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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/03/22 Onespaworld Holdings Ltd. 10-Q 6/30/22 71:11M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 3.18M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 26K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 26K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 22K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 22K
11: R1 Document and Entity Information HTML 82K
12: R2 Condensed Consolidated Balance Sheets HTML 135K
13: R3 Condensed Consolidated Balance Sheets HTML 32K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Operations HTML 110K
15: R5 Condensed Consolidated Statements of Comprehensive HTML 51K
(Loss) Income
16: R6 Condensed Consolidated Statements of Equity HTML 90K
17: R7 Condensed Consolidated Statements of Cash Flows HTML 113K
18: R8 Organization HTML 31K
19: R9 Summary of Significant Accounting Policies HTML 210K
20: R10 Goodwill and Intangible Assets HTML 106K
21: R11 Long-Term Debt HTML 147K
22: R12 Warrant Liabilities HTML 27K
23: R13 Stock-Based Compensation HTML 71K
24: R14 Revenue Recognition HTML 112K
25: R15 Segment and Geographical Information HTML 91K
26: R16 Changes in Accumulated Other Comprehensive (Loss) HTML 98K
Income
27: R17 Fair Value Measurements and Derivatives HTML 362K
28: R18 Income Taxes HTML 30K
29: R19 Commitments and Contingencies HTML 27K
30: R20 Subsequent Events HTML 27K
31: R21 Summary of Significant Accounting Policies HTML 215K
(Policies)
32: R22 Summary of Significant Accounting Policies HTML 200K
(Tables)
33: R23 Goodwill and Intangible Assets (Tables) HTML 102K
34: R24 Long-Term Debt (Tables) HTML 127K
35: R25 Stock-Based Compensation (Tables) HTML 66K
36: R26 Revenue Recognition (Tables) HTML 94K
37: R27 Segment and Geographical Information (Tables) HTML 85K
38: R28 Changes in Accumulated Other Comprehensive (Loss) HTML 97K
Income (Tables)
39: R29 Fair Value Measurements and Derivatives (Tables) HTML 354K
40: R30 ORGANIZATION - Additional Information (Details) HTML 23K
41: R31 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - HTML 30K
Summary of Reconciles Cash, Cash Equivalents and
Restricted Cash (Details)
42: R32 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - HTML 67K
Summary of Income (Loss) per Basic and Diluted
Share Calculation (Details)
43: R33 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - HTML 44K
Summary of Number of Antidilutive Potential Common
Shares (Details)
44: R34 GOODWILL AND INTANGIBLE ASSETS - Additional HTML 36K
Information (Details)
45: R35 GOODWILL AND INTANGIBLE ASSETS - Summary of Cost, HTML 42K
Accumulated Amortization, and Net Balance of the
Definite-Lived Intangible Assets (Details)
46: R36 LONG-TERM DEBT - Summary of Long-term Debt HTML 43K
(Details)
47: R37 LONG-TERM DEBT - Schedule of Principal Repayments HTML 40K
on Long-term Debt (Details)
48: R38 LONG-TERM DEBT - Additional Information (Details) HTML 67K
49: R39 LONG-TERM DEBT - Schedule of Borrowing Capacity HTML 26K
and Amount Borrowed (Details)
50: R40 WARRANT LIABILITIES - Additional Information HTML 27K
(Details)
51: R41 STOCK-BASED COMPENSATION - Additional Information HTML 38K
(Details)
52: R42 STOCK-BASED COMPENSATION - Summary of Restricted HTML 39K
Share Units Activity (Details)
53: R43 STOCK-BASED COMPENSATION - Summary of PSUs HTML 34K
Activity (Details)
54: R44 REVENUE RECOGNITION - Additional Information HTML 32K
(Details)
55: R45 REVENUE RECOGNITION - Summary of Disaggregation of HTML 41K
Revenue By Revenue Source and Operating Segment
(Details)
56: R46 SEGMENT AND GEOGRAPHICAL INFORMATION - Summary of HTML 45K
Geographic Information (Details)
57: R47 Changes in Accumulated Other Comprehensive (LOSS) HTML 55K
INCOME - Summary of Changes in Accumulated Other
Comprehensive (Loss) Income (Details)
58: R48 FAIR VALUE MEASUREMENTS AND DERIVATIVES - Summary HTML 51K
of Carrying Amounts and Estimated Fair Values of
the Company's Cash, Restricted Cash, and Long-term
Debt (Details)
59: R49 FAIR VALUE MEASUREMENTS AND DERIVATIVES - Summary HTML 48K
of Fair Value on Recurring Basis (Details)
60: R50 FAIR VALUE MEASUREMENTS AND DERIVATIVES - HTML 50K
Significant Assumptions used to Determine Fair
Value of Public and 2020 PIPE Warrants (Details)
61: R51 FAIR VALUE MEASUREMENTS AND DERIVATIVES - HTML 41K
Significant Assumptions used to Determine Fair
Value of Sponsor Warrants (Details)
62: R52 FAIR VALUE MEASUREMENTS AND DERIVATIVES - HTML 35K
Additional Information (Details)
63: R53 FAIR VALUE MEASUREMENTS AND DERIVATIVES - Summary HTML 28K
of Interest Rate Swap Contract (Details)
64: R54 INCOME TAXES - Additional Information (Details) HTML 30K
65: R55 COMMITMENTS AND CONTINGENCIES - Additional HTML 30K
Information (Details)
66: R56 SUBSEQUENT EVENTS - Additional Information HTML 35K
(Details)
69: XML IDEA XML File -- Filing Summary XML 129K
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| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the three months ended i June 30, i 2022 /
OR
i ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: i 001-38843
i OneSpaWorld Holdings Limited
(Exact name of Registrant as Specified in its Charter)
Commonwealth of The i Bahamas |
|
Not Applicable |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
Harry B. Sands, Lobosky Management Co. Ltd. i Office Number 2 i Pineapple Business Park i P.O. Box N-624 i Nassau, Island of New Providence, Commonwealth of The i Bahamas |
|
Not Applicable |
(Address of principal executive offices) |
|
(Zip Code) |
( i 242) i 322-2670
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
i Common Shares, par value (U.S.) $0.0001 per share |
|
i OSW |
|
i The Nasdaq Capital Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer |
|
☐ |
|
i Accelerated filer |
|
☒ |
|
|
|
|
|||
Non-Accelerated filer |
|
☐ |
|
Smaller reporting company |
|
i ☐ |
|
|
|
|
|||
|
|
|
|
Emerging growth company |
|
i ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. i ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☒
As of June 30, 2022, the registrant had i 78,709,037 voting shares and i 13,421,914 non-voting shares of common stock issued and outstanding.
OneSpaWorld Holdings Limited
Table of Contents
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Page |
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1 |
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Item 1. |
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1 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
20 |
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Item 3. |
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30 |
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Item 4. |
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30 |
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31 |
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Item 1. |
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31 |
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Item 1A. |
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31 |
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Item 2. |
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31 |
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Item 4. |
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31 |
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Item 5. |
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31 |
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Item 6. |
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31 |
|
i
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
||
|
|
As of |
|
|||||
|
|
|
|
|
||||
ASSETS |
|
|
|
|
|
|
||
CURRENT ASSETS: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 31,990 |
|
|
$ |
i 30,937 |
|
Restricted cash |
|
|
i 1,896 |
|
|
|
i 1,896 |
|
Accounts receivable, net |
|
|
i 31,791 |
|
|
|
i 19,480 |
|
Inventories, net |
|
|
i 33,595 |
|
|
|
i 29,483 |
|
Prepaid expenses |
|
|
i 5,887 |
|
|
|
i 6,574 |
|
Other current assets |
|
|
i 3,054 |
|
|
|
i 577 |
|
Total current assets |
|
|
i 108,213 |
|
|
|
i 88,947 |
|
Property and equipment, net |
|
|
i 13,813 |
|
|
|
i 14,107 |
|
Intangible assets, net |
|
|
i 573,879 |
|
|
|
i 582,290 |
|
OTHER ASSETS: |
|
|
|
|
|
|
||
Deferred tax asset |
|
|
— |
|
|
|
i 70 |
|
Other non-current assets |
|
|
i 4,912 |
|
|
|
i 3,454 |
|
Total other assets |
|
|
i 4,912 |
|
|
|
i 3,524 |
|
Total assets |
|
$ |
i 700,817 |
|
|
$ |
i 688,868 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
||
LIABILITIES: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 27,170 |
|
|
$ |
i 15,846 |
|
Accrued expenses |
|
|
i 36,411 |
|
|
|
i 32,232 |
|
Current portion of long-term debt |
|
|
i 2,085 |
|
|
|
i 1,776 |
|
Other current liabilities |
|
|
i 925 |
|
|
|
i 2,011 |
|
Total current liabilities |
|
|
i 66,591 |
|
|
|
i 51,865 |
|
Deferred rent |
|
|
i 381 |
|
|
|
i 341 |
|
Income tax contingency |
|
|
i 4,013 |
|
|
|
i 4,129 |
|
Warrant liabilities |
|
|
i 45,400 |
|
|
|
i 107,300 |
|
Other long-term liabilities |
|
|
i 2,493 |
|
|
|
i 2,646 |
|
Long-term debt, net |
|
|
i 228,154 |
|
|
|
i 228,683 |
|
Total liabilities |
|
|
i 347,032 |
|
|
|
i 394,964 |
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
||
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
||
Common stock: |
|
|
|
|
|
|
||
Voting common stock, $ i i 0.0001 / par value; i i 225,000,000 / shares authorized, i i 78,709,037 / issued and outstanding at June 30, 2022 and i i 78,422,887 / shares issued and outstanding at December 31, 2021 |
|
|
i 8 |
|
|
|
i 8 |
|
Non-voting common stock, $ i i 0.0001 / par value; i i 25,000,000 / shares authorized, i i i i 13,421,914 / / / shares issued and outstanding, at both June 30, 2022 and December 31, 2021 |
|
|
i 1 |
|
|
|
i 1 |
|
Additional paid-in capital |
|
|
i 693,840 |
|
|
|
i 687,660 |
|
Accumulated deficit |
|
|
( i 342,190 |
) |
|
|
( i 391,768 |
) |
Accumulated other comprehensive income (loss) |
|
|
i 2,126 |
|
|
|
( i 1,997 |
) |
Total shareholders' equity |
|
|
i 353,785 |
|
|
|
i 293,904 |
|
Total liabilities and shareholders' equity |
|
$ |
i 700,817 |
|
|
$ |
i 688,868 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
1
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service revenues |
|
$ |
i 103,616 |
|
|
$ |
i 7,648 |
|
|
$ |
i 174,778 |
|
|
$ |
i 12,252 |
|
Product revenues |
|
|
i 23,766 |
|
|
|
i 1,507 |
|
|
|
i 40,267 |
|
|
|
i 2,493 |
|
Total revenues |
|
|
i 127,382 |
|
|
|
i 9,155 |
|
|
|
i 215,045 |
|
|
|
i 14,745 |
|
COST OF REVENUES AND OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of services |
|
|
i 87,019 |
|
|
|
i 9,561 |
|
|
|
i 149,686 |
|
|
|
i 17,045 |
|
Cost of products |
|
|
i 23,278 |
|
|
|
i 1,504 |
|
|
|
i 37,930 |
|
|
|
i 2,799 |
|
Administrative |
|
|
i 3,861 |
|
|
|
i 4,862 |
|
|
|
i 7,694 |
|
|
|
i 8,706 |
|
Salary, benefits and payroll taxes |
|
|
i 7,994 |
|
|
|
i 5,988 |
|
|
|
i 16,721 |
|
|
|
i 13,640 |
|
Amortization of intangible assets |
|
|
i 4,206 |
|
|
|
i 4,206 |
