OneSpaWorld Holdings Limited (OSW) Bundle
Understanding OneSpaWorld Holdings Limited (OSW) Revenue Streams
Understanding OneSpaWorld Holdings Limited’s Revenue Streams
The company generates revenue primarily through two segments: services and products, which contribute significantly to overall income.
Revenue Breakdown
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Change (%) |
|---|---|---|---|
| Service Revenues | $194.4 | $175.8 | 11% |
| Product Revenues | $47.3 | $40.4 | 17% |
| Total Revenues | $241.7 | $216.3 | 12% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total revenues were $677.8 million, compared to $599.2 million for the same period in 2023, reflecting a growth rate of 13%.
Service revenues increased from $489.2 million to $547.5 million, a growth of 12%.
Product revenues rose from $110.0 million to $130.4 million, marking an 18% increase.
Contribution of Different Business Segments
During the nine months ended September 30, 2024, the contribution of service and product revenues to total revenues was:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Service Revenues | $547.5 | 81% |
| Product Revenues | $130.4 | 19% |
| Total Revenues | $677.8 | 100% |
Analysis of Significant Changes in Revenue Streams
The increase in service revenues is attributed to a higher average ship count, which grew by 7% to 190 health and wellness centers onboard during the nine months ended September 30, 2024. Product revenues benefited from increased guest engagement and innovative product offerings, enhancing overall revenue performance.
Overall, the company has successfully executed initiatives aimed at driving revenue growth, resulting in consistent year-over-year increases across both primary revenue streams.
A Deep Dive into OneSpaWorld Holdings Limited (OSW) Profitability
A Deep Dive into OneSpaWorld Holdings Limited's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 9%, an increase from 7% for the same period in 2023. The gross profit for this period was $60.8 million compared to $41.6 million in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, stood at 9%, significantly up from 7% in 2023. Operating income rose to $60.8 million from $41.6 million.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was 9%, a substantial increase from 1% in the prior year. Net income for this period totaled $58.5 million, compared to $4.3 million in 2023.
Trends in Profitability Over Time
The following table outlines the profitability metrics over the last two years:
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Gross Profit Margin | 9% | 7% | +2% |
| Operating Profit Margin | 9% | 7% | +2% |
| Net Profit Margin | 9% | 1% | +8% |
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company’s profitability metrics are as follows:
| Metric | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 9% | 10% |
| Operating Profit Margin | 9% | 8% |
| Net Profit Margin | 9% | 5% |
Analysis of Operational Efficiency
The operational efficiency metrics indicate a strong focus on cost management, as evidenced by the following:
- Cost of Services: For the nine months ended September 30, 2024, the cost of services was $454.4 million, which is an increase of 11% from $409.6 million in 2023.
- Administrative Expenses: Administrative expenses increased slightly to $13.0 million from $12.8 million, reflecting a 2% rise.
- Interest Expense: Interest expense decreased to $7.7 million, a 40% reduction from $12.7 million.
Overall, the company's gross margin trends indicate an effective cost management strategy, particularly as the service revenues have shown consistent growth, supporting a favorable operational efficiency outlook.
Debt vs. Equity: How OneSpaWorld Holdings Limited (OSW) Finances Its Growth
Debt vs. Equity: How OneSpaWorld Holdings Limited Finances Its Growth
The financial structure of OneSpaWorld Holdings Limited (OSW) is characterized by a balanced approach to debt and equity financing. As of September 30, 2024, the company reported total long-term debt of $98.7 million, down from $158.2 million at the end of 2023, following significant repayments of $159.6 million in the first and second lien term loan facilities.
Debt Levels
Breaking down the debt structure, the company has a term loan facility with an interest rate of 6.9% that matures in 2029, totaling $100 million. As of September 30, 2024, the current portion of long-term debt stands at $3.75 million, indicating manageable short-term obligations.
Debt-to-Equity Ratio
As of September 30, 2024, OneSpaWorld's total shareholders' equity was $540.1 million. This results in a debt-to-equity ratio of approximately 0.18, which is significantly lower than the industry standard of around 0.5 to 1.0. This conservative leverage suggests a robust financial position relative to its peers.
Recent Debt Issuances and Credit Ratings
In September 2024, OneSpaWorld entered into a credit agreement with Bank of America, establishing senior secured credit facilities. These facilities include a fully drawn term loan of $100 million and an undrawn revolving loan facility of $50 million. The company has maintained a strong credit profile, evidenced by a recent upgrade in credit ratings due to improved operational performance and reduced debt levels.
