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What changed in ONESPAWORLD HOLDINGS Ltd's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ONESPAWORLD HOLDINGS Ltd's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+494 added−258 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in ONESPAWORLD HOLDINGS Ltd's 2023 10-K

494 paragraphs added · 258 removed · 194 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

108 edited+265 added−30 removed56 unchanged
Biggest changeCertain thermal suites also offer cold plunge pools, large therapeutic jacuzzis, and rooms surrounding occupants with layers of body cleansing salt crystals. • Medi-spa. We offer medi-spa services on the majority of our ships. Our service menu consists of the leading medi-spa brands, including BOTOX Cosmetic, Dysport, Restylane, CoolSculpting, Thermage, dermal fillers, and microneedling, among others.
Biggest changeOur service menu consists of the leading medi-spa brands, including Dysport, Restylane, CoolSculpting, Thermage, dermal fillers, and microneedling, among others. Medi-spa services are administered by medically licensed professionals. By the end of 2024, we expect to offer medi-spa services on 148 ships. • Health. Our health and pain management offerings present one of our largest and most profitable categories.
Our cruise line relationships average over 20 years and encompass substantially all of the major global cruise lines, including Carnival Cruise Line, Royal Caribbean Cruises, Princess Cruises, Norwegian Cruise Lines, Celebrity Cruises, Costa Cruises and Holland America, among many others, as well as recent additions to the industry, such as Virgin Voyages.
Our cruise line relationships average over 20 years and encompass substantially all of the major global cruise lines, including Carnival Cruise Line, Royal Caribbean Cruises, Princess Cruises, Norwegian Cruise Line, Celebrity Cruises, Costa Cruises and Holland America, among many others, as well as recent additions to the industry, such as Virgin Voyages.
Our cruise line relationships average over 20 years and encompass substantially all of the major global cruise lines, including Carnival Cruise Line, Royal Caribbean Cruises, Princess Cruises, Norwegian Cruise Lines, Celebrity Cruises, Costa Cruises, Seabourn Cruise Line, Virgin Voyages, and Holland America, among many others.
Our cruise line relationships average over 20 years and encompass substantially all of the major global cruise lines, including Carnival Cruise Line, Royal Caribbean Cruises, Princess Cruises, Norwegian Cruise Line, Celebrity Cruises, Costa Cruises, Seabourn Cruise Line, Virgin Voyages, and Holland America, among many others.
Key recent initiatives include: • continued innovation in our service and product offerings, coupled with enhanced consultative sales training techniques, resulting in a shifting revenue mix toward higher value-add and higher priced services, higher-priced products, and higher attachment rates for product purchases in connection with a guest service; • enhancing and expanding collaboration with cruise line and destination resort partners; • expanding pre-marketing, pre-booking and pre-payment platforms with optimal positioning on cruise line websites; • employing data-driven, dynamic pricing of services to optimize facility utilization and revenue generation; and • incorporating advanced direct marketing programs, including personalized communications and value promotions, to drive consumer demand.
Our key initiatives include: • continued innovation in our service and product offerings, coupled with enhanced consultative sales training techniques, resulting in a shifting revenue mix toward higher value-add and higher priced services, higher-priced products, and higher attachment rates for product purchases in connection with a guest service; • enhancing and expanding collaboration with cruise line and destination resort partners; • expanding pre-marketing, pre-booking and pre-payment platforms with optimal positioning on cruise line websites; • employing data-driven, dynamic pricing of services to optimize facility utilization and revenue generation; and • incorporating advanced direct marketing programs, including personalized communications and value promotions, to drive consumer demand.
Medi-spa has been a highly successful innovation for OneSpaWorld at sea and is now an accretive component of our offerings. Performed by medically licensed professionals, the medi-spa offerings provide the latest cosmetic medical services to guests, such as non-surgical cosmetic procedures, including BOTOX Cosmetic, Dysport, Restylane, CoolSculpting, Thermage, and dermal fillers.
Medi-spa has been a highly successful innovation for OneSpaWorld at sea and is now an accretive component of our offerings. Performed by medically licensed professionals, the medi-spa offerings provide the latest cosmetic medical services to guests, such as non-surgical cosmetic procedures, including Dysport, Restylane, CoolSculpting, Thermage, and dermal fillers.
We have not only maintained relationships with existing cruise line partners, but also have a history of winning contracts and gaining market share. In August 2021, we extended our current agreement with Azamara through May 2026. In November 2022, we extended our current agreement with Norwegian Cruise Lines through December 2029 for all ships across their three brands.
We have not only maintained relationships with existing cruise line partners, but also have a history of winning contracts and gaining market share. In August 2021, we extended our current agreement with Azamara through May 2026. In November 2022, we extended our current agreement with Norwegian Cruise Line through December 2029 for all ships across their three brands.
Marketing and Promotion We promote our services and products to cruise passengers and destination resort guests through targeted marketing, including pre-and post-cruise emails, website advertising, on-site demonstrations and seminars, video presentations shown on in-cabin/in-room television, ship newsletters, tours of our centers, and dedicated signage around the ship.
