OneSpaWorld Third Quarter 2026 Earnings Call - ONESPAWORLD HOLDINGS LTD

Explicit Guidance:

• FY2026 Full Year:
  • Total Revenue: Raised midpoint to $1.033 billion – $1.038 billion (previously $1.018B–$1.038B); represents ~10% growth vs. 2025 (excluding exited/reorganized operations).
  • Adjusted EBITDA: Raised midpoint to $138 million – $140 million (previously $130M–$134M); represents ~13% growth vs. 2025 (excluding exited/reorganized operations).
  • FY2026 Q4 Specifics: Expected Total Revenue $248 million – $253 million; Expected Adjusted EBITDA $32 million – $34 million.
  • Fiscal Year Outlook: Management expects FY2026 to mark the fourth consecutive year of record results.
• Capital Allocation:
  • Share Repurchases: New program approved for up to $100 million (replaces completed $75M program); $37.5M utilized in prior nine months of 2026.
  • Dividends: Quarterly dividend increased 25% to $0.0625 per share, payable December 2, 2026 (record date November 18, 2026).

Business-Segment Outlook:

• Fleet & Footprint:
  • Target to operate health and wellness centers on 208 ships by year-end 2026 (currently 207 ships as of Q3 2026; 204 in Q3 2025).
  • 2 New Ships: On track to introduce health and wellness centers on two additional shipments before year-end 2026.
  • Destination Resorts: Expecting to end the year with 12 destination resorts, following the completion of the exit from land-based centers in Asia.
• Product & Service Mix:
  • High-Value Services: Continued double-digit growth expected from MedSpa, TruSculpt, CoolSculpting, IV therapy, acupuncture, and LED light therapy.
  • MedSpa Expansion: Aiming to have MedSpa offerings on 159 ships by year-end 2026 (currently 157 ships).
  • Retail: Red light masks being piloted on select ships; full rollout pending.
  • Pre-Booked Revenue: Current run rate is 23.2% of service revenue; management targets moving this closer to 30% over the next 2–2.5 years, contingent on cruise line platform enhancements.
  • Longevity: New "longevity experience" facilities planned for new builds and retrofits; rollout expected to commence upon new ship introductions.
• Productivity: Focus on revenue per passenger/day and staff per day; pre-booking position up 18% YoY; staff retention >81%.

Market and Competitive Outlook:

• Cruise Line Partnerships: Renewed agreements with Azamara and Silversea; ongoing discussions regarding square footage expansion on new builds and retrofits.
• Pricing Strategy: No price increases cited for current spend growth; increases driven by mix shift toward higher-priced treatments (MedSpa/IV vs. standard massage/facial).
• Dynamic Pricing: AI-driven dynamic pricing engine (vendor selected, RFP complete) expected to launch no earlier than Q4 2027, initially for pre-booking; aimed at maximizing yield based on supply/demand.
• New Build Opportunities: Conversations underway with cruise lines to convert portions of new facilities into "longevity lounges" and expand MedSpa/IV lounge footprints.

Macro / Industry Outlook:

• Geopolitical Stability: Despite the war in Iran and Middle East tensions, North American demand for Europe/Mediterranean routes held up better than feared; no significant demand downtick observed.
• Capacity & Seasonality:
  • Caribbean: Expected to absorb ~7–8% additional capacity in 2027; management views this as a natural tailwind due to higher North American guest spend in shorter cruises.
  • Alaska: Performed well during the quarter.
  • Seasonality: Winter quarters expected to be "sloppier" (soft), though specific financial impact not quantified.
• Fleet Expansion: Continued growth in global cruise ship builds (2026 fleet expansion) contributing to revenue growth.
• Partnerships: No immediate engagement regarding Royal Caribbean's partnership with Sandals; future opportunities remain open but undefined.

Strategic Initiatives:

• AI Implementation:
  • Amanda (Yield Optimization): Added NAD+ and IV therapy recommendations to all 188 vessels; upcoming features include success indicators and post-voyage assessments.
  • AVA (Operational Assistant): Rolled out to more use cases (labor convention, safety data, SPAR equipment); expansion to all onboard staff and inventory queries planned.
  • Serena (Guest Assistant): 1,287 conversations handled since May launch; 28 improvements made; focus on refining return options and human handoff.
  • Marina & Claude: Launched for post-cruise service; enterprise-wide AI assistant absorbing routine work to free staff for strategic tasks.
• Operational Restructuring: Reorganization of UK and Italy operations completed; shift of services from internal to third-party logistics impacting administrative expenses.
• Expansion: Focus on retrofitting existing vessels to add MediSpa/IV therapy rooms and longevity spaces; "stretch classes" added to gym facilities.

Risks and Headwinds to Outlook:

• External Factors: Geopolitical instability (Iran war), oil prices, and potential supply chain disruptions cited as variables managed through business model durability.
• Execution Risks: Delays in AI-driven dynamic pricing software development (target Q4 2027 launch); potential slower-than-expected adoption of pre-booking tools by cruise line partners.
• Capacity Absorption: Future year (2027) capacity influx in the Caribbean could impact guest demographics or spending quality if demand does not match supply.
• Margin Sensitivity: Service margin improvements heavily dependent on MedSpa mix exceeding 10% of gross revenue; limited immediate impact from AI on margins compared to mix dynamics.
• Reorganization Impacts: Past reorganizations (UK/Italy/Asia) resulted in revenue decreases and administrative cost shifts; continued monitoring of land-based footprint reduction.

Management Tone on the Future:

• Confidence Level: High; expressed "unwavering commitment" to strategy and "strong conviction" in growth, leading to a full-year guidance raise.
• Momentum: Describes entering Q4 with "positive momentum" and achieving the "4th consecutive year of record results."
• Hedges: Management avoids specific numerical projections for AI revenue impact or dynamic pricing benefits, citing development timelines and dependency on cruise partner integration.
• Strategic Shift: Emphasis on "asset-light" model durability and shifting focus to high-value, high-margin medical and longevity services rather than traditional spa amenities.

Miscellaneous:

• Balance Sheet: Strong liquidity of $80.9 million (including undrawn credit facility) as of Q3 2026; Net debt $70.5 million.
• Capital Allocation: Priorities remain: (1) invest in business growth, (2) return capital via buybacks/dividends, (3) reduce debt.
• Staffing: Workforce fully staffed at 4,645 personnel on vessels (up from 4,000 in 2025); retention >81%.