Balancing Debt Financing and Equity Funding
OneSpaWorld has effectively balanced its financing strategy, utilizing both debt and equity to fund operations and growth initiatives. In the nine months ended September 30, 2024, the company repurchased 1,395,432 common shares for $19 million, reflecting its commitment to returning value to shareholders while managing debt. The ability to reduce interest expense by 40% year-over-year to $7.7 million also highlights effective debt management.
| Financial Metric | Amount (in millions) |
|---|---|
| Total Long-term Debt | $98.7 |
| Total Shareholders' Equity | $540.1 |
| Debt-to-Equity Ratio | 0.18 |
| Interest Rate on Term Loan | 6.9% |
| Current Portion of Long-term Debt | $3.75 |
| Recent Share Repurchase | 1,395,432 shares for $19 million |
| Interest Expense (9M 2024) | $7.7 |
In summary, OneSpaWorld's strategic management of its debt and equity structure positions it favorably for sustained growth and shareholder returns in 2024 and beyond.
Assessing OneSpaWorld Holdings Limited (OSW) Liquidity
Assessing OneSpaWorld Holdings Limited's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Current Ratio |
|---|---|---|
| $144,728 | $78,767 | 1.84 |
Quick Ratio: The quick ratio, which excludes inventories from current assets, is:
| Quick Assets (in thousands) | Current Liabilities (in thousands) | Quick Ratio |
|---|---|---|
| $101,330 | $78,767 | 1.29 |
Analysis of Working Capital Trends: Working capital as of September 30, 2024, shows a positive trend:
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $144,728 | $78,767 | $65,961 |
| December 31, 2023 | $126,722 | $80,859 | $45,863 |
Cash Flow Statements Overview: The cash flow statement highlights the following trends:
- Operating Cash Flow: Net cash provided by operating activities for the nine months ended September 30, 2024, was $62,247,000, compared to $46,337,000 for the same period in 2023.
- Investing Cash Flow: Net cash used in investing activities was ($3,433,000) for the nine months ended September 30, 2024.
- Financing Cash Flow: Net cash used in financing activities was ($37,861,000) for the nine months ended September 30, 2024.
Potential Liquidity Concerns or Strengths: The company has entered into a credit agreement, providing for senior secured credit facilities consisting of:
- Term Loan Facility: $100 million (fully drawn).
- Revolving Loan Facility: Up to $50 million (undrawn as of September 30, 2024).
Cash and Cash Equivalents: Cash and cash equivalents as of September 30, 2024, were $48,795,000, up from $27,704,000 as of December 31, 2023.
Debt Obligations: Long-term debt as of September 30, 2024, was $94,917,000, significantly reduced from $158,207,000 as of December 31, 2023.
Interest Expense: Interest expense for the nine months ended September 30, 2024, was $7,672,000, down from $12,688,000 for the same period in 2023.
The company has demonstrated a solid liquidity position with a current ratio above 1.0 and a declining trend in long-term debt, which indicates improved financial health and ability to meet short-term obligations.
Is OneSpaWorld Holdings Limited (OSW) Overvalued or Undervalued?
Valuation Analysis
To determine whether OneSpaWorld Holdings Limited (OSW) is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, OneSpaWorld reported a net income of $58.5 million for the nine months ended September 30, 2024, compared to $4.3 million for the same period in 2023. The diluted earnings per share (EPS) for the most recent quarter was $0.56. Assuming a current stock price of approximately $9.00, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $9.00 / $0.56 = 16.07.
Price-to-Book (P/B) Ratio
As of September 30, 2024, the total shareholders' equity was $540.1 million. With approximately 104 million shares outstanding, the book value per share is:
Book Value Per Share = Total Equity / Shares Outstanding = $540.1 million / 104 million = $5.19.
Assuming a stock price of $9.00, the P/B ratio is calculated as:
P/B Ratio = Stock Price / Book Value Per Share = $9.00 / $5.19 = 1.73.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For the nine months ended September 30, 2024, EBITDA was $60.8 million. The enterprise value (EV) is calculated as:
- Market Capitalization = Stock Price Shares Outstanding = $9.00 104 million = $936 million.
- Total Debt = $98.7 million.
- Cash and Cash Equivalents = $21.1 million.
- Enterprise Value = Market Capitalization + Total Debt - Cash = $936 million + $98.7 million - $21.1 million = $1,013.6 million.
Thus, the EV/EBITDA ratio is:
EV/EBITDA = Enterprise Value / EBITDA = $1,013.6 million / $60.8 million = 16.67.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated, starting at approximately $8.00 and reaching a high of $10.50. The current price of $9.00 indicates a 12.5% increase year-to-date.
Dividend Yield and Payout Ratio
The company declared a dividend of $0.04 per share. With a current stock price of $9.00, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $0.04 / $9.00 = 0.44%.
The payout ratio based on the most recent EPS is:
Payout Ratio = Dividend / EPS = $0.04 / $0.56 = 7.14%.
