Good day. And welcome to the OneSpaWorld’s First Quarter 2025 Earnings Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Allison Malkin of ICR. Please go ahead.

Thank you. Good morning, and welcome to OneSpaWorld's First Quarter 2025 Earnings Call and Webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements. These forward-looking statements reflect our judgment and analysis, only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made on this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter 2025 earnings release, which was furnished to the SEC today on Form 8-K. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. An explanation of these metrics can be found in our earnings release issued earlier this morning. Joining me today are Leonard Fluxman, Executive Chairman and Chief Executive Officer and President; and Stephen Lazarus, Chief Operating Officer and Chief Financial Officer. Leonard will begin with a review of our first quarter 2025 performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and guidance. Following our prepared remarks, we will turn the call over to the operator to begin the question-and-answer portion of the call. I would now like to turn the call over to Leonard.

Thank you, Allison. Good morning and welcome to OneSpaWorld’s First Quarter 2025 Earnings Conference Call. It is a pleasure to speak to you today and share a strong start to the year, which continues the sustained positive momentum in our business into 2025. Our team delivered first quarter results at the high end of our guidance, with our performance reflecting the impact of our mission to invest in our cruise line and destination resort partnerships, continuously innovate our guest experiences, and enhance our productivity and profitability across our business. This led to increases across all key operating metrics during the quarter, the addition of new ships to our fold, and new agreements with longstanding partners. As outlined in our earnings release issued earlier this morning, based on our performance and with continued positive momentum, we remain confident in our ability to navigate the increasingly dynamic economic environment, which is reflected in our reaffirmation of our annual guidance. In addition to our strategic growth drivers, our cruise line partners continue to experience strong bookings and onboard spend, and consumers continue to prioritize experiences with cruising, a value alternative to other vacation choices. Turning to the highlights of the quarter, total revenues increased 4% to $219.6 million, compared to $211.2 million in the first quarter of 2024. Income from operations of $16.8 million included $2.5 million of nonrecurring severance expense, and compared to $17 million in the first quarter of 2024. And adjusted EBITDA increased 5% to $26.6 million, which included $1.1 million of nonrecurring cash severance expense, and compared to $25.3 million in the first quarter of 2024. At quarter end, we operated health and wellness centers on 199 ships, with an average ship count of 193 for the quarter. This compares with a total of 193 ships, and an average ship count of 188 ships at the end of the first quarter of fiscal 2024. Also, at quarter end, we had 4,240 cruise ship personnel on vessels, compared with 4,082 cruise ship personnel on vessels at the end of first quarter of fiscal 2024. The quarter marked meaningful progress in our key priorities. Let me share some of those highlights with you. First, we captured highly visible new ship growth with current cruise line partners, and added new cruise line partnerships to our fold. In support of this priority, we introduced a new health and wellness center on Norwegian Cruise Lines’ first Prima Plus Class ship, Norwegian Aqua, in the first quarter, and remain on track to introduce health and wellness centers on an additional eight new ships, commencing voyages later this year. In addition, following quarter end, we executed a new agreement to operate health and wellness centers on 11 ships for P&O Cruise Lines and Cunard, which recognizes our strong performance and continues our longstanding partnerships. Second, we continue to expand high-value services and products. These higher-value services, including medi-spa, IV therapy, and acupuncture, to name a few, help to grow sales productivity as we introduce these services to more ships and expand offerings with the latest innovations. To this end, the quarter saw us elevate the innovation in our medi-spa services with the continued rollout of next-generation technology with FLX and CoolSculpting Elite, which offer improved results and reduce treatment time by up to 50%. These new technologies generated over 20% growth for these treatments in Q1 versus last year. In addition, acupuncture remains a sought-after service with strong adoption of LED light therapy as a high-conversion add-on treatment. At quarter end, medi-spa services were available on 148 ships, up from 142 ships at the end of the 2024 first quarter. We continue to expect to have medi-spa offerings on 151 ships this year. Third, we focused on enhancing health and wellness center productivity. This is best reflected in the delivery across-the-board growth in key operating metrics, including revenue per passenger per day, weekly revenue, pre-cruise revenue, and revenue per staff per day, which are driven by, one, staff retention, which remains a key contributor to our consistent gains in operating metrics, as experienced team members are driving incremental revenue through more effective customer recommendations. We continue to invest in best-in-class training and have recently redesigned our talent management process to further support productivity and long-term growth in our operating metrics. Our enhanced sales training continues to fuel increases in the number of guests using the spa, service frequency, service spend, retail, and average spend per guest. Additionally, pre-booking revenue as a percentage of revenues remains strong at 23%. During the quarter, we introduced pre-booking on the Virgin Voyages fleet of three vessels. And fourth, we enhanced our capital structure and strengthened our balance sheet again. In recognition of our strong competitive and financial position and our consistent free cash flow generation, our board of directors approved a new $75 million share repurchase program, extending our prior $50 million share repurchase program that we substantially completed in the first quarter. Together with our quarterly cash dividend, this program demonstrates our commitment to enhance shareholder value through our enterprise growth and capital allocation strategies. As we look ahead, we are experiencing favorable trends at the start of the second quarter and expect our proven operating strategies and strong competitive and financial position, further buoyed by decades of long experience and the resilience of our business across economic cycles, to have us poised to achieve our annual guidance. Overall, we believe we are well positioned to provide increasingly valuable services to our partners, experiences to our guests, and results for our stakeholders and shareholders in fiscal 2025 and beyond. With that, I'll turn the call over to Stephen, who will provide more details on our first quarter results and guidance.

