OneSpaWorld Holdings Limited Common Shares 2026 Q3 Earnings Call

Good morning, and welcome to OneSpaWorld's third quarter 2026 earnings call and webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements. These forward-looking statements reflect our judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our third quarter 2026 earnings release, which was furnished to the SEC today on Form 8-K.

We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. Explanations of these metrics can be found in our earnings release issued earlier this morning. Joining me today are Leonard Fluxman, Executive Chairman and Chief Executive Officer, and Stephen Lazarus, President, Chief Financial Officer, and Chief Operating Officer. Leonard will begin with a review of our third quarter 2026 performance and provide an update on our key priorities. Then Stephen will provide more detail on the financials and guidance. Following our prepared remarks, we'll turn the call over to the operator to begin the question and answer portion of the call. I would now like to turn the call over to Leonard.

Thank you, Allison. Good morning, and welcome to OneSpaWorld's third quarter 2026 earnings conference call. I'm pleased to share we delivered an excellent third quarter performance. Our results exceeded the high end of our guidance and marked our 22nd consecutive quarter of record year-over-year growth for total revenue and Adjusted EBITDA. Our sustained momentum reflects the durability of our business model, the successful execution of our strategy, and our unwavering commitment to deliver memorable experiences for guests of our health and wellness centers at sea and on land. I want to thank our outstanding global team members for their continued commitment to deliver our strong performance. Our strength was broad-based. We saw gains across all key operating metrics, and we set the stage to further expansion by entering into new agreements that extend our longstanding cruise line partnerships, which I will discuss in a moment.

In addition, our asset-light business model has led to consistently strong and growing free cash flow. This, along with the confidence we have in our near and long-term outlook, paved the way for our board to approve a new $100 million share repurchase program and a 25% increase in our quarterly dividend. Looking ahead, we expect the continuation of our strategy to give us our fourth consecutive year of record results in fiscal 2026. Turning to some of the highlights of the quarter. Total revenues increased 7% and Adjusted EBITDA increased 12%. At quarter end, we operated health and wellness centers on 207 ships, with an average ship count of 206 for the quarter. This compares with a total of 204 ships and an average ship count of 199 ships at the end of the third quarter of 2025.

Also at quarter end, our cruise ship health and wellness centers were fully staffed with 4,645 personnel, compared with 4,466 personnel on vessels at the end of the third quarter of fiscal 2025. The quarter marked continued progress on our key priorities. Let me discuss some of those highlights. First, we continued to grow with our cruise line partners. During the quarter, we entered into new agreements with Azamara Cruises and Silversea. These agreements extended our long-term partnerships and enabled us to enhance and elevate spa facilities to broaden the range of services, products, and experiences we offer to cruise line guests. Under the renewed agreement, Azamara completed its first spa refit on board Azamara Quest, adding treatment rooms, a retail space, and importantly, a new MediSpa and IV therapy services. We remain on track to introduce health and wellness centers on two additional ship builds this year.

Second, we continue to expand high-value services and products. These services, including our innovative offerings of Thermage, truSculpt, CoolSculpting, IV therapy, acupuncture, and LED light therapy, continued to drive strong double-digit growth compared to last year. We remain focused on expanding these services across our fleet while introducing new offerings that address guests' interest in longevity and wellness. In addition, we continued to broaden our product range with red light masks now available for purchase on a select pilot group of ships. At quarter end, MediSpa services were available on 157 ships, up from 150 ships at the end of the third quarter of 2025. We continue to expect to have MediSpa offerings on 159 ships by the year-end 2026. Thirdly, we focused on enhancing health and wellness center productivity.

This is best reflected in the continued growth in key maritime operating metrics, including revenue per passenger per day, weekly revenue, and revenue per staff per day. In addition, pre-booked revenue increased 20% and represented 23.2% of service revenue, up from 21.5% a year ago, and our forward-booking position is up 18% compared to the same time last year. Staff retention reached over 81% at quarter end, up nearly five percentage points from a year ago. Experienced staff remain an important contributor to our operating metrics. These team members drive incremental revenue through more effective guest recommendations, cross-selling, and upselling. We remain committed to investing in best-in-class training to support productivity and long-term growth in our operating metrics. Fourth, we maintained our strong balance sheet and continued to generate strong free cash flow.

During the quarter, we returned $42.3 million to shareholders through share repurchases and dividends while also reducing debt. Together, these actions advanced each of our capital allocation objectives and underscore the strength and durability of our asset-light business model. In addition, as a further indication of our conviction in our ongoing growth, our board approved a new $100 million share repurchase program and a 25% increase in our quarterly dividend to six and one-quarter cents per share, which Stephen will discuss further. In summary, our results reflect our unique experiences in the operations of health and wellness centers on land and at sea. We enter the fourth quarter with positive momentum, and this, along with our strong first nine months performance, has led us to raise the midpoint of our guidance ranges.

We expect 2026 to represent our fourth consecutive fiscal year of record performance and remain focused on executing our strategy, serving our cruise line and destination resort partners and their guests, and creating long-term value for our shareholders. I am now going to turn the call over to Stephen.

Stephen? Thank you, Leonard. Good morning, everyone.

We are pleased with our third quarter performance, with total revenue increasing by 7% and Adjusted EBITDA increasing by 12% compared to the third quarter of 2025, both of these exceeding the high end of the guidance ranges we provided in July. Our results were driven by higher average guest spend and higher volumes, reflecting ongoing innovation in our guest services and products and our continued collaboration with our cruise line and destination resort partners, as well as growth in our fleet from new ship builds. Combined, this served to further bolster our competitive position and deliver consistent growth. Total revenues increased 7% to $276.5 million compared to $258.5 million for the third quarter of 2025.

The $18 million increase was driven by a 3.3% increase in average guest spend, fleet expansion due to 2026 new ship builds, and higher volumes, primarily reflecting a 1.8% increase in revenue days net of 2026 fleet expansion and an increase in guest count contributing $8.2 million, $7 million, and $4.3 million, respectively. Contributing to the increased volume and spend was $6.9 million in increased pre-booked revenue at health and wellness centers included in our ship count as of September 30, 2026. Growth in our maritime total revenues was partially offset by a $1.4 million decrease in destination resorts, partially due to the closure of hotels where we had previously operated. The decrease in product revenue was driven by the previously announced reorganization of operations in the U.K. and Italy, which decreased product revenue by $1.3 million.

Cost of services increased $12.2 million attributable to the $18.3 million increase in service revenue compared to the third quarter of 2025. Cost of products decreased $300,000 attributable to the decrease in product revenue. Administrative expenses were $7 million compared to $4.6 million in the third quarter of 2025. The increase was primarily due to $2.1 million in third-party fees for certain management and logistics services as a result of our previously announced reorganization of operations in the U.K. and Italy, pursuant to which services previously performed internally by company staff and related costs have shifted from salaries, benefits, and payroll taxes to administrative expenses. Salaries, benefits, and payroll taxes were $8.7 million, compared to $8.4 million in the third quarter of 2025.