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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 September 30, 2023

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 September 30, 2023, the registrant had 99,910,834 common shares 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

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

29

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

29

 

 

 

 

 

PART II - OTHER INFORMATION

 

30

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

30

 

 

 

 

 

Item 1A.

 

Risk Factors

 

30

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

30

 

 

 

 

 

Item 5.

 

Other Information

 

30

 

 

 

 

 

Item 6.

 

Exhibits

 

30

 

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

 

 

 

September 30,
2023

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

  Cash and cash equivalents

 

$

26,802

 

 

$

32,064

 

  Restricted cash

 

 

1,198

 

 

 

1,198

 

  Accounts receivable, net

 

 

47,694

 

 

 

33,558

 

  Inventories, net

 

 

43,843

 

 

 

39,835

 

  Prepaid expenses

 

 

8,207

 

 

 

7,084

 

  Other current assets

 

 

4,444

 

 

 

4,154

 

  Total current assets

 

 

132,188

 

 

 

117,893

 

Property and equipment, net

 

 

14,038

 

 

 

14,517

 

Operating lease right-of-use assets, net

 

 

12,528

 

 

 

13,932

 

Intangible assets, net

 

 

552,849

 

 

 

565,467

 

OTHER ASSETS:

 

 

 

 

 

 

  Deferred tax asset

 

 

 

 

 

227

 

  Other non-current assets

 

 

3,148

 

 

 

5,399

 

  Total other assets

 

 

3,148

 

 

 

5,626

 

  Total assets

 

$

714,751

 

 

$

717,435

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

31,614

 

 

$

24,124

 

Accrued expenses

 

 

46,163

 

 

 

39,999

 

Current portion of operating leases

 

 

2,232

 

 

 

2,239

 

Current portion of long-term debt

 

 

 

 

 

2,085

 

Other current liabilities

 

 

1,049

 

 

 

1,116

 

  Total current liabilities

 

 

81,058

 

 

 

69,563

 

Income tax contingency

 

 

 

 

 

3,912

 

Warrant liabilities

 

 

9,600

 

 

 

52,900

 

Other long-term liabilities

 

 

2,449

 

 

 

2,449

 

Long-term operating leases

 

 

10,597

 

 

 

12,101

 

Long-term debt, net

 

 

162,970

 

 

 

210,701

 

  Total liabilities

 

 

266,674

 

 

 

351,626

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

Voting common stock, $0.0001 par value; 225,000,000 shares authorized, 99,910,834 issued and outstanding at September 30, 2023 and 79,544,055 shares issued and outstanding at December 31, 2022

 

 

10

 

 

 

8

 

Non-voting common stock, $0.0001 par value; 25,000,000 shares authorized, zero shares issued and outstanding, at September 30, 2023 and 13,421,914 shares issued and outstanding at December 31, 2022

 

 

 

 

 

1

 

Additional paid-in capital

 

 

779,907

 

 

 

700,612

 

Accumulated deficit

 

 

(334,279

)

 

 

(338,609

)

Accumulated other comprehensive income

 

 

2,439

 

 

 

3,797

 

Total shareholders' equity

 

 

448,077

 

 

 

365,809

 

Total liabilities and shareholders' equity

 

$

714,751

 

 

$

717,435

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

175,849

 

 

$

132,777

 

 

$

489,204

 

 

$

307,555

 

Product revenues

 

 

40,422

 

 

 

29,515

 

 

 

110,035

 

 

 

69,782

 

Total revenues

 

 

216,271

 

 

 

162,292

 

 

 

599,239

 

 

 

377,337

 

COST OF REVENUES AND OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

146,128

 

 

 

110,585

 

 

 

409,648

 

 

 

260,271

 

Cost of products

 

 

34,477

 

 

 

25,323

 

 

 

94,949

 

 

 

63,253

 

Administrative

 

 

4,673

 

 

 

3,936

 

 

 

12,762

 

 

 

11,630

 

Salary, benefits and payroll taxes

 

 

9,833

 

 

 

8,411

 

 

 

27,708

 

 

 

25,132

 

Amortization of intangible assets

 

 

4,206

 

 

 

4,206

 

 

 

12,618

 

 

 

12,618

 

Total cost of revenues and operating expenses

 

 

199,317

 

 

 

152,461

 

 

 

557,685

 

 

 

372,904

 

Income from operations

 

 

16,954

 

 

 

9,831

 

 

 

41,554

 

 

 

4,433

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(3,726

)

 

 

(3,984

)

 

 

(12,688

)

 

 

(10,935

)

Change in fair value of warrant liabilities

 

 

7,365

 

 

 

300

 

 

 

(26,736

)

 

 

62,200

 

Total other income (expense)

 

 

3,639

 

 