Thank you, Leonard. Good morning, everyone. We are indeed pleased with our first-quarter results, realizing our expected growth in total revenues and adjusted EBITDA and generating predictably strong free cash flow. Our efficient capital structure and asset-light business model, combined with our strong cash flow generation, funded the return of $42 million to our shareholders in the quarter through our quarterly dividend payment and repurchases of our common shares. I will now share further details on our first-quarter results that we reported earlier this morning. Total revenues increased 4% to $219.6 million, compared to $211.12 in the first quarter of 2024. The increase in service revenue and product revenues were driven by a 2% increase in revenue days, which impacted revenue by $5.3 million, and a 2% increase in guest spend, which positively impacted revenue by $4.7 million. Contributing to the increased volume and spend was $2.3 million in increased pre-booking revenues at health and wellness centers included in our ship count as of quarter end. This was offset by a $1.5 million decrease in our land-based spa business, partially due to the closure of hotels where we had previously operated. Cost of services were $148.2 million, compared to $144 million for the first quarter of 2024, with the increase being primarily attributable to costs associated with increased service revenues of $178.5 million in the quarter from our health and wellness centers at sea and on land, compared with service revenue of $172.2 million in the first quarter of 2024. Similarly, cost of products was $35.3 million, compared to $33.5 million in the first quarter of 2024. The increase was primarily attributable to costs associated with increased product revenue of $41.1 million for the quarter from our health and wellness centers at sea and on land, compared to product revenues of $39 million for the first quarter of 2024. Salary benefits and payroll taxes were $11 million, compared to $8.5 million in the first quarter of 2024. The increase was primarily attributable to expenses associated with the termination of employment of a company's former Chief Commercial Officer, including $1.1 million of severance expense and $1.4 million of expense related to vesting treatment with respect to restricted stock units and performance stock units. Net income was $15.3 million, or net income per diluted share of $0.15, as compared to net income of $21.2 million, or net income per diluted share of $0.21 for the first quarter of 2024. The change was primarily attributable to a $7.7 million benefit resulting from the change in the fair value of warrant liabilities in the first quarter of last year. The first quarter of 2025 benefited from a $1.8 million decrease in interest expense. As you know, the change in fair value of warrant liabilities was the result of the re-measurement to fair value of the warrants exercised during the first quarter of 2024, reflecting changes in market prices of our common shares and other observable inputs, deriving the value of these financial instruments. The $1.8 million decrease in interest expense was primarily attributable to lower debt balances and a lower effective interest rate. Adjusted net income was $22.6 million, or adjusted net income per diluted share of $0.22, as compared to adjusted net income of $19.3 million, or adjusted net income per diluted share of $0.19 for the first quarter of 2024. And adjusted EBITDA was $26.6 million, inclusive of that aforementioned $1.1 million cash termination expense, compared to adjusted EBITDA of $25.3 million in the first quarter of 2024. If we turn then to the balance sheet, we continue to possess a strong balance sheet at quarter end with total cash of $23.8 million after repurchasing $37.9 million of our common shares and paying a $4.2 million dividend in the quarter. In addition, we had full availability on our $50 million revolving loan facility, giving us total liquidity of $73.8 million as of March 31st, 2025. Total debt, net to deferred financing costs, was $97.4 million at March 2025, compared to $98.6 million at December 2024. As Leonard mentioned, reflecting our strong competitive and financial position and efficient capital structure and asset-light business model that delivers consistent, strong cash flow generation, our board of directors approved a new share repurchase program. This program replaces the $50 million share repurchase program that we initiated in the first quarter of 2024, which is substantially complete. We expect to continue to invest our surplus cash after investing in our growth to support the payment of our quarterly cash dividends, repurchase our common shares, and pay down debt. We expect the continued execution of our strategy and return of capital to shareholders to create long-term value for all of our stakeholders. Before moving on to guidance, I would like to briefly comment on tariffs. As you are likely aware, the majority of our operations are not impacted by tariffs, as products for distributions to cruise ships are held in a free trade zone. In addition, products for use in our many spas are purchased from U.S. suppliers. These suppliers have not noted any disruption in the supply chain, nor any increases in current pricing. Moving then on to guidance, as we look ahead, we remain confident in our outlook and expect total revenue growth to increase as we move through the year, as we benefit from our strategic initiatives, and as we add health and wellness centers on eight additional cruise ships during the remainder of the year, most of them being back-weighted. As such, we continue to expect to report high single-digit revenue and adjusted EBITDA growth rates at the midpoints of our guidance ranges in fiscal 2025 compared to fiscal 2024. Our guidance does not assume a significant deterioration in guest spending on board, or a significant slowdown in cruising activity. As a reminder, for the full year of fiscal 2025, we expect total revenue in the range of $950 million to $970 million, with adjusted EBITDA expected in the range of $115 million to $125 million. We introduce for the second quarter of 2025, total revenue in the range of $235 million to $240 million, with adjusted EBITDA expected in a range of $28 million to $30 million. In summary, our business continues to build momentum, and we see significant opportunity ahead with a clear growth strategy, a high-performing team, and strong execution across the board. We expect fiscal 2025 to deliver meaningful gains and drive substantial value for all of our shareholders. With that, we will open up the call for questions. Debbie, if you could open the call, please.