|
|
|
i 8,412 |
|
|
|
i 8,412 |
|
Total cost of revenues and operating expenses |
|
|
i 126,358 |
|
|
|
i 26,121 |
|
|
|
i 220,443 |
|
|
|
i 50,602 |
|
Income (loss) from operations |
|
|
i 1,024 |
|
|
|
( i 16,966 |
) |
|
|
( i 5,398 |
) |
|
|
( i 35,857 |
) |
OTHER INCOME (EXPENSE), NET: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( i 3,544 |
) |
|
|
( i 3,412 |
) |
|
|
( i 6,951 |
) |
|
|
( i 6,763 |
) |
Change in fair value of warrant liabilities |
|
|
i 58,500 |
|
|
|
i 20,700 |
|
|
|
i 61,900 |
|
|
|
( i 2,600 |
) |
Total other income (expense), net |
|
|
i 54,956 |
|
|
|
i 17,288 |
|
|
|
i 54,949 |
|
|
|
( i 9,363 |
) |
Income (loss) before income tax expense (benefit) |
|
|
i 55,980 |
|
|
|
i 322 |
|
|
|
i 49,551 |
|
|
|
( i 45,220 |
) |
INCOME TAX EXPENSE (BENEFIT) |
|
|
i 86 |
|
|
|
i 17 |
|
|
|
( i 27 |
) |
|
|
i 43 |
|
NET INCOME (LOSS) |
|
$ |
i 55,894 |
|
|
$ |
i 305 |
|
|
$ |
i 49,578 |
|
|
$ |
( i 45,263 |
) |
NET INCOME (LOSS) PER VOTING AND NON-VOTING SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
i 0.61 |
|
|
$ |
i 0.00 |
|
|
$ |
i 0.54 |
|
|
$ |
( i 0.51 |
) |
Diluted |
|
$ |
i 0.46 |
|
|
$ |
( i 0.04 |
) |
|
$ |
i 0.39 |
|
|
$ |
( i 0.51 |
) |
WEIGHTED-AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
i 92,352 |
|
|
|
i 90,563 |
|
|
|
i 92,278 |
|
|
|
i 88,903 |
|
Diluted |
|
|
i 94,798 |
|
|
|
i 92,932 |
|
|
|
i 94,864 |
|
|
|
i 88,903 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(in thousands)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2021 |
|
|
2021 |
|
|||||
Net income (loss) |
$ |
i 55,894 |
|
|
$ |
i 305 |
|
|
$ |
i 49,578 |
|
|
$ |
( i 45,263 |
) |
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
( i 373 |
) |
|
|
i 2 |
|
|
|
( i 615 |
) |
|
|
i 114 |
|
Cash flows hedges: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net unrealized gain (loss) on derivative |
|
i 899 |
|
|
|
( i 194 |
) |
|
|
i 4,142 |
|
|
|
i 705 |
|
Amount realized and reclassified into earnings |
|
i 199 |
|
|
|
i 487 |
|
|
|
i 596 |
|
|
|
i 980 |
|
Total other comprehensive income (loss) net of tax |
|
i 725 |
|
|
|
i 295 |
|
|
|
i 4,123 |
|
|
|
i 1,799 |
|
Total comprehensive income (loss) |
$ |
i 56,619 |
|
|
$ |
i 600 |
|
|
$ |
i 53,701 |
|
|
$ |
( i 43,464 |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2022 |
|
|||||||||||||||||||
|
|
Issued Common Voting Shares |
|
|
Issued Common Non-Voting Shares |
|
|
Voting and Non-Voting Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Income |
|
|
Accumulated Deficit |
|
|
Total Shareholders’ equity |
|
|||||||
BALANCE, March 31, 2022 |
|
|
i 78,709 |
|
|
|
i 13,422 |
|
|
$ |
i 9 |
|
|
$ |
i 691,001 |
|
|
$ |
i 1,401 |
|
|
$ |
( i 398,084 |
) |
|
$ |
i 294,327 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 55,894 |
|
|
|
i 55,894 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 2,835 |
|
|
|
— |
|
|
|
— |
|
|
|
i 2,835 |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 373 |
) |
|
|
— |
|
|
|
( i 373 |
) |
Proceeds from 2021 exercise of public warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 4 |
|
|
|
— |
|
|
|
— |
|
|
|
i 4 |
|
Unrecognized gain on derivatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,098 |
|
|
|
— |
|
|
|
i 1,098 |
|
BALANCE, June 30, 2022 |
|
|
i 78,709 |
|
|
|
i 13,422 |
|
|
$ |
i 9 |
|
|
$ |
i 693,840 |
|
|
$ |
i 2,126 |
|
|
$ |
( i 342,190 |
) |
|
$ |
i 353,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2022 |
|
|||||||||||||||||||
|
|
Issued Common Voting Shares |
|
|
Issued Common Non-Voting Shares |
|
|
Voting and Non-Voting Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive (Loss) Income |
|
|
Accumulated Deficit |
|
|
Total Shareholders’ equity |
|
|||||||
BALANCE, December 31, 2021 |
|
|
i 78,423 |
|
|
|
i 13,422 |
|
|
$ |
i 9 |
|
|
$ |
i 687,660 |
|
|
$ |
( i 1,997 |
) |
|
$ |
( i 391,768 |
) |
|
$ |
i 293,904 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 49,578 |
|
|
|
i 49,578 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 6,121 |
|
|
|
— |
|
|
|
— |
|
|
|
i 6,121 |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 615 |
) |
|
|
— |
|
|
|
( i 615 |
) |
Unrecognized gain on derivatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 4,738 |
|
|
|
— |
|
|
|
i 4,738 |
|
Proceeds from 2021 exercise of public warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 59 |
|
|
|
— |
|
|
|
— |
|
|
|
i 59 |
|
Common shares issued under equity incentive plan |
|
|
i 286 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
BALANCE, June 30, 2022 |
|
|
i 78,709 |
|
|
|
i 13,422 |
|
|
$ |
i 9 |
|
|
$ |
i 693,840 |
|
|
$ |
i 2,126 |
|
|
$ |
( i 342,190 |
) |
|
$ |
i 353,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|
|||||||||||||||||||
|
|
Issued Common Voting Shares |
|
|
Issued Common Non-Voting Shares |
|
|
Voting and Non-Voting Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss |
|
|
Accumulated Deficit |
|
|
Total Shareholders’ equity |
|
|||||||
BALANCE, March 31, 2021 |
|
|
i 73,282 |
|
|
|
i 17,186 |
|
|
$ |
i 9 |
|
|
$ |
i 671,646 |
|
|
$ |
( i 3,971 |
) |
|
$ |
( i 368,814 |
) |
|
$ |
i 298,870 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 305 |
|
|
|
i 305 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,729 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,729 |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 2 |
|
|
|
— |
|
|
|
i 2 |
|
Unrecognized gain on derivatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 293 |
|
|
|
— |
|
|
|
i 293 |
|
Common shares issued under equity incentive plan |
|
|
i 8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
BALANCE, June 30, 2021 |
|
|
i 73,290 |
|
|
|
i 17,186 |
|
|
$ |
i 9 |
|
|
$ |
i 673,375 |
|
|
$ |
( i 3,676 |
) |
|
$ |
( i 368,509 |
) |
|
$ |
i 301,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 |
|
|||||||||||||||||||
|
|
Issued Common Voting Shares |
|
|
Issued Common Non-Voting Shares |
|
|
Voting and Non-Voting Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss |
|
|
Accumulated Deficit |
|
|
Total Shareholders’ equity |
|
|||||||
BALANCE, December 31, 2020 |
|
|
i 69,292 |
|
|
|
i 17,186 |
|
|
$ |
i 9 |
|
|
$ |
i 649,540 |
|
|
$ |
( i 5,475 |
) |
|
$ |
( i 323,246 |
) |
|
$ |
i 320,828 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 45,263 |
) |
|
|
( i 45,263 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 5,360 |
|
|
|
— |
|
|
|
— |
|
|
|
i 5,360 |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 114 |
|
|
|
— |
|
|
|
i 114 |
|
Unrecognized gain on derivatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,685 |
|
|
|
— |
|
|
|
i 1,685 |
|
At-The Market Equity Offering, net of issuance cost |
|
|
i 1,712 |
|
|
|
— |
|
|
|
— |
|
|
|
i 18,475 |
|
|
|
— |
|
|
|
— |
|
|
|
i 18,475 |
|
Common shares issued under equity incentive plan |
|
|
i 681 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion of deferred shares into common shares |
|
|
i 1,600 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion of public warrants into common shares |
|
|
i 5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
BALANCE, June 30, 2021 |
|
|
i 73,290 |
|
|
|
i 17,186 |
|
|
$ |
i 9 |
|
|
$ |
i 673,375 |
|
|
$ |
( i 3,676 |
) |
|
$ |
( i 368,509 |
) |
|
$ |
i 301,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
|
|
Six Months Ended June 30, |
|
|||||||
|
|
|
|
|
2021 |
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|||
Net income (loss) |
|
$ |
i 49,578 |
|
|
|
$ |
( i 45,263 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) |
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
i 10,717 |
|
|
|
|
i 11,370 |
|
|
Amortization of deferred financing costs |
|
|
i 514 |
|
|
|
|
i 513 |
|
|
Change in fair value of warrant liabilities |
|
|
( i 61,900 |
) |
|
|
|
i 2,600 |
|
|
Stock-based compensation |
|
|
i 6,121 |
|
|
|
|
i 5,360 |
|
|
Provision for doubtful accounts |
|
|
i 3 |
|
|
|
|
i 81 |
|
|
Loss from write-offs of property and equipment |
|
|
i 10 |
|
|
|
|
i 156 |
|
|
Deferred income taxes |
|
|
i 70 |
|
|
|
|
— |
|
|
Changes in: |
|
|
|
|
|
|
|
|||
Accounts receivable, net |
|
|
( i 12,314 |
) |
|
|
|
( i 1,225 |
) |
|
Inventories, net |
|
|
( i 4,112 |
) |
|
|
|
i 541 |
|
|
Prepaid expenses |
|
|
i 687 |
|
|
|
|
( i 497 |
) |
|
Other current assets |
|
|
( i 903 |
) |
|
|
|
i 593 |
|
|
Other non-current assets |
|
|
i 382 |
|
|
|
|
i 156 |
|
|
Accounts payable |
|
|
i 11,324 |
|
|
|
|
( i 1,066 |
) |
|
Accrued expenses |
|
|
i 4,179 |
|
|
|
|
i 7,077 |
|
|
Other current liabilities |
|
|
i 41 |
|
|
|
|
( i 123 |
) |
|
Income tax contingency |
|
|
( i 116 |
) |
|
|
|
— |
|
|
Deferred rent |
|
|
i 40 |
|
|
|
|
i 53 |
|
|
Other long-term liabilities |
|
|
i 44 |
|
|
|
|
— |
|
|
Net cash provided by (used in) operating activities |
|
|
i 4,365 |
|
|
|
|
( i 19,674 |
) |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|||
Capital expenditures |
|
|
( i 2,025 |
) |
|
|
|
( i 677 |
) |
|
Net cash used in investing activities |
|
|
( i 2,025 |
) |
|
— |
|
|
( i 677 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|||
Proceeds from At-the Market Equity Offering, net of issuance costs paid |
|
|
— |
|
|
|
|
i 18,550 |
|
|
Proceeds from exercise of public warrants |
|
|
i 59 |
|
|
|
|
— |
|
|
Repayment on term loan facilities |
|
|
( i 734 |
) |
|
|
|
— |
|
|
Net cash (used in) provided by financing activities |
|
|
( i 675 |
) |
|
|
|
i 18,550 |
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
( i 612 |
) |
|
|
|
i 148 |
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
i 1,053 |
|
|
|
|
( i 1,653 |
) |
|
Cash, cash equivalents and restricted cash, Beginning of period |
|
|
i 32,833 |
|
|
|
|
i 43,448 |
|
|
Cash, cash equivalents and restricted cash, End of period |
|
$ |
i 33,886 |
|
|
|
$ |
i 41,795 |
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
(in thousands)
|
Six Months Ended June 30, |
|
|||||
|
|
|
2021 |
|
|||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
||
Income taxes |
$ |
i 265 |
|
|
$ |
i 29 |
|
Interest |
$ |
i 6,842 |
|
|
$ |
i 6,409 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
OneSpaWorld Holdings Limited (“OneSpaWorld,” the “Company,” “we,” “us,” or “our”) is an international business company incorporated under the laws of the Commonwealth of The Bahamas. OneSpaWorld is a global provider and innovator in the fields of health and wellness, fitness and beauty. In facilities on cruise ships and in land-based resorts, the Company strives to create a relaxing and therapeutic environment where guests can receive health and wellness, fitness and beauty services and experiences of the highest quality. The Company’s services include traditional and alternative massage, body and skin treatments, fitness, acupuncture, and medi-spa treatments. The Company also sells premium quality health and wellness, fitness and beauty products at its facilities and through its timetospa.com website. The predominant business, based on revenues, is sales of services and products on cruise ships and in land-based resorts, followed by sales of products through the timetospa.com website.