 

(3,684

)

 

 

(39,424

)

 

 

51,265

 

Income before income tax (benefit) expense

 

 

20,593

 

 

 

6,147

 

 

 

2,130

 

 

 

55,698

 

INCOME TAX (BENEFIT) EXPENSE

 

 

(2,818

)

 

 

236

 

 

 

(2,200

)

 

 

209

 

NET INCOME

 

$

23,411

 

 

$

5,911

 

 

$

4,330

 

 

$

55,489

 

NET INCOME PER VOTING AND NON-VOTING SHARE

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.23

 

 

$

0.06

 

 

$

0.04

 

 

$

0.60

 

Diluted

 

$

0.16

 

 

$

0.06

 

 

$

0.04

 

 

$

0.49

 

WEIGHTED-AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

99,963

 

 

 

92,557

 

 

 

96,975

 

 

 

92,371

 

Diluted

 

 

101,369

 

 

 

94,432

 

 

 

96,975

 

 

 

94,745

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

2


 

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

$

23,411

 

 

$

5,911

 

 

$

4,330

 

 

$

55,489

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(126

)

 

 

(108

)

 

 

110

 

 

 

(722

)

Cash flows hedges:

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain on derivative

 

240

 

 

 

1,971

 

 

 

1,062

 

 

 

6,112

 

Amount realized and reclassified into earnings

 

(936

)

 

 

(211

)

 

 

(2,530

)

 

 

385

 

Total other comprehensive (loss) income, net of tax

 

(822

)

 

 

1,652

 

 

 

(1,358

)

 

 

5,775

 

Total comprehensive income

$

22,589

 

 

$

7,563

 

 

$

2,972

 

 

$

61,264

 

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 September 30, 2023

 

 

 

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, June 30, 2023

 

 

99,470

 

 

 

 

 

$

10

 

 

$

777,275

 

 

$

3,261

 

 

$

(357,690

)

 

$

422,856

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,411

 

 

 

23,411

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,197

 

 

 

 

 

 

 

 

 

2,197

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(126

)

 

 

 

 

 

(126

)

Unrecognized loss on derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(696

)

 

 

 

 

 

(696

)

Cashless exercise of warrants

 

 

31

 

 

 

 

 

 

 

 

 

435

 

 

 

 

 

 

 

 

 

435

 

Common shares issued under equity incentive plan

 

 

410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, September 30, 2023

 

 

99,911

 

 

 

 

 

$

10

 

 

$

779,907

 

 

$

2,439

 

 

$

(334,279

)

 

$

448,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

 

 

 

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, December 31, 2022

 

 

79,544

 

 

 

13,422

 

 

$

9

 

 

$

700,612

 

 

$

3,797

 

 

$

(338,609

)

 

$

365,809

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,330

 

 

 

4,330

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

7,045

 

 

 

 

 

 

 

 

 

7,045

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

110

 

Unrecognized loss on derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,468

)

 

 

 

 

 

(1,468

)

Exchange of warrants into common shares

 

 

3,854

 

 

 

 

 

 

1

 

 

 

45,260

 

 

 

 

 

 

 

 

 

45,261

 

Exercise of warrants (1)

 

 

194

 

 

 

 

 

 

 

 

 

2,620

 

 

 

 

 

 

 

 

 

2,620

 

Cashless exercise of warrants

 

 

84

 

 

 

2,123

 

 

 

 

 

 

24,370

 

 

 

 

 

 

 

 

 

24,370

 

Common shares issued under equity incentive plan

 

 

690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of non-voting common shares into voting shares

 

 

15,545

 

 

 

(15,545

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, September 30, 2023

 

 

99,911

 

 

 

 

 

$

10

 

 

$

779,907

 

 

$

2,439

 

 

$

(334,279

)

 

$

448,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The exercise of Warrants includes $2.2 million of cash received and a reduction of warrants liability related to the exercise of the Warrants.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 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, June 30, 2022

 

 

78,709

 

 

 

13,422

 

 

$

9

 

 

$

693,840

 

 

$

2,126

 

 

$

(342,190

)

 

$

353,785

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,911

 

 

 

5,911

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,175

 

 

 

 

 

 

 

 

 

3,175

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108

)

 

 

 

 

 

(108

)

Unrecognized gain on derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,760

 

 

 

 

 

 

1,760

 

Common shares issued under equity incentive plan

 

 

345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, September 30, 2022

 

 

79,054

 

 

 

13,422

 

 

$

9

 

 

$

697,015

 

 

$

3,778

 

 

$

(336,279

)

 

$

364,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 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

 

 

78,423

 

 

 

13,422

 

 

$

9

 

 

$

687,660

 

 

$

(1,997

)

 

$

(391,768

)

 

$