The first question is from Steve Wieczynski with Stifel.

Hey, guys. Good morning. So, Leonard, I want to understand spend patterns a little bit more on board. Maybe you could give us some more color around what you're seeing in real-time in terms of guest spending. And I think you mentioned in your prepared remarks that April trends were essentially the same as what you guys witnessed in the first quarter. But I want to understand if you guys have seen any changes in whether it's attachment rates, whether there's a difference in terms of spending across what you've seen in your land-based assets versus maritime, or any change in demand for higher-end services versus traditional treatments. Just trying to dig in a little bit more in terms of if your guests are starting to change their behaviors at all.

Yes. Well, to be honest, we look at the same questions that you just asked, because those are all the indicators of pressure from the consumer or consumer confidence or sentiment starting to decline. Fortunately, in our first month here in April, we have not seen a significant increase in discounting. We have seen spend continue to increase. Actually, this last week was a good week, too, and spend was up. We are still seeing high-end services, medi-spa services, and some of the upper-body services in high demand. So we scraped through every single banner to take a look at where there was any kind of significant pressure, and we have not seen that. So we will keep monitoring that, because for us, the first indicator of a reduction in consumer sentiment or demand would be, do we have to tweak any of our marketing tools that we use on board each and every week? We have not had to do that. So your answer simply is, at this point, we've actually seen no decline. If anything, we've seen a slight improvement in April.

Okay. That's interesting. Thanks for that, Leonard. And then second question, I guess, if we think about full-year guidance, Stephen, you mentioned that full-year guidance doesn't assume any material changes in spending patterns. But maybe help us think about what would get you guys more towards the low end of that guidance range or even below the low end. I guess what we're trying to figure out here and understand is maybe the sensitivity of how much of a deterioration or change in demand and spending would have to occur in order to get you guys at the low end of that range or even below that range.

Steve, good morning. I think I would answer the question simply as follows. The low end of the range assumes a moderation in spending on board, so some slowdown. But if it's going to be a significant slowdown, then perhaps it goes below that. There is nothing that we are looking at that tells us we should pause and be concerned about a significant deterioration in spend on board. The cruise lines have generally come out and talked about their bookings, which have been very, very strong. They still continue to offer this tremendous value alternative to the guest. We then have a further layer of insulation where we are canvassing and bringing in on the ship a smaller percentage of those folks that want to spend money. So we feel, at this point in time, really comfortable about delivering our number.

The next question is from Sharon Zackfia with William Blair.

