger activities on cruise ships.
  • Cybersecurity: The company is exposed to the threat of cyberattacks and data breaches, which could disrupt operations and damage its reputation.

Opportunities

  • New Ship Growth: The company is well-positioned to capture new ship growth with existing cruise line partners.
  • Service Innovation: The company has a strong track record of introducing innovative new services and products, such as medi-spa treatments.
  • Enhanced Productivity: The company is focused on enhancing health and wellness center productivity through pre-booking, targeted marketing, and technology.
  • Market Share Expansion: The company has opportunities to win new contracts with cruise lines that currently utilize smaller competitors.

Conclusion and Actionable Insights

OneSpaWorld Holdings Limited has demonstrated strong financial performance in 2024, with revenue growth, improved profitability, and a solid balance sheet. The company’s focus on new ship growth and service innovation positions it well for continued success. However, investors should carefully consider the risks associated with the cruise industry, tax law changes, and potential economic downturns.

Overall Assessment: Hold. The company’s strong performance and growth potential are attractive, but the risks associated with the cruise industry and other factors warrant a cautious approach.

Recommendations:

  • Monitor Cruise Industry Trends: Closely track developments in the cruise industry, including economic conditions, outbreaks of illnesses, and regulatory changes.
  • Diversify Revenue Streams: Explore opportunities to diversify revenue streams beyond cruise ships, such as expanding the destination resort business or developing new online channels.
  • Manage Customer Concentration Risk: Continue to strengthen relationships with existing cruise line partners and pursue new contracts to reduce customer concentration.
  • Invest in Cybersecurity: Prioritize investments in cybersecurity to protect against data breaches and other disruptions.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: (Total Revenue – Cost of Services – Cost of Products) / Total Revenue
      • 2024: ($895,019 – $599,756 – $145,799) / $895,019 = 0.1667 or 16.67%
      • 2023: ($794,045 – $541,356 – $125,649) / $794,045 = 0.1600 or 16.00%
    • Trend: (0.1667 – 0.1600) / 0.1600 = 4.19%. The gross profit margin increased by 4.19% from 2023 to 2024.
    • Industry: The leisure industry generally has gross profit margins between 20% and 40%. OneSpaWorld’s gross profit margin is below the industry average.
  • Operating Profit Margin:

    • Calculation: Income from Operations / Total Revenue
      • 2024: $78,060 / $895,019 = 0.0872 or 8.72%
      • 2023: $54,172 / $794,045 = 0.0682 or 6.82%
    • Trend: (0.0872 – 0.0682) / 0.0682 = 27.86%. The operating profit margin increased by 27.86% from 2023 to 2024.
    • Industry: The leisure industry generally has operating profit margins between 5% and 15%. OneSpaWorld’s operating profit margin is within the industry average.
  • Net Profit Margin:

    • Calculation: Net Income / Total Revenue
      • 2024: $72,864 / $895,019 = 0.0814 or 8.14%
      • 2023: $(2,974) / $794,045 = -0.0037 or -0.37%
    • Trend: (0.0814 – (-0.0037)) / (-0.0037) = -2300%. The net profit margin increased significantly from a loss in 2023 to a profit in 2024.
    • Industry: The leisure industry generally has net profit margins between 3% and 10%. OneSpaWorld’s net profit margin is within the industry average.
  • Return on Assets (ROA):

    • Calculation: Net Income / Total Assets
      • 2024: $72,864 / $746,423 = 0.0976 or 9.76%
      • 2023: $(2,974) / $706,140 = -0.0042 or -0.42%
    • Trend: (0.0976 – (-0.0042)) / (-0.0042) = -2423%. The return on assets increased significantly from a loss in 2023 to a profit in 2024.
    • Industry: The leisure industry generally has ROA between 5% and 10%. OneSpaWorld’s ROA is within the industry average.
  • Return on Equity (ROE):

    • Calculation: Net Income / Total Shareholders’ Equity
      • 2024: $72,864 / $554,497 = 0.1314 or 13.14%
      • 2023: $(2,974) / $434,069 = -0.0068 or -0.68%
    • Trend: (0.1314 – (-0.0068)) / (-0.0068) = -2032%. The return on equity increased significantly from a loss in 2023 to a profit in 2024.
    • Industry: The leisure industry generally has ROE between 10% and 20%. OneSpaWorld’s ROE is within the industry average.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: Net Income / Weighted Average Shares Outstanding
      • Basic EPS 2024: $72,864 / 104,024 = $0.70
      • Diluted EPS 2024: $72,864 / 104,940 = $0.69
      • Basic EPS 2023: $(2,974) / 97,826 = $(0.03)
      • Diluted EPS 2023: $(2,974) / 97,826 = $(0.03)
    • Trend:
      • Basic EPS: ($0.70 – $(-0.03)) / (-0.03) = -2433%. Basic EPS increased significantly from a loss in 2023 to a profit in 2024.
      • Diluted EPS: ($0.69 – $(-0.03)) / (-0.03) = -2400%. Diluted EPS increased significantly from a loss in 2023 to a profit in 2024.
    • Industry: EPS varies widely depending on the company.

