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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the three months ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-38843

 

OneSpaWorld Holdings Limited

(Exact name of Registrant as Specified in its Charter)

 

 

Commonwealth of The Bahamas

 

Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

Harry B. Sands, Lobosky Management Co. Ltd.

Office Number 2

Pineapple Business Park
Airport Industrial Park

P.O. Box N-624

Nassau, Island of New Providence, Commonwealth of The Bahamas

 

Not Applicable

(Address of principal executive offices)

 

(Zip Code)

(242) 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

Common Shares, par value (U.S.)

$0.0001 per share

 

OSW

 

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. 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). 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

 

 

Accelerated filer

 

 

 

 

 

Non-Accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of March 31, 2022, the registrant had 78,709,037 voting shares and 13,421,914 non-voting shares of common stock issued and outstanding.

 

 


 

OneSpaWorld Holdings Limited

Table of Contents

 

 

 

Page

PART I - FINANCIAL INFORMATION

 

1

 

 

 

 

 

Item 1.

 

Unaudited Financial Statements

 

1

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

 

 

PART II - OTHER INFORMATION

 

28

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

28

 

 

 

 

 

Item 1A.

 

Risk Factors

 

28

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

28

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

28

 

 

 

 

 

Item 5.

 

Other Information

 

28

 

 

 

 

 

Item 6.

 

Exhibits

 

28

 

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

 

 

 

March 31,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

29,054

 

 

$

30,937

 

Restricted cash

 

 

1,896

 

 

 

1,896

 

Accounts receivable, net

 

 

21,707

 

 

 

19,480

 

Inventories, net

 

 

29,703

 

 

 

29,483

 

Prepaid expenses

 

 

5,824

 

 

 

6,574

 

Other current assets

 

 

619

 

 

 

577

 

  Total current assets

 

 

88,803

 

 

 

88,947

 

Property and equipment, net

 

 

13,748

 

 

 

14,107

 

Intangible assets, net

 

 

578,085

 

 

 

582,290

 

OTHER ASSETS:

 

 

 

 

 

 

  Deferred tax asset

 

 

70

 

 

 

70

 

  Other non-current assets

 

 

5,320

 

 

 

3,454

 

  Total other assets

 

 

5,390

 

 

 

3,524

 

  Total assets

 

$

686,026

 

 

$

688,868

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

17,572

 

 

$

15,846

 

Accrued expenses

 

 

32,022

 

 

 

32,232

 

Current portion of long-term debt

 

 

2,085

 

 

 

1,776

 

Other current liabilities

 

 

829

 

 

 

2,011

 

  Total current liabilities

 

 

52,508

 

 

 

51,865

 

Deferred rent

 

 

361

 

 

 

341

 

Income tax contingency

 

 

4,062

 

 

 

4,129

 

Warrant liabilities

 

 

103,900

 

 

 

107,300

 

Other long-term liabilities

 

 

2,449

 

 

 

2,646

 

Long-term debt, net

 

 

228,419

 

 

 

228,683

 

  Total liabilities

 

 

391,699

 

 

 

394,964

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

Voting common stock, $0.0001 par value; 225,000,000 shares authorized, 78,709,037 shares issued and outstanding at March 31, 2022 and 78,422,887 shares issued and outstanding at December 31, 2021

 

 

8

 

 

 

8

 

Non-voting common stock, $0.0001 par value; 25,000,000 shares authorized, 13,421,914 shares issued and outstanding, at both March 31, 2022 and December 31, 2021

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

691,001

 

 

 

687,660

 

Accumulated deficit

 

 

(398,084

)

 

 

(391,768

)

Accumulated other comprehensive income (loss)

 

 

1,401

 

 

 

(1,997

)

Total shareholders' equity

 

 

294,327

 

 

 

293,904

 

Total liabilities and shareholders' equity

 

$

686,026

 

 

$

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 March 31,

 

 

 

2022

 

 

2021

 

REVENUES:

 

 

 

 

 

 

Service revenues

 