Hi, good morning. Thanks for taking the questions. I guess I wanted to kind of follow up with that on the pre-booking trends and whether you're seeing any difference in willingness for consumers to pre-book ahead of time. Or alternatively, if you're seeing the cruise lines use kind of onboard spend credit incrementally to bolster trends, which could actually benefit you. And a corollary to that would just be, I know that you don't control the pre-booking engines that the cruise companies have. Just given the uncertainty, do you or are you seeing any pullback in the cruise companies' willingness to invest to continue to reduce friction in those pre-booking engines?

Hey, Sharon, it's Leonard. Look, we actually saw a slight pickup. I mean, although it's pretty much comparable, 23%. We're very encouraged thus far. We just rolled it out on Virgin for the first time, as I mentioned. We have not seen a decline in the focus and energy, although we're focusing on it much more with the cruise lines because it's important to keep the focus there and the pressure on the importance of pre-booking. But we have not materially in any way adjusted pricing on pre-booking. It's a very important part of setting the cruise up as 23% of services are pre-booked. So, it continues to remain constant, if not slightly up. We expect with pre-booking on Virgin, it will improve. There are other initiatives in place to improve it as well. So, the cruise lines are being as receptive as they can, and they're not pulling back in any significant way, Sharon. So, we still focus on that. We still focus on that as a material and important part of setting the table for each cruise and how we yield manage through that cruise.

And Leonard, on the onboard spend credits, are you seeing the cruise companies use onboard credits more aggressively at all?

Not yet, Sharon. I mean, they only really use that lever when they see a significant decline in booking trends. And I don't think we've seen that reported yet. I mean, Royal Caribbean's commentary yesterday was very positive about 2025. I mean, the visibility to 2026 is comparable with historical trends. NCLH continues to say it's decent, although they said there's some softening. So, clearly, each cruise line is going to have a slightly different view of bookings. But look, we focus always on the top suites first. In order to get our 11% penetration, we focus on the best guests, and then we go everywhere else, obviously, to fill the columns. So, we're not seeing the use of that magic onboard credit yet. I think when you see them start doing that, clearly, then there are signs of some softening. But we haven't seen it yet in any material shape.

The next question is from Max Rakhlenko with TD Cowen.

Great. Thanks a lot, and congrats on a very nice quarter. So, first question, did you guys mention what comps were for the medi-spa? I've missed that. I think you've provided that the past couple of quarters. And then just how should we think about the potential slowdown in usage for medi-spa if the backdrop were to soften a little bit, just given the significantly higher ticket?

The medi-spa continues to grow as a percentage of service. It's still, Max, under 10%. It's still 8% or 9%. But we do see, as we roll out more onto some of the newer ships, as we continue to improve the operating on existing ships where maybe the full platform is not rolled out. And there are ships that will still get some of the new services that are not there. We've not seen a reduction in demand thus far. So, yes, it's a high-end ticket. But clearly, the demand for it right now continues through April, from what we've seen. And it was very decent in the first quarter. So, we're not seeing the early signs of deterioration, even in the high-end medi-spa services.

Got it. That's great. Appreciate it. And then, if you can just take us back a little bit, going to GFC, can you remind us how the business held in, both on top line as well as margins? We are obviously starting to get more and more questions around what the downside can look like. So, if you could just take us back and remind how the business held in at the time.

Yes. So, the GFC was obviously the worst time. But it was a very small, protracted period of time in which there was major emotional and stress to the financial systems. And so, people pretty much shut down. But that didn't last for a very long period of time. It pretty much kicked in at the end of ‘08 and then lasted for about four months into ‘09 and then started to improve. We do not expect that type of contraction. And our business actually fared better than most, as you can imagine. We were able to adjust marketing, maybe some discounting. The only thing that was impacted in any significant way was the retail attachment, which thus far continues. In fact, if anything, it's improved in the first quarter. So, we've not seen that. And where we did have contraction or less demand for the retail attachment, we wanted to get the people in for services or two services, which is normal. But on the retail side, we maybe had to discount or bundle slightly differently. We've not done that thus far.

The next question is from Laura Champine with Loop Capital.

Thanks for taking my question. I note that you were pretty heavy in the market to buy your own stock in Q1 and that you've re-upped the authorization this quarter. How sensitive is your buyback to any potential sign of softening in your business? Meaning, should we expect those buybacks to be contingent upon growth staying as strong as it is today?