Marketing and Promotion We market and promote our services and products to cruise passengers and destination resort guests through targeted marketing, including pre-and post-cruise emails, website advertising, on-site demonstrations and seminars, video presentations shown on in-cabin/in-room television, ship newsletters, tours of our centers, and dedicated signage around the ship.
To attract, retain, motivate and advance the best talent, we strive to embed a culture where employees can safely thrive in an environment supportive of their unique personalities, boundaries, talents, passions, strengths, challenges, responsibilities, and personal and career goals. • Our People.
To attract, retain, motivate and advance the best talent, we strive to embed a culture where employees can safely thrive in an environment supportive of their unique personalities, talents, passions, strengths, challenges, responsibilities, and personal and career goals. • Our People.
Our Board of Directors directly oversees procedures and corporate culture promoting and upholding the ethical conduct of the Company’s business, including adopting and monitoring compliance with the Company’s Code of Ethics, which sets forth the Company’s policies of promoting high standards of integrity by and toward our employees.
Our Board of Directors (the “Board”) directly oversees procedures and corporate culture promoting and upholding the ethical conduct of the Company’s business, including adopting and monitoring compliance with the Company’s Code of Ethics, which sets forth the Company’s policies of promoting high standards of integrity by and toward our employees.
Products and supplies can only be loaded at designated ports around the world during a limited window of time while the ship is in port, in many cases overnight, adding to the complexity of the process. • Yield and Revenue Management —We have developed proprietary technology, processes and staff training tools to consistently measure, analyze and maximize onboard and destination resort revenue and profitability. • Exclusive Relationships with Global Brands —Due to our scale, superior operations, industry longevity and attractive captive consumer audience, through the OneSpaWorld platform at sea, we offer for sale and utilize in our services more than 1,400 product SKUs sourced from over 75 vendors, including ELEMIS, Grown Alchemist, Kérastase, Thermage, GoodFeet® Arch Supports, Hyperice TM , and GO SMILE® Teeth Whitening, among others. • Facility Design and Branding Expertise —We design our state-of-the-art health and wellness centers specifically for each cruise line vessel and destination resort, creating bespoke branding, guest experience, guest services offerings, complementary retail products assortment, and competitive differentiation for each of our cruise line and destination resort partners to optimize guest experiences and maximize productivity and financial performance.
Products and supplies can only be loaded at designated ports around the world during a limited window of time while the ship is in port, in many cases overnight, adding to the complexity of the process. • Yield and Revenue Management —We have developed proprietary technology, processes and staff training tools to consistently measure, analyze and maximize onboard and destination resort revenue and profitability. • Exclusive Relationships at sea with Global Brands —Due to our scale, superior operations, industry longevity and attractive captive consumer audience, through the OneSpaWorld platform at sea, we offer for sale and utilize in our services more than 1,400 product SKUs sourced from over 75 vendors, including ELEMIS, Grown Alchemist, Kérastase, Thermage, GoodFeet Arch Supports, and Hyperice, among others. • Facility Design and Branding Expertise —We design our state-of-the-art health and wellness centers specifically for each cruise line vessel and destination resort, creating bespoke branding, guest experience, guest services offerings, complementary retail products assortment, and competitive differentiation for each of our cruise line and destination resort partners to optimize guest experiences and maximize productivity and financial performance.
Over more than 50 years, we have continuously defined and redefined the onboard health, fitness, beauty and wellness category by consistently expanding our onboard offerings with innovative and leading-edge service and product introductions, while developing the powerful back-end recruiting, training and logistics platforms to manage and optimize the complexity of our operations and maintain our industry-leading quality standards.
For more than 50 years, we have continuously defined and redefined the onboard health, fitness, beauty and wellness category by consistently expanding our onboard offerings with innovative and leading-edge service and product introductions, while developing the powerful back-end recruiting, training and logistics platforms to manage and optimize the complexity of our operations and maintain our industry-leading quality standards.
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. These competitive advantages have served our business well during these extremely challenging times for our industry.
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. These competitive advantages have served our business well during the recent challenging times for our industry.
We advertise U.S. corporate and destination resort health and wellness center positions on a human resources applicant tracking system, which provides visibility toward all applicants, including diverse candidates. Countries from which we recruited personnel during 2022 are highlighted in blue on the map below. 14 • Talent Retention: Compensation and Benefits.
We advertise U.S. corporate and destination resort health and wellness center positions on a human resources applicant tracking system, which provides visibility toward all applicants, including diverse candidates. Countries from which we recruited personnel during 2023 are highlighted in blue on the map below. 14 • Talent Retention: Compensation and Benefits.
This new ship growth is highly visible as demonstrated in a publicly available global order book outlining over five years of new ship orders. Across our contracts, OneSpaWorld typically operates on all ships in a fleet and on new ships added during the contract term, securing both existing and new ship revenue.