$

71,162

 

 

$

4,604

 

Product revenues

 

 

16,501

 

 

 

986

 

Total revenues

 

 

87,663

 

 

 

5,590

 

COST OF REVENUES AND OPERATING EXPENSES:

 

 

 

 

 

 

Cost of services

 

 

62,667

 

 

 

7,484

 

Cost of products

 

 

14,652

 

 

 

1,295

 

Administrative

 

 

3,833

 

 

 

3,844

 

Salary, benefits and payroll taxes

 

 

8,727

 

 

 

7,652

 

Amortization of intangible assets

 

 

4,206

 

 

 

4,206

 

Total cost of revenues and operating expenses

 

 

94,085

 

 

 

24,481

 

Loss from operations

 

 

(6,422

)

 

 

(18,891

)

OTHER EXPENSE, NET:

 

 

 

 

 

 

Interest expense

 

 

(3,407

)

 

 

(3,351

)

Change in fair value of warrant liabilities

 

 

3,400

 

 

 

(23,300

)

Total other expense, net

 

 

(7

)

 

 

(26,651

)

Loss before income tax (benefit) expense

 

 

(6,429

)

 

 

(45,542

)

INCOME TAX (BENEFIT) EXPENSE

 

 

(113

)

 

 

26

 

NET LOSS

 

$

(6,316

)

 

$

(45,568

)

NET LOSS PER VOTING AND NON-VOTING SHARE

 

 

 

 

 

 

Basic and diluted

 

$

(0.07

)

 

$

(0.52

)

WEIGHTED-AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

Basic and diluted

 

 

92,204

 

 

 

87,121

 

 

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 March 31,

 

 

2022

 

 

2021

 

Net loss

$

(6,316

)

 

$

(45,568

)

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

Foreign currency translation adjustments

 

(242

)

 

 

112

 

Cash flows hedges:

 

 

 

 

 

Net unrealized gain on derivative

 

3,243

 

 

 

899

 

Amount realized and reclassified into earnings

 

397

 

 

 

493

 

Total other comprehensive income, net of tax

 

3,398

 

 

 

1,504

 

Total comprehensive loss

$

(2,918

)

 

$

(44,064

)

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 March 31, 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

 

 

78,423

 

 

 

13,422

 

 

$

9

 

 

$

687,660

 

 

$

(1,997

)

 

$

(391,768

)

 

$

293,904

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,316

)

 

 

(6,316

)

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,286

 

 

 

 

 

 

 

 

 

3,286

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(242

)

 

 

 

 

 

(242

)

 

Unrecognized gain on derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,640

 

 

 

 

 

 

3,640

 

 

Proceeds from 2021 exercise of public warrants

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

55

 

 

Common shares issued under equity incentive plan

 

 

286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, March 31, 2022

 

 

78,709

 

 

 

13,422

 

 

$

9

 

 

$

691,001

 

 

$

1,401

 

 

$

(398,084

)

 

$

294,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

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, 2020

 

 

69,292

 

 

 

17,186

 

 

$

9

 

 

$

649,540

 

 

$

(5,475

)

 

$

(323,246

)

 

$

320,828

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,568

)

 

 

(45,568

)

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,631

 

 

 

 

 

 

 

 

 

3,631

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

112

 

 

 

 

 

 

112

 

 

Unrecognized gain on derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,392

 

 

 

 

 

 

1,392

 

 

At-The Market Equity Offering, net of issuance cost

 

 

1,712

 

 

 

 

 

 

 

 

 

18,475

 

 

 

 

 

 

 

 

 

18,475

 

 

Common shares issued under equity incentive plan

 

 

673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of deferred shares into common shares

 

 

1,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of public warrants into common shares

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, March 31, 2021

 

 

73,282

 

 

 

17,186

 

 

$

9

 

 

$

671,646

 

 

$

(3,971

)

 

$

(368,814

)

 

$

298,870

 

 

 

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)

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

$

(6,316

)

 

$

(45,568

)