Impact of Coronavirus (COVID-19) – Liquidity and Management’s Plans
In the face of the global impact of COVID-19, our cruise line partners paused their guest cruise operations and the majority of our land based destination resort spas temporarily closed in mid-March 2020. As of June 30, 2022, our health and wellness centers on i 167 ships of our cruise line partners and in i 48 land based destination resort spas were operating as part of our ongoing return to service. The extent of the effects of COVID-19 on our business are uncertain and will depend on future developments, including, but not limited to, the duration and continued severity of COVID-19 and the emergence of new COVID-19 variants. The ongoing effects of COVID-19 have had, and will continue to have, a material negative impact on our financial results and liquidity; however, our results experienced significant recovery during the three and six months ended June 30, 2022 when compared to the prior year periods, which drove positive net operating cash flows generation for the first period since the onset of COVID-19.
The estimation of our future liquidity requirements includes numerous assumptions that are subject to various risks and uncertainties. We cannot make assurances that our assumptions used to estimate our liquidity requirements will be realized as assumed or may not change because of the unprecedented environment we are experiencing due to COVID-19. We believe that we have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements, however, there may be material changes to those estimates and judgments in future periods. We have implemented a number of proactive measures to mitigate the financial and operational impacts of COVID-19, including completing a private placement of equity securities and various capital market transactions, reduction of capital expenditures and operating expenses, borrowing on our first lien revolving facility, deferring payment of dividends declared and the suspension of our dividend program. To the extent necessary, we will pursue all appropriate actions to optimize our liquidity.
Based on the actions the Company has taken as described above, and our assumptions regarding the impact of COVID-19, our current resources, our current operations, and the expected performance of our health and wellness center operations onboard vessels and in destination resorts, we have concluded that we will have sufficient liquidity to satisfy our obligations over the next 12 months and comply with all debt covenants as required by our debt agreements. Management cannot predict the magnitude and duration of the negative impact from the COVID-19 pandemic; new events beyond management’s control may have an incrementally material adverse impact on the Company’s results of operations, financial position and liquidity.
/
7
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation, Principles of Consolidation
In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in quarterly financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been omitted or condensed pursuant to the SEC’s rules and regulations. However, management believes that the disclosures contained herein are adequate to make the information presented not misleading. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (which are of a normal recurring nature) necessary to present fairly our unaudited financial position, results of operations and cash flows. The unaudited results of operations and cash flows of our interim periods are not necessarily indicative of the results of operations or cash flows that may be expected for the entire fiscal year. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated and combined financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Actual results could differ from those estimates. The accompanying unaudited condensed consolidated financial statements includes the condensed consolidated balance sheet and statement of operations, comprehensive income (loss), changes in equity, and cash flows of OneSpaWorld. All significant intercompany items and transactions have been eliminated in consolidation.
Restricted Cash
These balances include amounts held in escrow accounts, as a result of a legal proceeding related to a tax assessment. i The following table reconciles cash, cash equivalents and restricted cash reported in our condensed consolidated balance sheet as of June 30, 2022 and 2021 to the total amount presented in our condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 (in thousands):
|
|
Balance as of June 30, |
|
|||||
|
|
|
|
2021 |
|
|||
Cash and cash equivalents |
|
$ |
i 31,990 |
|
|
$ |
i 39,899 |
|
Restricted cash |
|
|
i 1,896 |
|
|
|
i 1,896 |
|
Total cash and restricted cash in the condensed consolidated statement of cash flows |
|
$ |
i 33,886 |
|
|
$ |
i 41,795 |
|
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the periodcan. Diluted earnings per share is computed by dividing net income (loss) adjusted for the change in fair value of warrant liabilities, if the impact is dilutive, by the weighted average number of diluted shares, as calculated under the treasury stock method, which includes the potential effect of dilutive common stock equivalents, such as options and warrants to purchase common shares, and contingently issuable shares. If the entity reports a net loss, rather than net income for the period, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, if their effect is anti-dilutive.
The Company has two classes of common stock, Voting and Non-Voting. Shares of Non-Voting common stock are in all respects identical to and treated equally with shares of Voting common stock except for the absence of voting rights. Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of Voting and Non-Voting common shares outstanding for the period. Diluted income (loss) per share is computed by dividing net income (loss) by the weighted average number of diluted Voting and Non-voting common shares, as calculated under the treasury stock method, which includes the potential effect of dilutive common stock equivalents, such as options and warrants to purchase Voting and Non-Voting common shares. If the entity reports a net loss, rather than net income for the period, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, as their effect would be anti-dilutive. The Company has not presented (loss) income per share under the two-class method, because the income (loss) per share are the same for both Voting and Non-Voting common stock since they are entitled to the same liquidation and dividend rights.
8
The following table provides details underlying OneSpaWorld’s income (loss) per basic and diluted share calculation (in thousands, except per share data):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 (a) |
|
|||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
i 55,894 |
|
|
$ |
i 305 |
|
|
$ |
i 49,578 |
|
|
$ |
( i 45,263 |
) |
Less change in fair value of in-the-money warrant liabilities |
|
|
( i 12,400 |
) |
|
|
( i 4,000 |
) |
|
|
( i 12,200 |
) |
|
|
— |
|
Net income (loss), adjusted for change in fair value of warrants for diluted earnings per share |
|
$ |
i 43,494 |
|
|
$ |
( i 3,695 |
) |
|
$ |
i 37,378 |
|
|
$ |
( i 45,263 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding – Basic |
|
|
i 92,352 |
|
|
|
i 90,563 |
|
|
|
i 92,278 |
|
|
|
i 88,903 |
|
Dilutive effect of 2020 PIPE Warrants |
|
|
i 1,895 |
|
|
|
i 2,369 |
|
|
|
i 2,043 |
|
|
|
— |
|
Dilutive effect of stock-based awards |
|
|
i 551 |
|
|
|
— |
|
|
|
i 543 |
|
|
|
— |
|
Diluted |
|
|
i 94,798 |
|
|
|
i 92,932 |
|
|
|
i 94,864 |
|
|
|
i 88,903 |
|
Net Income (loss) per voting and non-voting share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
i 0.61 |
|
|
$ |
i 0.00 |
|
|
$ |
i 0.54 |
|
|
$ |
( i 0.51 |
) |
Diluted |
|
$ |
i 0.46 |
|
|
$ |
( i 0.04 |
) |
|
$ |
i 0.39 |
|
|
$ |
( i 0.51 |
) |
(a) Potential common shares under the treasury stock method and the if-converted method were antidilutive because the Company reported a an adjusted net loss in this period and the effect of the change in the fair value of warrants was antidilutive. Consequently, the Company did not have any adjustments in this period between basic and diluted loss per share related to stock options, restricted share units and warrants.
/The table below presents the number of antidilutive potential common shares that are not considered in the calculation of diluted income (loss) per share (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|||||||||
|
|
|
|
2021 |
|
|
2022 |
|
2021 |
|
|||||
Sponsor Warrants |
|
|
i 8,000 |
|
|
|
i 8,000 |
|
|
|
i 8,000 |
|
|
i 8,000 |
|
Public Warrants |
|
|
i 16,145 |
|
|
|
i 16,145 |
|
|
|
i 16,145 |
|
|
i 16,147 |
|
2020 PIPE Warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
i 5,000 |
|
Deferred shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
i 778 |
|
Employee stock options |
|
|
— |
|
|
|
i 3,434 |
|
|
|
— |
|
|
i 3,902 |
|
Restricted stock units |
|
|
i 49 |
|
|
|
i 1,720 |
|
|
|
i 49 |
|
|
i 1,734 |
|
Performance stock units |
|
|
— |
|
|
|
i 534 |
|
|
|
— |
|
|
i 707 |
|
|
|
|
i 24,194 |
|
|
|
i 29,833 |
|
|
|
i 24,194 |
|
|
i 36,268 |
|
9
Recent Accounting Pronouncements
With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to the Company. The following summary of recent accounting pronouncements is not intended to be an exhaustive description of the respective pronouncement.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase transparency and comparability among organizations by recognizing rights and obligations resulting from leases as lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The update requires lessees to recognize for all leases with a term of 12 months or more at the commencement date: (a) a lease liability or a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and (b) a right-of-use asset or a lessee’s right to use or control the use of a specified asset for the lease term. Under the update, lessor accounting remains largely unchanged. The update requires a modified retrospective transition approach for leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements and do not require any transition accounting for leases that expire before the earliest comparative period presented. In June 2020, the FASB issued guidance (ASU 2020-05) that defers the effective dates of the lease standard (ASU 2016-02) for entities that have not yet issued financial statements adopting the standard. The update is effective retrospectively for annual periods beginning after December 15, 2021, and interim periods beginning after December 15, 2022, with early adoption permitted. We intend to elect the optional transition method, which allows entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company continues to evaluate the effect that the update will have on the Company’s consolidated financial statements. The Company is completing its initial scoping review, which includes finalizing the population of leases to be recorded on the consolidated balance sheet with corresponding lease obligation and right of use asset, as well as the implementation of a new lease accounting system. The Company expects that the update will have a material effect on our consolidated balance sheets due to the recognition of operating lease assets and operating lease liabilities primarily related to the destination resort agreements and office space, which will result in a balance sheet presentation that is not comparable to the prior period in the first year of adoption. The Company is currently assessing the expected impact of the future adoption of this guidance.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” This ASU amends the FASB’s guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model (known as the current expected credit losses model) that is based on an expected losses model rather than an incurred losses model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The ASU is also intended to reduce the complexity of U.S. GAAP by decreasing the number of impairment models that entities use to account for debt instruments. In November 2019, the FASB issued guidance (ASU 2019-10) that defers the effective dates of the Financial Instruments—Credit Losses standard for entities that have not yet issued financial statements adopting the standard. The update is effective for annual periods beginning after December 15, 2022, and interim periods beginning after December 15, 2022, with early adoption permitted. The Company is in the process of starting its initial scoping review and is currently assessing the expected impact of the future adoption of this guidance.
3. GOODWILL AND INTANGIBLE ASSETS
Intangible assets consist of finite and indefinite life assets. i The following is a summary of the Company’s intangible assets as of June 30, 2022 (in thousands, except amortization period):
|
Cost |
|
|
Accumulated Amortization and Impairment |
|
|
Net Balance |
|
|
Weighted Average Amortization Period (in years) |
|
||||
Retail concession agreements |
$ |
i 604,700 |
|
|
$ |
( i 50,940 |
) |
|
$ |
i 553,760 |
|
|
|
i 39 |
|
Destination resort agreements |
|
i 17,900 |
|
|
|
( i 3,883 |
) |
|
|
i 14,017 |
|
|
|
i 15 |
|
Trade name |
|
i 6,200 |
|
|
|
( i 700 |
) |
|
|
i 5,500 |
|
|
i Indefinite-life |
|
|
Licensing agreement |
|
i 1,000 |
|
|
|
( i 398 |
) |
|
|
i 602 |
|
|
|
i 8 |
|
|
$ |
i 629,800 |
|
|
$ |
( i 55,921 |
) |
|
$ |
i 573,879 |
|
|
|
|
|
10
The following is a summary of the Company’s intangible assets as of December 31, 2021 (in thousands, except amortization period):
|
Cost |
|
|
Accumulated Amortization and Impairment |
|
|
Net Balance |
|
|
Weighted Average Amortization Period (in years) |
|
||||
Retail concession agreements |
$ |
i 604,700 |
|
|
$ |
( i 43,187 |
) |
|
$ |
i 561,513 |
|
|
|
i 39 |
|
Destination resort agreements |
|
i 17,900 |
|
|
|
( i 3,287 |
) |
|
|
i 14,613 |
|
|
|
i 15 |
|
Trade name |
|
i 6,200 |
|
|
|
( i 700 |
) |
|
|
i 5,500 |
|
|
i Indefinite-life |
|
|
Licensing agreement |
|
i 1,000 |
|
|
|
( i 336 |
) |
|
|
i 664 |
|
|
|
i 8 |
|
|
$ |
i 629,800 |
|
|
$ |
( i 47,510 |
) |
|
$ |
i 582,290 |
|
|
|
|
|
The Company amortizes intangible assets with definite lives on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended June 30, 2022 and 2021 was $ i i 4.2 / million for each period, respectively. Amortization expense for the six months ended June 30, 2022 and 2021 was $ i i 8.4 / million for each period, respectively. Amortization expense is estimated to be $ i i i i 16.8 / / / million in each of the next five years beginning in 2022.
