Business description of OneSpaWorld-Holdings-Limited from last 10-k form

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OneSpaWorld Holdings Limited (“OneSpaWorld,” the “Company,” “we,” “our, “us” and other similar terms refer to OneSpaWorld Holdings Limited and its consolidated subsidiaries).

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

From time to time, including in this report and other disclosures, we may issue “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views about future events and are subject to known and unknown risks, uncertainties and other factors which may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We attempt, whenever possible, to identify these statements by using words like “will,” “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “forecast,” “future,” “intend,” “plan,” “estimate” and similar expressions of future intent or the negative of such terms.

Such forward-looking statements include statements regarding:

These forward-looking statements are based on information available as of the date of this report and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. For a discussion of the risks involved in our business and investing in our common shares, see the section entitled “Risk Factors.”

Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

ITEM 1. BUSINESS

Business Combination

OneSpaWorld Holdings Limited is the pre-eminent global operator of health and wellness centers onboard cruise ships and a leading operator of health and wellness centers at destination resorts worldwide. Our highly trained and experienced staff offer guests a comprehensive suite of premium health, fitness, beauty and wellness services and products onboard 170 cruise ships and at 69 destination resorts globally as of December 31, 2019. We entered into the business combination (the “Business Combination”) contemplated by that certain Business Combination Agreement, dated as of November 1, 2018 (as amended, supplemented or otherwise modified from time to time, the “Transaction Agreement”), by and among us, Steiner Leisure Limited, an international business company incorporated under the laws of the Commonwealth of The Bahamas (“Steiner Leisure”), Steiner U.S. Holdings, Inc., a Florida corporation, Nemo (UK) Holdco, Ltd., a limited company formed under the laws of England and Wales, Steiner UK Limited, a limited company formed under the laws of England and Wales, Steiner Management Services, LLC, a Florida limited liability company, Haymaker Acquisition Corp. a Delaware corporation (“Haymaker”), Dory US Merger Sub, LLC, a Delaware limited liability company, Dory Acquisition Sub, Limited, an international business company incorporated under the laws of the Commonwealth of The Bahamas, Dory Intermediate LLC, a Delaware limited liability company, and Dory Acquisition Sub, Inc., a Delaware corporation. The Business Combination enabled us to re-enter the public markets as a leader in global health and wellness services and enhance our ability to deliver the world class service and innovation that our cruise line and resort partners have come to expect from our organization.

General

At our core, we are a global services company. With over 90% market share in the historically highly attractive outsourced maritime health and wellness market, we are the market leader at more than 10x the size of our closest maritime competitor. Over the last 50 years, we have built our leading market position on our depth of staff expertise; broad and innovative service and product offerings; expansive global recruitment, training and logistics platform; and decades-long relationships with cruise and destination resort partners. Throughout our history, our mission has been simple: helping guests look and feel their best during and after their stay. We serve a critical role for our cruise line and destination resort partners, operating a complex and increasingly important aspect of their overall guest experience. Decades of investment and know-how have allowed us to construct an unmatched global infrastructure to manage the complexity of our operations, which in 2019 included over 8,600 annual voyages with visits to over 1,200 ports of call around the world. We have consistently expanded our onboard offerings with innovative, leading-edge service and product introductions, and developed a powerful back-end recruiting, training and logistics platform to manage our operational complexity, maintain our industry-leading quality standards and maximize revenue per center. The combination of our renowned recruiting and training platform, deep labor pool, global logistics and supply chain infrastructure and proven revenue management capabilities represents a significant competitive advantage that we believe is not economically feasible to replicate.

The majority of our revenue and profits are earned through long-term revenue sharing agreements with cruise line partners that economically align both parties and contribute to our attractive asset-light financial profile. These agreements average approximately five years in length and provide us with the exclusive right to offer health, fitness, beauty and wellness services and the ability to sell complementary products onboard the ships we serve. Under these long-term agreements, cruise line partners retain a specified percentage of revenues from all our sales onboard. This inherent alignment encourages collaboration in all aspects of our operations, including facility design, product innovation, pre- and post-cruise sales opportunities, capacity utilization initiatives and other data-driven strategies to drive increased guest traffic and revenue growth. Most of our cruise line agreements encompass 100% of a partner cruise line’s existing fleet and all new ships introduced by the cruise line during the term of the agreement. As opposed to fixed-rent landlords, cruise lines and destination resorts serve as our aligned economic partners.