Adjustments to reconcile net loss to net cash used in
   operating activities:

 

 

 

 

 

Depreciation and amortization

 

5,477

 

 

 

5,882

 

Amortization of deferred financing costs

 

257

 

 

 

257

 

Change in fair value of warrant liabilities

 

(3,400

)

 

 

23,300

 

Stock-based compensation

 

3,286

 

 

 

3,631

 

Provision for doubtful accounts

 

 

 

 

10

 

Loss from write-offs of property and equipment

 

10

 

 

 

156

 

Changes in:

 

 

 

 

 

Accounts receivable, net

 

(2,227

)

 

 

(267

)

Inventories, net

 

(220

)

 

 

327

 

Prepaid expenses

 

750

 

 

 

1,352

 

Other current assets

 

217

 

 

 

(273

)

Other non-current assets

 

192

 

 

 

(20

)

Accounts payable

 

1,726

 

 

 

(294

)

Accrued expenses

 

(210

)

 

 

2,627

 

Other current liabilities

 

(56

)

 

 

(204

)

Income tax contingency

 

(67

)

 

 

 

Deferred rent

 

20

 

 

 

26

 

Net cash used in operating activities

 

(561

)

 

 

(9,058

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(919

)

 

 

(367

)

Net cash used in investing activities

 

(919

)

 

 

(367

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from At-the Market Equity Offering, net of issuance costs paid

 

 

 

 

18,550

 

Proceeds from exercise of public warrants

 

55

 

 

 

 

Repayment on term loan facilities

 

(212

)

 

 

 

Net cash (used in) provided by financing activities

 

(157

)

 

 

18,550

 

Effect of exchange rate changes on cash

 

(246

)

 

 

146

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

(1,883

)

 

 

9,271

 

Cash and cash equivalents and restricted cash, Beginning of period

 

32,833

 

 

 

43,448

 

Cash and cash equivalents and restricted cash, End of period

$

30,950

 

 

$

52,719

 

 

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)

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Income taxes

$

35

 

 

$

9

 

Interest

$

3,350

 

 

$

3,299

 

 

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

MARCH 31, 2022

(Unaudited)

1. ORGANIZATION

OneSpaWorld Holdings Limited (“OneSpaWorld”, the “Company”, “we”, “us”, “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 Medispa 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 March 31, 2022, our health and wellness centers on 127 ships of our cruise line partners and 48 land based destination resort spas were operating as part of our gradual 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 length of time it takes to return the Company to profitability. The ongoing effects of COVID-19 have had, and will continue to have, a material negative impact on our financial results and liquidity.

 

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 revolving credit 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, our assumptions regarding the impact of COVID-19, our current resources, our current operations, vessels expected to return to sailing, destination resort spas expected to reopen, and our assumptions regarding 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 incrementally material adverse impact on the Company’s results of operations, financial position and liquidity.

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 2021 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.

7


 

Restricted Cash

These balances include amounts held in escrow accounts, as a result of a legal proceeding related to a tax assessment. The following table reconciles cash, cash equivalents and restricted cash reported in our condensed consolidated balance sheet as of March 31, 2022 and 2021 to the total amount presented in our condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 (in thousands):

 

 

 

Balance as of March 31,

 

 

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

29,054

 

 

$

50,823

 

Restricted cash

 

 

1,896

 

 

 

1,896

 

Total cash and restricted cash in the condensed consolidated statement of cash flows

 

$

30,950

 

 

$

52,719

 

Loss Per Share

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income 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, as their effect would be 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 (loss) income per share is computed by dividing net (loss) income by the weighted average number of Voting and Non-Voting common shares outstanding for the period. Diluted (loss) income per share is computed by dividing net income 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 (loss) income per share are the same for both Voting and Non-Voting common stock since they are entitled to the same liquidation and dividend rights.

The following table provides details underlying OneSpaWorld’s loss per basic and diluted share calculation (in thousands, except per share data):

 

 

Three Months Ended March 31,

 

 

 

2022 (a)