/4. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands, except interest rate):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
Interest Rate As of |
|
|
|
As of |
|
||||||||
|
|
|
|
Maturities Through |
|
|
|
|
|
||||||
First lien term loan facility |
|
i 5.2% |
|
i 4.0% |
|
i 2026 |
|
$ |
i 201,723 |
|
|
|
$ |
i 202,457 |
|
Second lien term loan facility |
|
i 8.7% |
|
i 7.6% |
|
i 2027 |
|
|
i 25,000 |
|
|
|
|
i 25,000 |
|
First lien revolving facility |
|
i 5.0% |
|
i 4.0% |
|
i 2024 |
|
|
i 7,000 |
|
|
|
|
i 7,000 |
|
Total debt |
|
|
|
|
|
|
|
$ |
i 233,723 |
|
|
|
$ |
i 234,457 |
|
Less: unamortized debt issuance cost |
|
|
|
|
|
|
|
|
( i 3,484 |
) |
|
|
|
( i 3,998 |
) |
Total debt, net of unamortized debt issuance cost |
|
|
|
|
|
|
|
$ |
i 230,239 |
|
|
|
$ |
i 230,459 |
|
Less: current portion of long-term debt |
|
|
|
|
|
|
|
|
( i 2,085 |
) |
|
|
|
( i 1,776 |
) |
Long-term debt, net |
|
|
|
|
|
|
|
$ |
i 228,154 |
|
|
|
$ |
i 228,683 |
|
i The following are scheduled principal repayments on long-term debt as of June 30, 2022 for each of the next five years (in thousands):
Year |
|
Amount |
|
|
2022 |
|
$ |
i 1,042 |
|
2023 |
|
|
i 2,085 |
|
2024 |
|
|
i 9,085 |
|
2025 |
|
|
i 2,085 |
|
2026 |
|
|
i 2,085 |
|
Thereafter |
|
|
i 217,341 |
|
Total |
|
$ |
i 233,723 |
|
On March 19, 2019, the Company entered into (i) senior secured first lien credit facilities (the “First Lien Credit Facilities”) with Goldman Sachs Lending Partners LLC, as administrative agent, and certain lenders, consisting of (x) a term loan facility of $ i 208.5 million (of which $ i 20 million was borrowed by a subsidiary of the Company) (the “First Lien Term Loan Facility”), (y) a revolving loan facility of up to $ i 20 million (the “First Lien Revolving Facility”) and (z) a delayed draw term loan facility of $ i 5 million (the “First Lien Delayed Draw Facility”), and (ii) a senior secured second lien term loan facility of $ i 25 million with Cortland Capital Market Services LLC, as administrative agent, and Neuberger Berman Alternative Funds, Neuberger Berman Long Short Fund, as lender (the “Second Lien Term Loan Facility” and, together with the First Lien Term Loan Facility, the “Term Loan Facilities”; the New Term Loan Facilities, together with the First Lien Revolving Facility and the First Lien Delayed Draw Facility, are referred to as the “New Credit Facilities”). The First Lien Revolving Facility includes borrowing capacity available for letters of credit up to $ i 5 million. Any issuance of letters of credit reduces the amount available under the New First Lien Revolving Facility. The First Lien Term Loan Facility matures i seven years after March 19, 2019, the First Lien Revolving Facility matures i five years after March 19, 2019 and the Second Lien Term Loan Facility matures i eight years after March 19, 2019.
11
Loans outstanding under the First Lien Credit Facilities will accrue interest at a rate per annum equal to LIBOR plus a margin of i 4.00%, with one step down to i 3.75% upon achievement of a certain leverage ratio, and undrawn amounts under the First Lien Revolving Facility will accrue a commitment fee at a rate per annum of i 0.50% on the average daily undrawn portion of the commitments thereunder, with one step down to i 0.325% upon achievement of a certain leverage ratio. Loans outstanding under the Second Lien Term Loan Facility will accrue interest at a rate per annum equal to i LIBOR plus i 7.50 / %.
The obligations under the New Credit Facilities are guaranteed by the Company and each of its direct or indirect wholly-owned subsidiaries organized under the laws of the United States and the Commonwealth of The Bahamas, in each case, other than certain excluded subsidiaries, including, but not limited to, immaterial subsidiaries, non-profit subsidiaries, and any other subsidiary with respect to which the burden or cost of providing a guarantee is excessive in view of the benefits to be obtained by the lenders therefrom. In addition, under the New Credit Facilities, certain of our direct and indirect subsidiaries have granted the lenders a security interest in substantially all of their assets.
The Term Loan Facilities require the Company to make certain mandatory prepayments, with (i) i 100% of net cash proceeds of all non-ordinary course asset sales or other dispositions of property, subject to the ability to reinvest such proceeds and certain other exceptions, and subject to step downs if certain leverage ratios are met and (ii) i 100% of the net cash proceeds of any debt incurrence, other than debt permitted under the definitive agreements (but excluding debt incurred to refinance the New Credit Facilities). The Company also is required to make quarterly amortization payments equal to i 0.25% of the original principal amount of the First Lien Term Loan Facility commencing after the first full fiscal quarter after the closing date of the New Credit Facilities (subject to reductions by optional and mandatory prepayments of the loans). The Company may prepay (i) the First Lien Credit Facilities at any time without premium or penalty, subject to payment of customary breakage costs and a customary “soft call,” and (ii) the Second Lien Term Loan Facility at any time without premium or penalty, subject to a customary make-whole premium for any voluntary prepayment prior to the date that is 30 months following the closing date of the New Credit Facilities (the “Callable Date”), following by a call premium of (x) i 4.00% on or prior to the first anniversary of the Callable Date, (y) i 2.50% after the first anniversary but on or prior to the second anniversary of the Callable Date, and (z) i 1.50% after the second anniversary but on or prior to the third anniversary of the Callable Date. During the fourth quarter of 2019, we prepaid principal amounts of $ i 5 million of our First Lien Credit Facilities.
The New Credit Facilities contain a financial covenant related to the maintenance of a leverage ratio and a number of customary negative covenants including covenants related to the following subjects: consolidations, mergers, and sales of assets; limitations on the incurrence of certain liens; limitations on certain indebtedness; limitations on the ability to pay dividends; and certain affiliate transactions. i As of June 30, 2022 and December 31, 2021, the Company was in compliance with all of the covenants contained in the New Credit Facilities.
If we do not comply with these covenants, we would have to seek amendments to these covenants from our lenders or evaluate the options to cure the defaults contained in the credit agreements. However, no assurances can be made that such amendments would be approved by our lenders. If an event of default occurs, the lenders under the New Credit Facilities are entitled to take various actions, including the acceleration of amounts due under the New Credit Facilities and all actions permitted to be taken by a secured creditor, subject to customary inter creditor provisions among the first and second lien secured parties, which would have a material adverse impact to our operations and liquidity.
Borrowing Capacity:
As of June 30, 2022, our available borrowing capacity under the First Lien Revolving Facility was $ i 13 million. Utilization of the borrowing capacity was as follows (in thousands):
|
|
Borrowing Capacity |
|
|
Amount Borrowed |
|
||
First Lien Revolving Facility |
|
$ |
i 20,000 |
|
|
$ |
i 7,000 |
|
5. WARRANT LIABILITIES
Sponsor Warrants
As of June 30, 2022 and December 31, 2021, i i eight / million Sponsor Warrants were issued and outstanding.
Public Warrants
As of June 30, 2022 and December 31, 2021, i i 16,145,279 / Public Warrants were issued and outstanding.
2020 PIPE Warrants
As of June 30, 2022 and December 31, 2021, i i five / million 2020 PIPE Warrants were issued and outstanding.
/12
6. STOCK-BASED COMPENSATION
On February 22, 2022, the Company granted i 189,640 time-based restricted share units (“RSUs”) to certain executive officers, of which one-third vested on March 7, 2022 and two-thirds are scheduled to vest on December 5, 2022.
The share-based compensation expense for the three months ended June 30, 2022 and 2021 was $ i 2.8 million and $ i 1.7 million, respectively, which is included as a component of salary, benefits and payroll taxes in the accompanying condensed consolidated statements of operations.
The share-based compensation expense for the six months ended June 30, 2022 and 2021 was $ i 6.1 million and $ i 5.4 million, respectively, which is included as a component of salary, benefits and payroll taxes in the accompanying condensed consolidated statements of operations.
The following is a summary of RSUs activity for the six months ended June 30, 2022:
RSUs Activity |
|
Number of Awards |
|
|
Weighted-Average Grant Date Fair Value |
|
||
|
|
|
|
|
|
|
||
Outstanding at December 31, 2021 |
|
|
i 1,498,045 |
|
|
$ |
i 8.76 |
|
Granted |
|
|
i 189,640 |
|
|
|
i 9.69 |
|
Vested |
|
|
( i 109,818 |
) |
|
|
i 12.26 |
|
Non-Vested share units as of June 30, 2022 |
|
|
i 1,577,867 |
|
|
$ |
i 8.63 |
|
The following is a summary of performance share units (“PSUs”) activity for the six months ended June 30, 2022:
PSUs Activity |
|
Number of Performance-Based Awards |
|
|
Weighted-Average Grant Date Fair Value |
|
||
|
|
|
|
|
|
|
||
Outstanding at December 31, 2021 |
|
|
i 786,971 |
|
|
$ |
i 10.63 |
|
Vested |
|
|
( i 176,332 |
) |
|
|
i 11.35 |
|
Non-Vested share units as of June 30, 2022 |
|
|
i 610,639 |
|
|
$ |
i 10.42 |
|
7. REVENUE RECOGNITION
The Company's revenue generating activities include the following:
Service Revenues
Service revenues consist primarily of sales of health, wellness and beauty services, including a full range of massage treatments, facial treatments, nutritional/weight management consultations, teeth whitening, mindfulness services and medi-spa services to cruise ship passengers and destination resort guests. Each service or consultation represents a separate performance obligation and revenues are generally recognized immediately upon the completion of our service. Given the short duration of our performance obligation, although some services are recognized over time, there is no material difference in the timing of recognition across reporting periods.
Product Revenues
Product revenues consist primarily of sales of health and wellness products, such as facial skincare, body care, hair care, orthotics and nutritional supplements to cruise ship passengers, destination resort guests and timetospa.com customers. Our Shop & Ship program provides guests the ability to buy retail products onboard and have products shipped directly to their home. Each product unit represents a separate performance obligation. Our performance obligations are satisfied, and revenue is recognized when the customer obtains control of the product, which occurs either at the point of sale for retail sales and at the time of shipping for Shop & Ship and timetospa.com product sales. The Company provides no warranty on products sold. Shipping and handling fees charged to customers are included in net sales.
Gift Cards
The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold, no revenue is recognized; rather, the Company records a contract liability to customers. The liability is relieved, and revenue is recognized equal to the amount redeemed at the time gift cards are redeemed for products or services. The Company records revenue from an estimate of unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns. The liability for unredeemed gift cards is included in “Other current liabilities” on the Company's condensed consolidated balance sheets and was $ i 0.8 million and $ i 0.7 million as of June 30, 2022 and December 31, 2021, respectively.
13
Customer Loyalty Rewards Program
The Company initiated a customer loyalty program during October 2019 in which customers earn points based on their spending on timetospa.com. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer. The liability for customer loyalty programs was not material as of June 30, 2022 and December 31, 2021.
Contract Balances
Receivables from the Company’s contracts with customers are included within accounts receivables, net. Such amounts are typically remitted to us by our cruise line or destination resort partners, except for online sales, and are net of commissions they withhold. Although paid by our cruise line partners, i customers are typically required to pay with major credit cards, reducing our credit risk to individual customers. Amounts are billed immediately, and our cruise line and destination resort partners typically remit payments to us within 30 days. As of June 30, 2022, and December 31, 2021, our receivables from contracts with customers were $ i 31.8 million and $ i 19.5 million, respectively and the increase as of June 30, 2022 when compared to December 31, 2021 reflects the impact of increased revenues during the second quarter of 2022 due to our ongoing resumption of our spa operations. Our contract liabilities for gift cards and customer loyalty programs are described above.