Not necessarily, Laura. If you look back at the last major economic downturn, the company still managed to produce solid free cash flow. So, even if we experience a slowdown in business—which I want to emphasize we have not seen so far, and I'm not suggesting we will—we would likely continue to buy back shares. The choice to repurchase shares is primarily based on the stock's value. We assess whether there is a disconnect between the stock's current value and where we believe it should be. Therefore, I anticipate we will continue to participate in share buybacks when the conditions are favorable.

The next question is from Gregory Miller with Truist Securities.

Thank you. Good morning. I'd like to ask a question similar to some of my peers as it relates to trends in the second quarter to date. Did you see any weaknesses in spend immediately or the couple of days after the tariffs were formally announced or where there were more material stock market declines immediately following the tariffs?

No, we didn't.

Playing devil's advocate, are you surprised that you did not see any changes in spend activity or behavior?

Immediately after the tariffs were announced, I mean, people are out there cruising. They had probably set in their minds what their budget was for spending or additional experiences. Did they get back home and start reevaluating with that incremental or discretionary spend needs to be? Probably, but we didn't see it whilst they were cruising during the tariff announcement.

Yes, Greg, I would echo that. What Leonard says is not dissimilar to what we've seen before in these short-term blips in the economy or incidents that affect the cruise lines where you're on vacation, you're going to spend money, but certainly, potentially, the minute you get home, the wallet's jammed shut. But while you're on board, you're there, you've spent the money, you might as well have a good time, and that's how we see people behaving in our business.

Our next questioner is Assia Georgieva with Infinity Research.

Good morning, guys. Congratulations on a very strong quarter. I had a couple of questions. In terms of the pre-booked revenue, the increase was $2.3 million, so about a quarter of the overall increase. How would you characterize what you have pre-booked for Q2 and Q3? I imagine you have some pretty nice visibility at this point.

Yes, it's too soon, Assia, frankly.

It’s too soon, Assia. And it's not something that we would provide a forward-looking metric on that. It's still in development. We only have one quarter underway. As we mentioned, at least we have one month into the quarter. We've not seen any change to that number, so as Stephen said, yes, it's too early for us to comment. And historically, we wouldn't comment on a forward-looking pre-booking number.

Unfortunately, but I understand. Stephen, you had mentioned that the provider of your medi-spa products has not seen any price increases yet. Is that correct?

Not necessarily. There are many providers of those items, and to be completely clear, they may have seen certain input prices go up, but they have, at this point in time, indicated to us that they did not expect any increases from them to OneSpaWorld. Our anticipation at this point in time is, irrespective of what's going on in the tariff world, we would not see medi-spa price increases.

So does it make sense to build inventory possibly for that to carry you through, let's say, a few-month-long period of tariff impact?

It's difficult. Some of the medi-spa has expirations. It has expiration dates, so you've got to be really careful.

It's refrigerated, and there's obviously limitations on the size of the refrigeration capabilities on board, but at the same time, we keep sufficient inventory even for high-demand or busy ships with MedSpa demand, but to keep an excess of that beyond what we can store safely, we don't do that.

It makes perfect sense. And just two very quick housekeeping questions. In terms of land-based closings, should we anticipate anything significant going forward the rest of the year?

What do you mean? Can you repeat the question?

You mentioned in your press release that land-based revenues were slightly down due to the closures or the end of relationships with some hotels and the closing of certain spas. Do you expect any significant changes in the number of spas that will be operated in the future? I don't think so.

No, not at this point in time. Yes, go ahead.

No. Leonard, thank you, you can go.

Yes, look, I mean, look, I think every type of vacation option out there competing with cruise lines potentially might not do as well as the cruise industry itself because it's still an incredibly differentiated experience, but also great value, and the delta between land and sea is still pretty significant. I imagine that that's still going to be your first call if you want to take a family, and we're moving into the second quarter, vacations, school kids coming out. So this is a quarter where a lot of people do go onto the ships and go to Alaska, go to the Mediterranean. So it's going to be an interesting second quarter, but I think pretty much every itinerary out there, the load factors are going to be consistently good and comparable with last year, if not better.

Perfect. And again, my very, very last question. The EBITDA number, if I were to exclude the cash severance amount, it would have actually come above guidance and would have been $27.7 million. Is that correct, Steve?

Yes.

All right. Thank you, everybody, and thanks for joining us today. We look forward to speaking with many of you at the upcoming investor meetings and when we report our second-quarter results in July. Thank you for joining us today. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.