Analyst Consensus
Analyst consensus on OSW’s stock is currently rated as a "Hold". This indicates that while the company has shown strong growth, market conditions suggest cautious optimism.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 16.07 |
| P/B Ratio | 1.73 |
| EV/EBITDA Ratio | 16.67 |
| Stock Price (Current) | $9.00 |
| Dividend Yield | 0.44% |
| Payout Ratio | 7.14% |
| Analyst Consensus | Hold |
Key Risks Facing OneSpaWorld Holdings Limited (OSW)
Key Risks Facing OneSpaWorld Holdings Limited
Industry Competition: The health and wellness industry, particularly in the cruise ship sector, is highly competitive. The company's performance may be affected by the presence of established competitors and new entrants who could impact market share and pricing strategies.
Regulatory Changes: Changes in health and safety regulations, particularly those related to cruise operations and health services, can impose additional costs or operational constraints. Compliance with international regulations can also be complex and costly.
Market Conditions: Economic downturns can lead to reduced discretionary spending on wellness services, impacting revenues. The company's revenue is significantly linked to the cruise industry, which can be affected by global economic conditions, pandemics, or geopolitical tensions.
Operational Risks: The reliance on a large number of health and wellness centers onboard ships (195 as of Q3 2024) heightens operational complexity. Issues such as staffing shortages, service quality, or equipment failures can negatively impact customer satisfaction and revenue.
Financial Risks: The company has significant long-term debt, with a total debt net of unamortized debt issuance costs amounting to $98.7 million as of September 30, 2024 . Interest expenses are also a concern, with net interest expense recorded at $7.7 million for the nine months ended September 30, 2024 .
Strategic Risks: The company's strategy to expand and enhance guest engagement and experiences is essential for growth. However, failure to execute these strategies effectively could result in lost revenue opportunities and diminished brand reputation.
Mitigation Strategies: The company has focused on improving operational efficiency and reducing debt levels, having repaid $115.6 million in debt instruments since December 31, 2022 . Additionally, they have entered into a new credit agreement with Bank of America for a term loan facility of $100 million .
| Risk Factor | Details |
|---|---|
| Industry Competition | High competition in the health and wellness sector can affect market share. |
| Regulatory Changes | Compliance with evolving health and safety regulations can increase costs. |
| Market Conditions | Economic downturns may lead to decreased discretionary spending. |
| Operational Risks | Dependence on numerous health and wellness centers increases operational complexity. |
| Financial Risks | Total debt net of unamortized debt issuance costs: $98.7 million. |
| Strategic Risks | Failure to execute on growth strategies could harm revenue. |
| Mitigation Strategies | Debt repayment of $115.6 million since 2022, new credit agreement for $100 million. |
Future Growth Prospects for OneSpaWorld Holdings Limited (OSW)
Future Growth Prospects for OneSpaWorld Holdings Limited
OneSpaWorld Holdings Limited is poised for significant growth driven by various key factors.
Analysis of Key Growth Drivers
- Product Innovations: The company has introduced new wellness products, contributing to an increase in product revenues. For the nine months ended September 30, 2024, product revenues reached $130.4 million, an increase of 18% compared to $110.0 million in the same period of 2023.
- Market Expansions: The average ship count increased by 7% to 190 health and wellness centers onboard ships during the nine months ended September 30, 2024.
- Acquisitions: Strategic acquisitions have allowed the company to expand its service offerings and enhance operational capabilities, although specific recent acquisitions are not detailed in the available data.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected based on ongoing operational improvements and market conditions. For the nine months ended September 30, 2024, total revenues amounted to $677.8 million, compared to $599.2 million for the same period in 2023, reflecting a growth rate of 13%.
Earnings estimates suggest continued profitability, with net income for the nine months ended September 30, 2024, reported at $58.5 million, a substantial increase of 1,250% from $4.3 million in the prior year.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has entered into a credit agreement to secure additional funding, which includes a $100 million term loan facility and a $50 million revolving loan facility, providing liquidity for strategic initiatives.
Competitive Advantages That Position the Company for Growth
- Established Presence: Operating health and wellness centers on 196 cruise ships and in 52 destination resorts enhances market reach.
- Strong Financial Performance: The company has shown operational efficiency, with an income from operations of $60.8 million for the nine months ended September 30, 2024, an increase of 46% compared to the previous year.
- Debt Reduction: The company has successfully reduced its debt burden, with total debt net of unamortized debt issuance costs standing at $98.7 million as of September 30, 2024.
| Metric | 2024 (Nine Months Ended Sept 30) | 2023 (Nine Months Ended Sept 30) | Growth (%) |
|---|---|---|---|
| Total Revenues | $677.8 million | $599.2 million | 13% |
| Service Revenues | $547.5 million | $489.2 million | 12% |
| Product Revenues | $130.4 million | $110.0 million | 18% |
| Net Income | $58.5 million | $4.3 million | 1,250% |
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Article updated on 8 Nov 2024
Resources:
- OneSpaWorld Holdings Limited (OSW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of OneSpaWorld Holdings Limited (OSW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View OneSpaWorld Holdings Limited (OSW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.