Disaggregation of Revenue and Segment Reporting
The Company operates facilities on cruise ships and in destination resorts, where we provide health, fitness, beauty and wellness services and sell related products. The Company also sells health and wellness, fitness and beauty related products through its timetospa.com website which is a post-cruise sales tool where guests may continue their wellness journey after disembarking. The Company’s Maritime and Destination Resorts operating segments are aggregated into a single reportable segment based upon similar economic characteristics, products, services, customers and delivery methods. Additionally, the Company’s operating segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief executive officer, who is the Company’s chief operating decision maker (CODM), in determining how to allocate the Company’s resources and evaluate performance. i The following table disaggregates the Company’s revenues by revenue source and operating segment (in thousands):
|
|
|
|
|
|
|
|
||||||
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||
|
|
2021 |
|
|
2022 |
|
2021 |
|
|||||
Service revenues: |
|
|
|
|
|
|
|
|
|
||||
Maritime |
$ |
i 94,698 |
|
$ |
i 958 |
|
|
$ |
i 158,059 |
|
$ |
i 1,114 |
|
Destination resorts |
|
i 8,918 |
|
|
i 6,690 |
|
|
|
i 16,719 |
|
|
i 11,138 |
|
Total service revenues |
|
i 103,616 |
|
|
i 7,648 |
|
|
|
i 174,778 |
|
|
i 12,252 |
|
Product revenues: |
|
|
|
|
|
|
|
|
|
||||
Maritime |
|
i 22,472 |
|
|
i 358 |
|
|
|
i 37,636 |
|
|
i 453 |
|
Destination resorts |
|
i 759 |
|
|
i 534 |
|
|
|
i 1,454 |
|
|
i 954 |
|
Timetospa.com |
|
i 535 |
|
|
i 615 |
|
|
|
i 1,177 |
|
|
i 1,086 |
|
Total product revenues |
|
i 23,766 |
|
|
i 1,507 |
|
|
|
i 40,267 |
|
|
i 2,493 |
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
$ |
i 127,382 |
|
$ |
i 9,155 |
|
|
$ |
i 215,045 |
|
$ |
i 14,745 |
|
14
8. SEGMENT AND GEOGRAPHICAL INFORMATION
The Company operates facilities on cruise ships and in destination resort spas, which provide health and wellness services and sell beauty products onboard cruise ships and in destination resort spas. The Company’s Maritime and Destination Resorts operating segments are aggregated into a single reportable segment based upon similar economic characteristics, products, services, customers and delivery methods. Additionally, the Company’s operating segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief executive officer, who is the Company’s CODM, in determining how to allocate the Company’s resources and evaluate performance.
The basis for determining the geographic information below is based on the countries in which the Company operates. i The Company is not able to identify the country of origin for the customers to which revenues from cruise ship operations relate. Geographic information is as follows (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||
|
|
|
2021 |
|
|
2022 |
|
2021 |
|
|||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
i 3,505 |
|
$ |
i 4,555 |
|
|
$ |
i 9,901 |
|
$ |
i 7,376 |
|
Not connected to a country |
|
|
i 118,753 |
|
|
i 1,315 |
|
|
|
i 195,545 |
|
|
i 1,567 |
|
Other countries |
|
|
i 5,124 |
|
|
i 3,285 |
|
|
|
i 9,599 |
|
|
i 5,802 |
|
Total |
|
$ |
i 127,382 |
|
$ |
i 9,155 |
|
|
$ |
i 215,045 |
|
$ |
i 14,745 |
|
|
|
As of |
|
|||||
|
|
|
|
|
||||
Property and equipment, net: |
|
|
|
|
|
|
||
U.S. |
|
$ |
i 5,626 |
|
|
$ |
i 5,951 |
|
Not connected to a country |
|
|
i 6,871 |
|
|
|
i 6,298 |
|
Other countries |
|
|
i 1,316 |
|
|
|
i 1,858 |
|
Total |
|
$ |
i 13,813 |
|
|
$ |
i 14,107 |
|
15
9. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following table presents the changes in accumulated other comprehensive (loss) income by component for the six months ended June 30, 2022 and 2021, respectively (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Accumulated Other Comprehensive (Loss) Income for the Six Months Ended June 30, 2022 |
|
Accumulated Other Comprehensive (Loss) Income for the Six Months Ended June 30, 2021 |
|
|||||||||||||||||||
|
Foreign Currency Translation Adjustments |
|
|
Changes Related to Cash Flow Derivative Hedge (1) |
|
|
Accumulated Other Comprehensive (Loss) Income |
|
|
Foreign Currency Translation Adjustments |
|
|
Changes Related to Cash Flow Derivative Hedge (1) |
|
|
Accumulated Other Comprehensive Loss |
|
||||||
Accumulated other comprehensive loss, beginning of period |
$ |
( i 673 |
) |
|
$ |
( i 1,324 |
) |
|
$ |
( i 1,997 |
) |
|
$ |
( i 560 |
) |
|
$ |
( i 4,915 |
) |
|
$ |
( i 5,475 |
) |
Current period other comprehensive (loss) income before reclassifications |
|
( i 615 |
) |
|
|
i 4,142 |
|
|
|
i 3,527 |
|
|
|
i 114 |
|
|
|
i 705 |
|
|
|
i 819 |
|
Amounts reclassified into earnings |
|
- |
|
|
|
i 596 |
|
|
|
i 596 |
|
|
|
- |
|
|
|
i 980 |
|
|
|
i 980 |
|
Net current period other comprehensive (loss) income |
|
( i 615 |
) |
|
|
i 4,738 |
|
|
|
i 4,123 |
|
|
|
i 114 |
|
|
|
i 1,685 |
|
|
|
i 1,799 |
|
Accumulated other comprehensive (loss) income, end of period |
$ |
( i 1,288 |
) |
|
$ |
i 3,414 |
|
|
$ |
i 2,126 |
|
|
$ |
( i 446 |
) |
|
$ |
( i 3,230 |
) |
|
$ |
( i 3,676 |
) |
10. FAIR VALUE MEASUREMENTS AND DERIVATIVES
Fair Value Measurements
Cash and cash equivalents at June 30, 2022 and December 31, 2021 are comprised of cash and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions. Restricted cash at June 30, 2022 and December 31, 2021 is comprised of amounts held in escrow accounts, as a result of a legal proceeding related to a tax assessment and is categorized as a Level 1 instrument. The fair value of outstanding long-term debt as of June 30, 2022 and December 31, 2021 is estimated using a discounted cash flow analysis based on current market interest rates for debt issuances with similar remaining years-to-maturity and adjusted for credit risk, which represents a Level 3 measurement in the fair value hierarchy. i The carrying amounts and estimated fair values of the Company's cash, restricted cash and long-term debt were as follows (in thousands):
|
|
|
|
|
||||||||||||
|
|
Carrying Value |
|
|
Estimated Fair Value |
|
|
Carrying Value |
|
|
Estimated Fair Value |
|
||||
Cash |
|
$ |
i 31,990 |
|
|
$ |
i 31,990 |
|
|
$ |
i 30,937 |
|
|
$ |
i 30,937 |
|
Restricted Cash |
|
|
i 1,896 |
|
|
|
i 1,896 |
|
|
|
i 1,896 |
|
|
|
i 1,896 |
|
Total cash |
|
$ |
i 33,886 |
|
|
$ |
i 33,886 |
|
|
$ |
i 32,833 |
|
|
$ |
i 32,833 |
|
First lien term loan facility |
|
$ |
i 201,723 |
|
|
$ |
i 184,370 |
|
|
$ |
i 202,457 |
|
|
$ |
i 198,580 |
|
Second lien term loan facility |
|
|
i 25,000 |
|
|
|
i 21,990 |
|
|
|
i 25,000 |
|
|
|
i 23,570 |
|
First lien revolving facility |
|
|
i 7,000 |
|
|
|
i 6,710 |
|
|
|
i 7,000 |
|
|
|
i 6,890 |
|
Total debt (a) |
|
$ |
i 233,723 |
|
|
$ |
i 213,070 |
|
|
$ |
i 234,457 |
|
|
$ |
i 229,040 |
|
(a) The debt amounts above do not include the impact of the interest rate swap or debt issuance costs.
16
Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy. i The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):
|
|
|
|
Fair Value Measurements at June 30, 2022 |
|
|
Fair Value Measurements at December 31, 2021 |
|
||||||||||||||||||||||||||
Description |
|
Balance Sheet Location |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments (1) |
|
Other current assets |
|
$ |
i 1,574 |
|
|
$ |
- |
|
|
$ |
i 1,574 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Derivative financial instruments (1) |
|
Other non-current assets |
|
|
i 1,840 |
|
|
|
- |
|
|
|
i 1,840 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total Assets |
|
|
|
$ |
i 3,414 |
|
|
$ |
- |
|
|
$ |
i 3,414 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments (1) |
|
Other current liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
i 1,126 |
|
|
$ |
- |
|
|
$ |
i 1,126 |
|
|
$ |
- |
|
Warrants |
|
Warrant liabilities |
|
|
i 45,400 |
|
|
|
- |
|
|
|
i 45,400 |
|
|
|
|
|
|
i 107,300 |
|
|
|
- |
|
|
|
i 107,300 |
|
|
|
- |
|
|
Derivative financial instruments (1) |
|
Other long term liabilities |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
i 197 |
|
|
|
- |
|
|
|
i 197 |
|
|
|
- |
|
|
Total liabilities |
|
|
|
$ |
i 45,400 |
|
|
$ |
- |
|
|
$ |
i 45,400 |
|
|
$ |
- |
|
|
$ |
i 108,623 |
|
|
$ |
- |
|
|
$ |
i 108,623 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Warrants
Public and 2020 PIPE Warrants
The fair value of the Public and 2020 PIPE Warrants are considered a Level 2 valuation and are determined using the Monte Carlo model. The significant assumptions which the Company used in the model are:
|
|
|
|
|
||||||||||||
|
|
Public Warrants |
|
|
2020 PIPE Warrants |
|
|
Public Warrants |
|
|
2020 PIPE Warrants |
|
||||
Stock price |
|
$ |
i 7.17 |
|
|
$ |
i 7.17 |
|
|
$ |
i 10.02 |
|
|
$ |
i 10.02 |
|
Strike price |
|
$ |
i 11.50 |
|
|
$ |
i 5.75 |
|
|
$ |
i 11.50 |
|
|
$ |
i 5.75 |
|
Remaining life (in years) |
|
|
i 1.72 |
|
|
|
i 2.95 |
|
|
|
i 2.22 |
|
|
|
i 3.45 |
|
Volatility |
|
|
i 59 |
% |
|
|
i 59 |
% |
|
|
i 68 |
% |
|
|
i 68 |
% |
Interest rate |
|
|
i 2.87 |
% |
|
|
i 2.96 |
% |
|
|
i 0.78 |
% |
|
|
i 1.03 |
% |
Redemption price |
|
$ |
i 18.00 |
|
|
$ |
i 14.50 |
|
|
$ |
i 18.00 |
|
|
$ |
i 14.50 |
|
Sponsor Warrants
The fair value of the Sponsor Warrants is considered a Level 2 valuation and is determined using the Black-Sholes model. The significant assumptions which the Company used in the model are:
|
|
|
|
|
||||
Stock price |
|
$ |
i 7.17 |
|
|
$ |
i 10.02 |
|
Strike price |
|
$ |
i 11.50 |
|
|
$ |
i 11.50 |
|
Remaining life (in years) |
|
|
i 1.72 |
|
|
|
i 2.22 |
|
Volatility |
|
|
i 59 |
% |
|
|
i 68 |
% |
Interest rate |
|
|
i 2.87 |
% |
|
|
i 0.80 |
% |
Dividend yield |
|
|
i 0.0 |
% |
|
|
i 0.0 |
% |
17
/
Derivatives
Market risk associated with the Company’s long-term floating rate debt is the potential increase in interest expense from an increase in interest rates. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. These instruments are recorded on the balance sheet at their fair value and are designated as hedges. The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged.
The Company assesses whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of its hedged forecasted transactions. The Company uses regression analysis for this hedge relationship and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction. These agreements involve the receipt of variable-rate amounts in exchange for fixed-rate interest payments over the life of the respective agreement without an exchange of the underlying notional amount. The Company classifies derivative instrument cash flows from hedges of benchmark interest rate as operating activities due to the nature of the hedged item. Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) until the underlying hedged transactions are recognized in earnings. If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to earnings.
The Company monitors concentrations of credit risk associated with financial and other institutions with which the Company conducts significant business. Credit risk, including, but not limited to, counterparty nonperformance under derivatives, is not considered significant, as the Company primarily conducts business with large, well-established financial institutions with which the Company has established relationships, and which have credit risks acceptable to the Company. The Company does not anticipate non-performance by its counterparty. The amount of the Company’s credit risk exposure is equal to the fair value of the derivative when any of the derivatives are in a net gain position.