Liquidity

  • Current Ratio:

    • Calculation: Total Current Assets / Total Current Liabilities
      • 2024: $161,505 / $79,405 = 2.03
      • 2023: $126,722 / $80,859 = 1.57
    • Trend: (2.03 – 1.57) / 1.57 = 29.30%. The current ratio increased by 29.30% from 2023 to 2024.
    • Industry: A current ratio of 1.5 to 2.0 is generally considered healthy. OneSpaWorld’s current ratio is within the healthy range.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Total Current Assets – Inventories) / Total Current Liabilities
      • 2024: ($161,505 – $46,748) / $79,405 = 1.45
      • 2023: ($126,722 – $47,504) / $80,859 = 0.98
    • Trend: (1.45 – 0.98) / 0.98 = 47.96%. The quick ratio increased by 47.96% from 2023 to 2024.
    • Industry: A quick ratio of 1.0 or higher is generally considered healthy. OneSpaWorld’s quick ratio is above 1.0.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents + Restricted Cash) / Total Current Liabilities
      • 2024: ($57,439 + $1,198) / $79,405 = 0.74
      • 2023: ($27,704 + $1,198) / $80,859 = 0.36
    • Trend: (0.74 – 0.36) / 0.36 = 105.56%. The cash ratio increased by 105.56% from 2023 to 2024.
    • Industry: A cash ratio of 0.5 to 1.0 is generally considered healthy. OneSpaWorld’s cash ratio is within the healthy range.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Liabilities / Total Shareholders’ Equity
      • 2024: $191,926 / $554,497 = 0.35
      • 2023: $272,071 / $434,069 = 0.63
    • Trend: (0.35 – 0.63) / 0.63 = -44.44%. The debt-to-equity ratio decreased by 44.44% from 2023 to 2024.
    • Industry: A debt-to-equity ratio of 1.0 to 2.0 is generally considered healthy. OneSpaWorld’s debt-to-equity ratio is below the healthy range.
  • Debt-to-Assets Ratio:

    • Calculation: Total Liabilities / Total Assets
      • 2024: $191,926 / $746,423 = 0.26
      • 2023: $272,071 / $706,140 = 0.38
    • Trend: (0.26 – 0.38) / 0.38 = -31.58%. The debt-to-assets ratio decreased by 31.58% from 2023 to 2024.
    • Industry: A debt-to-assets ratio of 0.5 or lower is generally considered healthy. OneSpaWorld’s debt-to-assets ratio is below the healthy range.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Income from Operations / Interest Expense
      • 2024: $78,060 / $10,048 = 7.77
      • 2023: $54,172 / $21,395 = 2.53
    • Trend: (7.77 – 2.53) / 2.53 = 207.11%. The interest coverage ratio increased by 207.11% from 2023 to 2024.
    • Industry: An interest coverage ratio of 1.5 or higher is generally considered healthy. OneSpaWorld’s interest coverage ratio is above the healthy range.

Activity/Efficiency

  • Inventory Turnover:

    • Calculation: Cost of Products / Average Inventory
      • 2024: $145,799 / (($46,748 + $47,504) / 2) = 3.09
      • 2023: $125,649 / (($47,504 + $47,504) / 2) = 2.64
    • Trend: (3.09 – 2.64) / 2.64 = 16.97%. The inventory turnover increased by 16.97% from 2023 to 2024.
    • Industry: Inventory turnover varies widely depending on the company.
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Total Revenue) * 365
      • 2024: ($46,264 / $895,019) * 365 = 18.87 days
      • 2023: ($40,784 / $794,045) * 365 = 18.75 days
    • Trend: (18.87 – 18.75) / 18.75 = 0.64%. The days sales outstanding increased by 0.64% from 2023 to 2024.
    • Industry: DSO varies widely depending on the company.
  • Days Payable Outstanding (DPO):

    • Calculation: (Accounts Payable / Cost of Services + Cost of Products) * 365
      • 2024: ($29,748 / ($599,756 + $145,799)) * 365 = 14.69 days
      • 2023: ($31,705 / ($541,356 + $125,649)) * 365 = 17.44 days
    • Trend: (14.69 – 17.44) / 17.44 = -15.77%. The days payable outstanding decreased by 15.77% from 2023 to 2024.
    • Industry: DPO varies widely depending on the company.
  • Asset Turnover:

    • Calculation: Total Revenue / Total Assets
      • 2024: $895,019 / $746,423 = 1.20
      • 2023: $794,045 / $706,140 = 1.12
    • Trend: (1.20 – 1.12) / 1.12 = 7.14%. The asset turnover increased by 7.14% from 2023 to 2024.
    • Industry: Asset turnover varies widely depending on the company.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / Earnings Per Share (EPS)
      • 2024: $19.08 / $0.70 = 27.26
      • 2023: $19.08 / $(0.03) = -636
    • Trend: N/A, as the 2023 EPS was negative.
    • Industry: P/E ratios vary widely depending on the company.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Capitalization / Total Shareholders’ Equity
      • Market Cap = Shares Outstanding * Stock Price = 104,551,189 * $19.08 = $1,994,938,097
      • 2024: $1,994,938,097 / $554,497,000 = 3.60
      • 2023: Market Cap = 99,734,672 * $19.08 = $1,902,902,617 / $434,069,000 = 4.38
    • Trend: (3.60 – 4.38) / 4.38 = -17.81%. The price-to-book ratio decreased by 17.81% from 2023 to 2024.
    • Industry: P/B ratios vary widely depending on the company.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Capitalization / Total Revenue
      • 2024: $1,994,938,097 / $895,019,000 = 2.23
      • 2023: $1,902,902,617 / $794,045,000 = 2.39
    • Trend: (2.23 – 2.39) / 2.39 = -6.69%. The price-to-sales ratio decreased by 6.69% from 2023 to 2024.
    • Industry: P/S ratios vary widely depending on the company.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: (Market Capitalization + Total Debt – Cash and Cash Equivalents) / Adjusted EBITDA
      • 2024: ($1,994,938,097 + $100,000,000 – $57,439,000) / $112,076,000 = 17.29
      • 2023: ($1,902,902,617 + $159,639,000 – $27,704,000) / $89,192,000 = 22.81
    • Trend: (17.29 – 22.81) / 22.81 = -24.20%. The enterprise value to EBITDA decreased by 24.20% from 2023 to 2024.
    • Industry: EV/EBITDA ratios vary widely depending on the company.

Growth Rates

  • Revenue Growth

    • Calculation: (Current Revenue – Previous Revenue) / Previous Revenue
      • (895,019 – 794,045) / 794,045 = 0.1272 or 12.72%
    • Trend: Revenue grew by 12.72% from 2023 to 2024.
    • Industry: Growth rates vary widely depending on the company.
  • Net Income Growth

    • Calculation: (Current Net Income – Previous Net Income) / Previous Net Income
      • (72,864 – (-2,974)) / (-2,974) = -2543.31%
    • Trend: Net income growth is significant as the company moved from a loss to a profit.
    • Industry: Growth rates vary widely depending on the company.
  • EPS Growth

    • Calculation: (Current EPS – Previous EPS) / Previous EPS
      • (0.70 – (-0.03)) / (-0.03) = -2433.33%
    • Trend: EPS growth is significant as the company moved from a loss to a profit.
    • Industry: Growth rates vary widely depending on the company.

Other Relevant Metrics

  • Adjusted EBITDA: Adjusted EBITDA is a non-GAAP metric that represents earnings before interest, taxes, depreciation, and amortization, adjusted for certain non-cash or non-recurring items. It is calculated by adding back interest expense, income tax expense, depreciation and amortization, long-lived assets impairment, stock-based compensation, change in fair value of warrant liabilities, and business combination costs to net income (loss). The company uses Adjusted EBITDA to assess its operating performance and compare it to that of its competitors.
    • 2024: $112,076 (thousands)
    • 2023: $89,192 (thousands)
    • 2022: $50,384 (thousands)

    Adjusted EBITDA increased from $89,192 in 2023 to $112,076 in 2024, a 25.66% increase. This indicates improved operational profitability. While non-GAAP metrics can be useful, it’s important to consider what adjustments are being made. In this case, the adjustments seem reasonable for understanding the core operating performance of the business.

  • Average Weekly Revenues Per Ship: This metric measures the average revenue generated per ship on a weekly basis. It is calculated by dividing total service revenues by the average ship count and then dividing by 52 weeks.
    • 2024: $86,213
    • 2023: $80,013
    • 2022: $66,494

    The average weekly revenues per ship increased from $80,013 in 2023 to $86,213 in 2024, a 7.75% increase. This indicates improved revenue generation per ship.

  • Average Weekly Revenues Per Destination Resort: This metric measures the average revenue generated per destination resort on a weekly basis. It is calculated by dividing total service revenues by the average resort count and then dividing by 52 weeks.
    • 2024: $13,962
    • 2023: $15,242
    • 2022: $14,946

    The average weekly revenues per destination resort decreased from $15,242 in 2023 to $13,962 in 2024, a -8.40% decrease. This indicates decreased revenue generation per destination resort.

Commentary

OneSpaWorld demonstrated a strong financial turnaround in 2024, moving from a net loss in 2023 to a significant net income, driven by increased revenues and improved operational efficiency. Profitability ratios such as gross profit margin, operating profit margin, ROA, and ROE all showed positive trends. The company also improved its liquidity position, as indicated by the increase in the current ratio, quick ratio, and cash ratio. However, the average weekly revenues per destination resort decreased, which could be a cause for concern.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️