We are recognized by our cruise line and destination resort partners and our guests for our comprehensive suite of services and products. We curate and deliver an exhaustive range of offerings centered on providing specific health and wellness solutions to meet our guests’ lifestyle routines or objectives. These services include: (i) traditional body, salon, and skin care services and products; (ii) specialized fitness classes and personal fitness training; (iii) innovative pain management, detoxifying programs and comprehensive body composition analyses; (iv) weight management programs and products; and (v) advanced medi-spa services. We also offer our guests access to leading beauty and wellness brands including ELEMIS ®, Kérastase ® and Dysport ®, with many brands offered exclusively by us at sea. On average, guests spend $230 per visit and our solution sales approach drives substantial retail sales, with approximately 25% of our revenues derived from the sale of retail products.

Our state-of-the-art health and wellness centers are designed and branded for each cruise line and destination resort to optimize the guest experience, align with the overall hospitality atmosphere and maximize productivity. Centers can employ up to 105 highly trained professionals and range in size from 200 to over 30,000 square feet, depending on the cruise or resort partner’s needs.

Our cruise line relationships average over 20 years and encompass substantially all of the major global cruise lines, including Carnival Cruise Line, Royal Caribbean, Princess Cruises, Norwegian Cruise Lines, Celebrity Cruises, Costa and Holland America, among many others. These partnerships extend across contemporary, premium, luxury and budget cruise lines that operate ships globally. We maintain an exceptional contract renewal rate with our cruise line partners, having renewed approximately 95% of our contracts based on ship count over the last 15 years, including 100% of our contracts with ships larger than 3,500 berths. We have not only maintained relationships with existing cruise line partners, but have a history of winning contracts and gaining market share. In 2019, we signed an agreement with Celebrity Cruises to become the exclusive operator of health and wellness centers on Celebrity’s entire fleet, increasing the Celebrity vessels on which we operated in 2020 by nine, extended our current agreement with Norwegian Cruise Lines through 2024, and signed an agreement with the new lifestyle brand Virgin Voyages as the exclusive operator of the spa and wellness offerings onboard the first three Virgin vessels planned to launch in 2020, 2021 and 2022. On land, we have longstanding relationships with the world’s leading destination hotel and resort operators, including Marriott, Starwood, Hilton, ClubMed, Caesars Entertainment, Lotte, Loews and Four Seasons, among others.

As a Bahamian international business company that earns a substantial portion of our revenue in low- or no-tax jurisdictions, we have benefited from a highly attractive effective cash tax rate. Additionally, we have minimal capital expenditures as third parties typically fund the build-out, maintenance, and refurbishment of our onboard health and wellness centers. The combination of our attractive tax rate and asset-light operating model leads to a financial profile that delivers exceptional Unlevered After-Tax Free Cash Flow. Annually, from 2017 through 2019, we converted approximately 90% of our Adjusted EBITDA to Unlevered After-Tax Free Cash Flow.

We have driven strong financial results and believe our leading market position in a growing industry, differentiated business model and entrenched partner relationships position our business for continued growth. For the year ended December 31, 2019, we achieved revenues of $562.2 million, Adjusted EBITDA of $58.7 million, Net Loss of $37 million and Unlevered After-Tax Free Cash Flow of $54.6 million.

On January 30, 2020, the World Health Organization declared the coronavirus outbreak (“COVID-19”) a “Public Health Emergency of International Concern,” and on March 10, 2020, declared COVID-19 a pandemic. The regional and global outbreak of COVID-19 has negatively impacted our operations. Quarantines, labor shortages and other disruptions, including the cancellation of cruise itineraries and the closure of resort properties, have adversely impacted our revenues, the ability to provide services, and our operating results, and may continue to have further or additional adverse impacts in the future. In addition, COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets of many countries, causing an economic downturn that could affect demand for our products and services, as we have seen in recent weeks. As such, the full impact on our operations and financial condition is difficult to assess at this point in time. As of the date of this report, the extent to which the coronavirus will impact us will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others.

Attractive Market Opportunity

Notwithstanding the recent uncertainties and adverse conditions impacting global operations and economies resulting from the coronavirus outbreak, we operate at the intersection of the historically attractive health and wellness and travel leisure industries. Although we cannot yet predict the full impact of the coronavirus outbreak on the industry, we believe we are well-positioned to grow as a result of the cruise industry’s historical new cruise ship and passenger growth, consumers’ desire for travel and experiences and increasing focus on health and wellness in consumers’ everyday lives.

Historical Cruise Industry Growth

The cruise industry has been among the fastest-growing segments in the travel leisure industry with passenger growth for more than 20 consecutive years, including through the recessions of 2001 and 2008. We estimate, based on annual statistics published by Cruise Lines International Association (“CLIA”), that global passenger counts have grown every year from approximately 6.3 million passengers in 1995 to a projected all-time high of 30.0 million passengers in 2019, representing a compound annual growth rate of 6.7%. This passenger growth has been driven by consistent, significant investments in new cruise ship capacity, strong loyalty among experienced cruisers and the large and growing appeal of cruising to all demographics, including millennials.