In September 2019, the Company entered into a floating-to-fixed interest rate swap agreement to make a series of payments based on a fixed interest rate of i 1.457% and receive a series of payments based on the greater of 1 Month USD LIBOR or Strike which is used to hedge the Company’s exposure to changes in cash flows associated with its variable rate Term Loan Facilities and has designated this derivative as a cash flow hedge. Both the fixed and floating payment streams are based on a notional amount of $ i 174.7 million at the inception of the contract.
The interest rate swap agreement has a maturity date of i September 19, 2024. As of June 30, 2022 and December 31, 2021, the notional amount is $ i 115.3 million and $ i 127.7 million, respectively. There was no ineffectiveness related to the interest rate swaps. The gain or loss on the derivative is recorded as a component of accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. The Company expects to reclassify $ i i i 1.6 / / million of income from accumulated other comprehensive income (loss) into interest expense within the next twelve months.
The fair value of the interest rate swap contract is measured on a recurring basis by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates (forward curves) derived from observable market interest rate curves. The interest rate swap contract was categorized as Level 2 in the fair value hierarchy. The Company is not required to post cash collateral related to this derivative instrument.
The effect of the interest rate swap contract designated as cash flows hedging instrument on the condensed consolidated financial statements was as follows (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|||||
Gain (losses) recognized in accumulated other comprehensive (loss) income |
|
$ |
i 899 |
|
|
$ |
( i 194 |
) |
|
$ |
i 4,142 |
|
|
$ |
i 705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains reclassified from accumulated other comprehensive (loss) income to interest expense |
|
$ |
i 199 |
|
|
$ |
i 487 |
|
|
$ |
i 596 |
|
|
$ |
i 980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
18
11. INCOME TAXES
For the three and six months ended June 30, 2022, the Company recorded an income tax expense of $ i 0.086 million and a benefit of $ i 0.027 million, respectively. For the three and six months ended June 30, 2021, the Company recorded an income tax expense of $ i 0.017 million and $ i 0.043 million, respectively. The difference between the expected provision for income taxes using the i 21% U.S. federal income tax rate and the Company’s actual provision is primarily attributable to the change in valuation allowance, foreign rate differential, including income earned in jurisdictions not subject to income taxes, and withholding taxes due in various jurisdictions. For the three and six months ended June 30, 2022, the Company recognized a discrete tax benefit of $ i i 0.1 / million as a result of the filing of an amended return during the first quarter of 2022, which is expected to result in a federal income tax refund. Further, the Company recorded a discrete tax expense of $ i i 0.1 / million for the three and six months ended June 30, 2022 related to a true-up to its deferred taxes.
/
12. COMMITMENTS AND CONTINGENCIES
We are routinely involved in legal proceedings, disputes, regulatory matters, and various claims and lawsuits that have been filed or are pending against us, including as noted below, arising in the ordinary course of our business. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability is typically limited to our deductible amount. Nonetheless, the ultimate outcome of those claims and lawsuits that are not covered by insurance cannot be determined at this time. We have evaluated our overall exposure with respect to all of our legal proceedings, threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure. We are currently unable to estimate any other potential contingent losses beyond those accrued, as discovery is not complete and adequate information is not available to estimate such range of loss or potential recovery. However, based on our current knowledge, we do not believe that the aggregate amount or range of reasonably possible losses with respect to these matters will be material to our consolidated results of operations, financial condition or cash flows. We intend to vigorously defend our legal position on all claims and, to the extent necessary, seek recovery.
In February 2020, the Company received a formal assessment of $ i 1.9 million by a foreign tax authority regarding the application of the value added tax (“VAT”) law on the change in the ultimate beneficial ownership of i one of our subsidiaries as result of the business combination in March 2019 (the “Business Combination”). The Company is disputing the assessment and has recorded an accrual of $ i i 1.2 / million for this matter as of June 30, 2022 and December 31, 2021, and is included in “Accrued expenses” on the Company's condensed consolidated balance sheets. The Company believes the ultimate outcome of this matter will not have a material adverse impact on the consolidated financial statements.
/
13. SUBSEQUENT EVENTS
On August 1, 2022, the Company exercised its right to terminate its At-The-Market Equity Offering Sales Agreement (the “Agreement”) entered into on December 7, 2020 with Stifel, Nicolaus & Company, Incorporated (the “Sales Agent”), pursuant to which the Company had the right to offer and sell, from time to time, through the Sales Agent, its common shares, par value $ i 0.0001 per share, having an aggregate offering price of up to $ i 50.0 million (the “ATM Program”). As of June 30, 2022, shares representing approximately $ i 10 million remained available for sale under the Agreement. The termination is effective as of August 1, 2022. Prior to the termination of the Agreement, the Company sold a total of i 3.9 million common shares through the ATM Program. i No sales of common shares by the Company under the ATM Program had occurred subsequent to October 2021.
/19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions that could cause actual results to differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” and in “Risk Factors” in our Form 10-K for the fiscal year ended December 31, 2021. We assume no obligation to update any of these forward-looking statements.
Due to the global impact of COVID-19, we experienced a near cessation of our operations commencing in the first quarter of 2020. We cannot fully predict the continuing impacts of the COVID-19 pandemic on the industry or on our business. Despite this uncertainty, we believe we have certain strengths that have positioned us as a leader in the hospitality-based health and wellness industry and to participate in the recovery of the cruise industry and the hospitality industry.
OneSpaWorld Holdings Limited (“OneSpaWorld,” the “Company,” “we,” “our, “us” and other similar terms refer to OneSpaWorld Holdings Limited and its consolidated subsidiaries) is the pre-eminent global operator of health and wellness centers onboard cruise ships and a leading operator of health and wellness centers at destination resorts worldwide. Our highly trained and experienced staff offered guests a comprehensive suite of premium health, fitness, beauty and wellness services and products onboard cruise ships and at destination resorts globally. We are the market leader at more than 10x the size of our closest maritime competitor. Over the last 50 years, we have built our leading market position on our depth of staff expertise, broad and innovative service and product offerings, expansive global recruitment, training and logistics platform, as well as decades-long relationships with cruise line and destination resort partners. Throughout our history, our mission has been simple: helping guests look and feel their best during and after their stay.
At our core, we are a global services company. We serve a critical role for our cruise line and destination resort partners, operating a complex and increasingly important aspect of our cruise line and destination resort partners’ overall guest experience. Decades of investment and know-how have allowed us to construct an unmatched global infrastructure to manage the complexity of our operations. We have consistently expanded our onboard offerings with innovative and leading-edge service and product introductions, and developed the powerful back-end recruiting, training and logistics platforms to manage our operational complexity, maintain our industry-leading quality standards, and maximize revenue and profitability per center. The combination of our renowned recruiting and training platform, deep proprietary labor pool, global logistics and supply chain infrastructure, and proven health and wellness center and revenue management capabilities represents a significant competitive advantage that we believe is not economically feasible to replicate.
A significant portion of our revenues are generated from our cruise ship operations. Historically, we have been able to renew almost all of our cruise line agreements that expired or were scheduled to expire. In August 2021, we extended our current agreement with Azamara through May 2026.
In response to the COVID-19 pandemic, the U.S. Centers for Disease Control and Prevention (“CDC”) have taken various measures intended to manage risks associated with the pandemic, including, most recently, publishing a voluntary COVID-19 Program for Cruise Ships, with which virtually all cruise lines, including all of the Company’s cruise line partners, had agreed to voluntarily participate. As of July 18, 2022, the COVID-19 Program for Cruise Ships is no longer in effect. The CDC has published new guidance for cruise ships on the mitigation and management of COVID-19, and will periodically reevaluate and update this guidance as needed. Cruise ship operators are encouraged to develop and maintain their own COVID-19 response plans to prevent and mitigate introduction and onboard transmission of COVID-19.
The global spread of the COVID-19 pandemic is complex and the disruptions it has caused to our industry have had a negative impact on our business performance. As the growth of new COVID-19 cases has generally declined in recent months, restrictions on traveling and other measures previously implemented by governments, public institutions and other organizations to contain the spread of the pandemic have gradually been lifted or relaxed. As a result, certain businesses in the global travel and hospitality industry, including our cruise line partners, have gradually resumed their operations and there has been increasing demand for travel and hospitality services. However, there is no assurance of when the global travel and hospitality industry can resume operations without restrictions imposed in response to the COVID-19 pandemic or when, or if, global demand for travel and hospitality services will return to pre-pandemic levels. As new variants of the COVID-19 pandemic have recently emerged and may continue to emerge in the future, it is difficult to predict the ultimate impact of the COVID-19 pandemic, but we anticipate that it will continue to have an adverse impact on our business performance in 2022.
20
Key Performance Indicators
In assessing the performance of our business, we consider several key performance indicators used by management. These key indicators include:
The Company is not reporting the financial indicators above due to the effect of COVID-19 on its business, as the comparison of these key performance indicators for the three and six months ended June 30, 2022 is not meaningful.
Key Financial Definitions
Revenues. Revenues consist primarily of sales of services and sales of products to cruise ship passengers and destination resort guests. The following is a brief description of the components of our revenues:
Cost of services. Cost of services consists primarily of an allocable portion of payments to cruise lines (which are derived as a percentage of service revenues or a minimum annual rent or a combination of both), an allocable portion of wages paid to shipboard employees, an allocable portion of staff-related shipboard expenses, costs related to recruitment and training of shipboard employees, wages paid directly to destination resort employees, payments to destination resort venue owners, the allocable cost of products consumed in the rendering of a service and health and wellness center depreciation. Cost of services has historically been highly variable; increases and decreases in cost of services are primarily attributable to a corresponding increase or decrease in service revenues. Cost of services has tended to remain consistent as a percentage of service revenues.
Cost of products. Cost of products consists primarily of the cost of products sold through our various methods of distribution, an allocable portion of wages paid to shipboard employees and an allocable portion of payments to cruise lines and destination resort partners (which are derived as a percentage of product revenues or a minimum annual rent or a combination of both). Cost of products has historically been highly variable; increases and decreases in cost of products are primarily attributable to a corresponding increase or decrease in product revenues and includes impairment of inventories. Cost of products has tended to remain consistent as a percentage of product revenues.
Administrative. Administrative expenses are comprised of expenses associated with corporate and administrative functions that support our business, including fees for professional services, insurance, headquarters rent and other general corporate expenses.
Salary, benefits and payroll taxes. Salary, benefits and payroll taxes are comprised of employee expenses associated with corporate and administrative functions that support our business, including fees for employee salaries, bonuses, stock-based compensation, payroll taxes, pension/401(k) and other employee costs.
21
Amortization of intangible assets. Amortization of intangible assets are comprised of the amortization of intangible assets with definite useful lives (e.g. retail concession agreements, destination resort agreements, licensing agreements) and amortization expenses associated with prior transactions.
Other expense, net. Other expense, net consists of interest expense and change in the fair value of warrant liabilities.
Income tax (benefit) expense. Income tax (benefit) expense includes current and deferred federal income tax expenses, as well as state and local income taxes.
Net loss. Net loss consists of loss from operations less other (expenses) income and income tax (benefit) expense.
Revenue Drivers and Business Trends
Our revenues and financial performance are impacted by a multitude of factors, including, but not limited to:
The effect of each of these factors on our revenues and financial performance varies from period to period.
22
Recent Accounting Pronouncements
Refer to Note 2 to the Condensed Consolidated Financial Statements in this report for a discussion of recent accounting pronouncements.
Results of Operations
Our results of operations for the three months ended June 30, 2021 were materially adversely impacted by COVID-19. We believe this should be taken into consideration when comparing the results for the three months ended June 30, 2021 to the results for the three months ended June 30, 2022.
|
|
Three Months |
|
|
% of Total |
|
|
Three Months |
|
|
% of Total |
|
||||
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service revenues |
|
$ |
103,616 |
|
|
|
81 |
% |
|
$ |
7,648 |
|
|
|
84 |
% |
Product revenues |
|
|
23,766 |
|
|
|
19 |
% |
|
|
1,507 |
|
|
|
16 |
% |
Total revenues |
|
|
127,382 |
|
|
|
100 |
% |
|
|
9,155 |
|
|
|
100 |
% |
COST OF REVENUES AND OPERATING |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of services |
|
|
87,019 |
|
|
|
68 |
% |
|
|
9,561 |
|
|
|
104 |
% |
Cost of products |
|
|
23,278 |
|
|
|
18 |
% |
|
|
1,504 |
|
|
|
16 |
% |
Administrative |
|
|
3,861 |
|
|
|
3 |
% |
|
|
4,862 |
|
|
|
53 |
% |
Salary, benefits and payroll taxes |
|
|
7,994 |
|
|
|
6 |
% |
|
|
5,988 |
|
|
|
65 |
% |
Amortization of intangible assets |
|
|
4,206 |
|
|
|
3 |
% |
|
|
4,206 |
|
|
|
46 |
% |
Total cost of revenues and operating expenses |
|
|
126,358 |
|
|
|
99 |
% |
|
|
26,121 |
|
|
|
285 |
% |
Income (loss) from operations |
|
|
1,024 |
|
|
|
1 |
% |
|
|
(16,966 |
) |
|
|
-185 |
% |
OTHER INCOME (EXPENSE), NET: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(3,544 |
) |
|
|
-3 |
% |
|
|
(3,412 |
) |
|
|
-37 |
% |
Change in fair value of warrant liabilities |
|
|
58,500 |
|
|
|
46 |
% |
|
|
20,700 |
|
|
|
226 |
% |
Total other income (expense), net |
|
|
54,956 |
|
|
|
43 |
% |
|
|
17,288 |
|
|
|
189 |
% |
Income (loss) before income tax expense (benefit) |
|
|
55,980 |
|
|
|
44 |
% |
|
|
322 |
|
|
|
4 |
% |
INCOME TAX EXPENSE (BENEFIT) |
|
|
86 |
|
|
|
0 |
% |
|
|
17 |
|
|
|
0 |
% |
NET INCOME (LOSS) |
|
$ |
55,894 |
|
|
|
44 |
% |
|
$ |
305 |
|
|
|
3 |
% |
NET INCOME (LOSS) PER VOTING AND NON-VOTING SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.61 |
|
|
|
|
|
$ |
0.00 |
|
|
|
|
||
Diluted (1) |
|
$ |
0.46 |
|
|
|
|
|
$ |
(0.04 |
) |
|
|
|
||
WEIGHTED-AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
92,352 |
|
|
|
|
|
|
90,563 |
|
|
|
|
||
Diluted |
|
|
94,798 |
|
|
|
|
|
|
92,932 |
|
|
|
|
||
(1) Refer to Note 2 to the Condensed Consolidated Financial Statements in this report for details underlying OneSpaWorld’s income diluted share calculation.
23
Comparison of Results for the three months ended June 30, 2022 compared to three months ended June 30, 2021
The results of operations in the second quarter of 2022 continue to recover from the material adverse impacts of COVID-19, which at its peak resulted in the cessation of operations of all of the Company’s health and wellness centers on board cruise ships and the closing of or substantial restrictions imposed on the operation of substantially all our health and wellness centers at destination resort spas at the end of first quarter 2020. As of June 30, 2022, our operations have resumed on 167 cruise ships and in 48 destination resort spas, as compared to 14 cruise ships and 42 destination resort spas as of June 30, 2021. Accordingly, we believe that the comparison of these results to the three months ended June 30, 2021 is not meaningful.
Revenues. Revenues for the three months ended June 30, 2022 and 2021 were $127.4 million and $9.2 million, respectively. The revenues generated in the three months ended June 30, 2022 were derived primarily from our 167 health and wellness centers onboard ships having resumed voyages and our 48 open and operating health and wellness centers in destination resort spas. The three months ended June 30, 2021 revenues were primarily related to the 14 cruise ships and 42 destination resort spas that were open during the quarter and e-commerce product sales through the Company’s timetospa.com website.
The break-down of revenue growth between service and product revenues was as follows:
Cost of services. Cost of services for the three months ended June 30, 2022 were $87.0 million, an increase of $77.4 million, or 810%, compared to $9.6 million for the three months ended June 30, 2021. The increase was primarily attributable to costs associated with increased service revenues of $96.0 million in the quarter from our operating health and wellness centers at sea and on land, compared with service revenue of $7.6 million in the second quarter of 2021, and increased costs related to the resumption of operations at our health and wellness centers at sea during the quarter.
Cost of products. Cost of products for the three months ended June 30, 2022 were $23.3 million, an increase of $21.8 million, or 1,448%, compared to $1.5 million for the three months ended June 30, 2021. The increase was primarily attributable to costs associated with increased product revenues of $22.3 million in the quarter from our operating health and wellness centers at sea and on land, compared to product revenue of $1.5 million in the second quarter of 2021.
Administrative. Administrative expenses for the three months ended June 30, 2022 were $3.9 million, a decrease of $1.0 million, or 21%, compared to $4.9 million for the three months ended June 30, 2021. The decrease was primarily attributable to higher costs in the three months ended June 30, 2021 in connection to professional services provided for the valuation of warrant liabilities accounting of $0.5 million, an allowance for accounts receivable of $0.2 million, and a $0.2 million accrual in connection with a formal assessment by a foreign tax authority regarding the application of the VAT law on the change in the ultimate beneficial ownership of one of our subsidiaries as result of the Business Combination.
Salary, benefits and payroll taxes. Salary, benefits and payroll taxes for the three months ended June 30, 2022 were $8.0 million, an increase of $2.0 million, or 34%, compared to $6.0 million for the three months ended June 30, 2021. The increase was primarily attributable to the measured increase in corporate head count to account for the return to sailing and lower corporate salaries in the three months ended June 30, 2021 due to salary reductions and lower headcount which were implemented due to the COVID-19 pandemic.
Amortization of intangible assets. Amortization of intangible assets for the three months ended June 30, 2022 and June 30, 2021 was $4.2 million in both periods.
Other income (expense), net. Other income (expense), net includes interest expense and change in the fair value of the warrant liabilities. Interest expense for the three months ended June 30, 2022 was $3.5 million, an increase of $0.1 thousand, or 4%, compared to $3.4 million for the three months ended June 30, 2021. The increase in other income (expense) was primarily attributable to the change in fair value of the outstanding warrants for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The change in fair value of the outstanding warrants during the three months ended June 30, 2022 was a gain of $58.5 million compared to a gain of $20.7 million during the three months ended June 30, 2021. The change in fair value of warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
Income tax expenses. Income tax expense for the three months ended June 30, 2022 was a expense of $86 thousand, an increase of $69 thousand, or 406%, compared to $17 thousand for the three months ended June 30, 2021.
24
Net income (loss). Net income for the three months ended June 30, 2022 was $55.9 million, an increase of $55.6 million, or 18,226%, compared to $0.3 million for the three months ended June 30, 2021. The improvement in the second quarter of 2022 was primarily a result of the $18.0 million change in income (loss) from operations derived from our 167 health and wellness centers onboard ships having resumed voyages and the change in the fair value of warrant liabilities. The change in fair value of the outstanding warrants during the three months ended June 30, 2022 was a gain of $58.5 million compared to a gain of $20.7 million during the three months ended June 30, 2021. The change in fair value of warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
|
|
Consolidated |
|
|||||||||||||
|
|
Six Months |
|
|
% of Total |
|
|
Six Months |
|
|
% of Total |
|
||||
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service revenues |
|
$ |
174,778 |
|
|
|
81 |
% |
|
$ |
12,252 |
|
|
|
83 |
% |
Product revenues |
|
|
40,267 |
|
|
|
19 |
% |
|
|
2,493 |
|
|
|
17 |
% |
Total revenues |
|
|
215,045 |
|
|
|
100 |
% |
|
|
14,745 |
|
|
|
100 |
% |
COST OF REVENUES AND OPERATING |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of services |
|
|
149,686 |
|
|
|
70 |
% |
|
|
17,045 |
|
|
|
116 |
% |
Cost of products |
|
|
37,930 |
|
|
|
18 |
% |
|
|
2,799 |
|
|
|
19 |
% |
Administrative |
|
|
7,694 |
|
|
|
4 |
% |
|
|
8,706 |
|
|
|
59 |
% |
Salary and payroll taxes |
|
|
16,721 |
|
|
|
8 |
% |
|
|
13,640 |
|
|
|
93 |
% |
Amortization of intangible assets |
|
|
8,412 |
|
|
|
4 |
% |
|
|
8,412 |
|
|
|
57 |
% |
Total cost of revenues and operating expenses |
|
|
220,443 |
|
|
|
103 |
% |
|
|
50,602 |
|
|
|
343 |
% |
Loss from operations |
|
|
(5,398 |
) |
|
|
-3 |
% |
|
|
(35,857 |
) |
|
|
-243 |
% |
OTHER (EXPENSE) INCOME, NET: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(6,951 |
) |
|
|
-3 |
% |
|
|
(6,763 |
) |
|
|
-46 |
% |
Change in fair value of warrant liabilities |
|
|
61,900 |
|
|
|
29 |
% |
|
|
(2,600 |
) |
|
|
-18 |
% |
Total other income (expense), net |
|
|
54,949 |
|
|
|
26 |
% |
|
|
(9,363 |
) |
|
|
-63 |
% |
Income (loss) before income tax expense (benefit) |
|
|
49,551 |
|
|
|
23 |
% |
|
|
(45,220 |
) |
|
|
-307 |
% |
INCOME TAX (BENEFIT) EXPENSE |
|
|
(27 |
) |
|
|
0 |
% |
|
|
43 |
|
|
|
0 |
% |
NET INCOME (LOSS) |
|
$ |
49,578 |
|
|
|
23 |
% |
|
$ |
(45,263 |
) |
|
|
-307 |
% |
NET INCOME (LOSS) PER VOTING AND NON-VOTING SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.54 |
|
|
|
|
|
$ |
(0.51 |
) |
|
|
|
||
Diluted (1) |
|
$ |
0.39 |
|
|
|
|
|
$ |
(0.51 |
) |
|
|
|
||
WEIGHTED-AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
92,278 |
|
|
|
|
|
|
88,903 |
|
|
|
|
||
Diluted |
|
|
94,864 |
|
|
|
|
|
|
88,903 |
|
|
|
|
||
(1) Refer to Note 2 to the Condensed Consolidated Financial Statements in this report for details underlying OneSpaWorld’s income diluted share calculation.
Comparison of Results for the six months ended June 30, 2022 compared to six months ended June 30, 2021
Results of operations in the six months ended June 30, 2022 continue to recover from the adverse impact of COVID-19, which at its peak resulted in the cessation of operations of all of the Company’s cruise ship health and wellness centers and the closing of or substantial restrictions imposed on the operation of substantially all of the destination resort spas where we operate health and wellness centers at the end of first quarter 2020. As of June 30, 2022, our operations have resumed on 167 cruise ships and in 48 destination resort spas, as compared to 14 cruise ships and 42 destination resort spas as of June 30, 2021. Accordingly, we believe that the comparison of these results to the six months ended June 30, 2020 is not meaningful.
Revenues. Revenues for the six months ended June 30, 2022 and 2021 were $215.0 million and $14.7 million, respectively. The revenues generated in the six months ended June 30, 2022 were derived primarily from our 167 health and wellness centers onboard ships having resumed voyages and our health and wellness centers at 48 open and operating destination resort spas. Revenues for the six months ended June 30, 2021 were negatively impacted by the COVID-19 pandemic and the resulting March 14, 2020 No Sail Order, with revenues derived primarily from the 14 health and wellness centers onboard ships and 47 destination resort spas where we operate health and wellness centers that were open during the six months and e-commerce product sales through the Company’s timetospa.com website.
25
The break-down of revenue between service and product revenues was as follows:
Cost of services. Cost of services for the six months ended June 30, 2022 were $149.7 million, an increase of $132.7 million, or 778%, compared to $17.0 million for the six months ended June 30, 2021. The increase was primarily attributable to costs associated with increased service revenues of $162.5 million in the six months from our operating health and wellness centers at sea and on land, compared with service revenue of $12.3 million in the six months ended June 31, 2021 and increased costs related to the resumption of operations at our health and wellness centers at sea and on land.
Cost of products. Cost of products for the six months ended June 30, 2022 were $37.9 million, an increase of $35.1 million, or 1,255%, compared to $2.8 million for the six months ended June 30, 2021. The increase was primarily attributable to costs associated with increased product revenues of $37.8 million in the six months ended June 30, 2022, compared to product revenues of $2.5 million in the six months ended June 30, 2021 from our operating health and wellness centers at sea and on land.
Administrative. Administrative expenses for the six months ended June 30, 2022 were $ 7.7 million, a decrease of $1.0 million, or 12%, compared to $8.7 million for the six months ended June 30, 2021. The decrease was primarily attributable to higher costs in the six months ended June 30, 2021 in connection to professional services provided for the valuation of warrant liabilities accounting of $0.5 million, an allowance for accounts receivable of $0.2 million, and a $0.2 million accrual in connection with a formal assessment by a foreign tax authority regarding the application of the VAT law on the change in the ultimate beneficial ownership of one of our subsidiaries as result of the Business Combination.
Salary, benefits and payroll taxes. Salary, benefits and payroll taxes for the six months ended June 30, 2022 were $16.7 million, an increase of $3.1 million, or 23%, compared to $13.6 million for the six months ended June 30, 2021. The increase was primarily attributable to the measured increase in corporate head count to account for the return to sailing and lower corporate salaries in the six months ended June 30, 2021 due to salary reductions and lower corporate headcount which were implemented due to the COVID-19 pandemic.
Amortization of intangible assets. Amortization of intangible assets for the six months ended June 30, 2022 and 2021 were both $8.4 million.
Other income (expense), net. Other income (expense), net includes interest expense and changes in the fair value of the warrant liabilities. Interest expense for the six months ended June 30, 2022 was $7.0 million, an increase of $0.2 million, or 3%, compared to $6.8 million for the six months ended June 30, 2021. The Increase in other income (expense), net was primarily attributable to the change in fair value of the outstanding warrants for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. The change in fair value of the outstanding warrants during the six months ended June 30, 2022 was a gain of $61.9 million compared to a loss of ($2.6) million during the six months ended June 30, 2021. The change in fair value of warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
Income tax (benefit) expense. Income tax (benefit) expense for the six months ended June 30, 2022 was a benefit of $27 thousand, a decrease of $70 thousand, or 163%, compared to an expense of $43 thousand for the six months ended June 30, 2021.
Net income (loss). Net income (loss) for the six months ended June 30, 2022 was $49.6 million, a change in the income (loss) of $94.9 million, or 210%, compared to a net loss of $45.3 million for the six months ended June 30, 2021. The improvement in the six months ended June 30, 2022 was primarily a result of the $30.5 million change in income (loss) from operations derived from our 167 health and wellness centers onboard ships having resumed voyages and the change in the fair value of warrant liabilities. The change in fair value of the outstanding warrants during the six months ended June 30, 2022 was a gain of $61.9 million compared to a loss of ($2.6) million during the six months ended June 30, 2022. The change in fair value of warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
Liquidity and Capital Resources
Overview
Since the onset of COVID-19, we have taken prudently aggressive actions to increase our financial flexibility by securing and reallocating capital resources, including: (i) eliminating all non-essential operating and capital expenditures, (ii) withdrawing the Company dividend program until further notice, (iii) deferring payment of a dividend declared on February 26, 2020 until approved by the Board of Directors, (iv) the completion of the 2020 Private Placement on June 12, 2020; (v) borrowing $7 million, net, on our first lien revolving facility, leaving $13 million available and undrawn; and (vi) entering into an agreement to allow for the Company to operate its ATM Program, which permitted the Company to sell, from time to time, common shares up to an aggregate offering price of $50.0 million, pursuant to which, as of June 30, 2022, shares representing approximately $10 million remained available for sale under the Agreement, and which Agreement was terminated by the Company on August 1, 2022. We have historically funded our operations with cash flow from operations, except prior to March 19, 2019 with
26
respect to certain expenses and operating costs that had been paid prior to the Business Combination by Steiner Leisure Limited (“Steiner Leisure”) on our behalf, and, when needed, with borrowings under our credit facility. Steiner Leisure has paid on our behalf expenses associated with the allocation of Steiner Leisure corporate overhead and costs associated with the purchase of products from related parties and forgiven by Steiner Leisure. Historical operating cash flows exclude the expenses and operating costs of Steiner Leisure's operating business acquired during the Business Combination paid by Steiner Leisure on our behalf. Consequently, our combined historical cash flows may not be indicative of cash flows had we been a separate stand-alone entity, or of our future cash flows.
Our principal uses for liquidity have been debt service and working capital. We expect that as our cruise line partners continue resuming operations, we will have increased costs related to redeployment of employees to sailing locations and other costs associated with resuming our operations.
Our results experienced significant recovery during the three and six months ended June 30, 2022 when compared to the prior year periods, which drove positive net operating cash flows generation for the first periods since the onset of COVID-19. Taking into account the actions described above and our current resources, we have concluded that we will have sufficient liquidity to satisfy our obligations over the next twelve months and comply with all debt covenants as required by our debt agreements.
The following table shows summary cash flow information for the six months ended June 30, 2022 and the six months ended June 30, 2021.
|
|
|
|
|||||
(in thousands) |
|
Six Months |
|
|
Six Months |
|
||
|
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
49,578 |
|
|
$ |
(45,263 |
) |
Depreciation and amortization |
|
|
10,717 |
|
|
|
11,370 |
|
Amortization of deferred financing costs |
|
|
514 |
|
|
|
513 |
|
Change in fair value of warrant liabilities |
|
|
(61,900 |
) |
|
|
2,600 |
|
Stock-based compensation |
|
|
6,121 |
|
|
|
5,360 |
|
Provision for doubtful accounts |
|
|
3 |
|
|
|
81 |
|
Loss from write-offs of property and equipment |
|
|
10 |
|
|
|
156 |
|
Deferred income taxes |
|
|
70 |
|
|
|
— |
|
Changes in working capital |
|
|
(748 |
) |
|
|
5,509 |
|
Net cash provided by (used in) operating activities |
|
|
4,365 |
|
|
|
(19,674 |
) |
Capital expenditures |
|
|
(2,025 |
) |
|
|
(677 |
) |
Net cash used in investing activities |
|
|
(2,025 |
) |
|
|
(677 |
) |
Proceeds from At-the Market Equity Offering, net of issuance costs paid |
|
|
— |
|
|
|
18,550 |
|
Proceeds from exercise of public warrants |
|
|
59 |
|
|
|
— |
|
Repayment on term loan facilities |
|
|
(734 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
(675 |
) |
|
|
18,550 |
|
Effect of exchange rates |
|
|
(612 |
) |
|
|
148 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
1,053 |
|
|
$ |
(1,653 |
) |
27
Comparison of Results for the six months ended June 30, 2022 and 2021
Operating activities. Our net cash provided by (used in) operating activities for the six months ended June 30, 2022 and 2021 were $4.4 million and $(19.7) million, respectively. The six months ended June 30, 2022 net operating cash flows were significantly impacted by the ongoing resumption of our health and wellness operation onboard vessels and in destination resorts. In the six months ended June 30, 2021, the Company incurred a deficit in net cash provided by (used in) operating activities as the Company had immaterial revenues from operations onboard cruise ships and substantially reduced revenues from operations in destination resorts due to the COVID-19 pandemic, while still incurring operating expenses.
Investing activities. Our net cash used in investing activities for the six months ended June 30, 2022 and 2021 were $2.0 million and $0.7 million, respectively. In the six months ended June 30, 2022, the Company incurred more capital expenditures than in the six months ended June 30, 2021, during which the Company incurred more limited capital expenditures due to the COVID-19 pandemic.
Financing activities. Our net cash provided by (used in) financing activities for the six months ended June 30, 2022 and 2021 were $0.7 million and $18.6 million, respectively. For the six months ended June 30, 2022, the Company repaid $0.7 million on the First Lien Term Loan facility and received proceeds from the exercise of public warrants of $0.059 million. For the six months ended June 30, 2021, the Company sold 1.7 million common shares under the ATM Program, resulting in $18.5 million in net proceeds.
Seasonality
A significant portion of our revenues are generated onboard cruise ships. The demand for cruises is stronger in the Northern Hemisphere during the summer months and during holidays, resulting in varying degrees of seasonality experienced by certain cruise lines and by us. Accordingly, the third quarter and holiday periods generally result in the highest revenue yields for us. Further, cruises and destination resorts have been negatively affected by the frequency and intensity of hurricanes. The negative impact of hurricanes in the Northern Hemisphere is highest during peak hurricane season from August to October. However, notwithstanding the periods of suppressed hurricane activity during the first six months of each of 2022 and 2021, we experienced low revenue yields during these periods as a result of the COVID-19 pandemic.
Contractual Obligations
As of June 30, 2022, our future contractual obligations have not changed significantly from the amounts disclosed in our 2021 Form 10-K.
Critical Accounting Policies
Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated unaudited financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated unaudited financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. At least quarterly, management reevaluates its judgments and estimates, which are based on historical experience, current trends and various other assumptions that are believed to be reasonable under the circumstances.
Our critical accounting policies are included in our 2021 Form 10-K. We believe that there have been no significant changes during the six months ended June 30, 2022 to the critical accounting policies disclosed in our 2021 Form 10-K.
Off-Balance Sheet Arrangements
Other than the operating lease arrangements described in our 2021 Form 10-K, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, income or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Inflation and Economic Conditions
We do not believe that inflation has had a material adverse effect on our revenues or results of operations. However, public demand for activities, including cruises, is influenced by general economic conditions, including inflation, global health epidemics/pandemics and customer preferences. Periods of economic softness could have a material adverse effect on the cruise industry and hospitality industry upon which we are dependent. Such a slowdown could adversely affect our results of operations and financial condition. The COVID-19 pandemic has negatively impacted our business, operations, results of operations and financial condition in 2022 and 2021. Recurrence of the more severe aspects of the recent adverse economic conditions, including a further escalation of the COVID-19 outbreak, as well as periods of fuel price increases, could have a material adverse effect on our results of operations and financial condition during the period of such recurrence. Weakness in the U.S. Dollar compared to the U.K. Pound Sterling and the Euro also could have a material adverse effect on our results of operations and financial condition.
Cautionary Statement Regarding Forward-Looking Statements
From time to time, including in this report and other disclosures, we may issue “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views about future events and are subject to known and unknown risks, uncertainties and other factors which may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We attempt, whenever possible, to identify these statements by using words like “will,” “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “forecast,” “future,” “intend,” “plan,” “estimate” and similar expressions of future intent or the negative of such terms.
Such forward-looking statements include, but are not limited to, statements regarding:
These risks and other risks are detailed in our 2021 Form 10-K filed with the Securities and Exchange Commission. That report contains important cautionary statements and a discussion of many of the factors that could materially affect the accuracy of our forward-looking statements and/or adversely affect our business, results of operations and financial condition.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these risks. For a discussion of the risks involved in our business and investing in our common shares, see the section entitled “Risk Factors” in our 2021 Form 10-K.
These risks are based on information available as of the date of this report and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances
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after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For a discussion of our market risks, refer to Part II, Item 7A. - Quantitative and Qualitative Disclosures about Market Risk in our 2021 Form 10-K.
Item 4. Controls and Procedures
We carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2022.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes in the risk factors previously disclosed in the Company’s 2021 Form 10-K, Part II, Item 1A. “Risk Factors.” However, the risks and uncertainties that we face are not limited to those set forth in the 2021 Form 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities, particularly in light of the uncertainties associated with the COVID-19 pandemic, containment measures implemented in response thereto, the potential for future waves of outbreaks and the related impacts to our business, results of operations and financial condition, including our liquidity.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit No. |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS* |
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XBRL Instance Document. |
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101.SCH* |
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XBRL Taxonomy Extension Schema Document. |
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101.CAL* |
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XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF* |
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XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB* |
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XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE* |
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XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
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The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101 |
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* To be furnished by amendment within the 30-day grace period provided by Rule 405(a)(2) of Regulation S-T.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: August 3, 2022
ONESPAWORLD HOLDINGS LIMITED |
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By: |
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/s/ Leonard Fluxman |
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Executive Chairman, President, Chief Executive Officer and Director |
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Principal Executive Officer |
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By: |
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/s/ STEPHEN B. LAZARUS |
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Stephen B. Lazarus |
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Chief Financial Officer and Chief Operating Officer |
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Principal Financial and Accounting Officer |
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 9/19/24 | ||||
| 12/15/22 | ||||
| 12/5/22 | ||||
| Filed on: | 8/3/22 | 8-K | ||
| 8/1/22 | ||||
| 7/18/22 | ||||
| For Period end: | 6/30/22 | |||
| 3/31/22 | 10-Q, 4 | |||
| 3/7/22 | ||||
| 2/22/22 | 4 | |||
| 12/31/21 | 10-K | |||
| 12/15/21 | ||||
| 6/30/21 | 10-Q, 4 | |||
| 3/31/21 | 10-Q, 4, 8-K | |||
| 12/31/20 | 10-K, 10-K/A, 5 | |||
| 12/7/20 | 424B5, 8-K | |||
| 6/30/20 | 10-Q | |||
| 6/12/20 | 3, 4, 8-K | |||
| 3/14/20 | ||||
| 2/26/20 | 8-K | |||
| 3/19/19 | 8-K | |||
| List all Filings | ||||