This new ship growth is highly visible as demonstrated in a publicly available global order book outlining over five years of new ship orders. Across our contracts, OneSpaWorld typically operates on all ships with spas in a fleet and all new ships with spas added during the contract term, securing both existing and new ship revenue.
Guests can begin a program on the cruise or at certain of our land-based health and wellness centers and remain engaged with our professional coaches through the successful completion of their programs, generating ongoing purchases of nutritional and detoxification products via our e-commerce platform timetospa.com . • Health.
Guests can begin a program on the cruise or at certain of our land-based health and wellness centers and remain engaged with our professional coaches through the successful completion of their programs, generating ongoing purchases of nutritional and detoxification products via our e-commerce platform timetospa.com . • Mind-Body and Wellness.
We maintain what we believe to be an exceptional contract renewal rate with our cruise line partners, having renewed approximately 94% 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 maintain what we believe to be an exceptional contract renewal rate with our cruise line partners, having renewed approximately 97% of our contracts based on ship count over the last 15 years, including 100% of our contracts with ships larger than 3,500 berths.
With seven global training facilities, we serve each cruise line’s needs for specific onboard staff with complex language, cultural and service modality requirements and are the only company with the infrastructure to commission highly trained staff at over 1,100 ports of call worldwide.
With seven global training facilities, we serve each cruise line’s needs for specific onboard staff with complex language, cultural and service modality requirements and are the only company with the infrastructure to commission highly trained staff at over 1,300 ports of call worldwide.
Prior to the cessation of our cruise line and land-based destination resort operations due to COVID-19, our comprehensive suite of premium health, fitness, beauty and wellness services and products reached more consumers than ever before, with 175 centers onboard cruise ships addressing a captive audience of over 20 million passengers annually, and 68 destination resort centers serving global travelers at premier destination resorts around the world.
Prior to the cessation of our cruise line and land-based destination resort operations due to COVID-19 in March 2020, our comprehensive suite of premium health, fitness, beauty and wellness services and products reached more consumers than ever before, with 175 centers onboard cruise ships addressing a captive audience of over 20 million passengers annually, and 68 destination resort centers serving global travelers at premier destination resorts around the world.
These services include: (i) traditional body, salon, and skin care services and products; (ii) self-service fitness facilities, 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, among others.
These services include: (i) traditional body, salon, and skin care services and products; (ii) self-service fitness facilities, specialized fitness classes and personal fitness training; (iii) innovative pain management, detoxifying programs and body composition analyses; (iv) nutrition and weight management programs and products; and (v) advanced medi-spa services, among others.
With our captive audience of, historically, over 20 million cruise guests annually, OneSpaWorld is a compelling distribution channel for leading health, fitness, beauty and wellness brands. Renowned brands, including ELEMIS and Kérastase, have partnered with us for exclusive distribution at sea.
With our captive audience of, historically, over 23 million cruise guests annually, OneSpaWorld is a compelling distribution channel for leading health, fitness, beauty and wellness brands. Renowned brands, including ELEMIS and Kérastase, have partnered with us for exclusive distribution at sea.
Culture of ethical behavior is at the forefront of our organization, binding our values and mission across every aspect of our business.
A culture of ethical behavior is at the forefront of our organization, binding our values and mission across every aspect of our business.
Our Operations and Performance We are a Bahamian international business company that earns a substantial portion of our revenue in low- or no-tax jurisdictions, benefiting from a comparatively low effective cash tax rate. Additionally, we have minimal capital expenditures, as our cruise line and destination resort partners typically fund the build-out, maintenance, and refurbishment of our health and wellness centers.
Our Operations and Performance We are a Bahamian international business company that earns a substantial portion of our revenue in low- or no-tax jurisdictions, resulting in a comparatively low effective cash tax rate. Additionally, we have minimal capital expenditures, as our cruise line and destination resort partners typically fund the build-out, maintenance, and refurbishment of our health and wellness centers.
Global Leader in the Hospitality-Based Health and Wellness Industry 4 As 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, we are at the center of the intersection between the health and wellness and travel leisure industries.
Global Leader in the Hospitality-Based Health and Wellness Industry As 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, we are at the center of the intersection between the health and wellness and hospitality and travel industries.
Through established cruise line partner relationships, current contracts, competitive positioning of our operating infrastructure, track record of delivering extraordinary guest experiences, and an approximately 94% contract renewal rate over the last 15 years, we are well-positioned to capture new ship growth over the long term.
Through established cruise line partner relationships, current contracts, competitive 7 positioning of our operating infrastructure, track record of delivering extraordinary guest experiences, and an approximately 97% contract renewal rate over the last 15 years, we are well-positioned to capture new ship growth over the long term.
Additionally, our solution sales approach drives substantial retail sales, with approximately 18% of our revenues derived from the sale of retail products during the year ended December 31, 2022.
Additionally, our solution sales approach drives substantial retail sales, with approximately 18% of our revenues derived from the sale of retail products during the year ended December 31, 2023.
Annually, from fiscal 2017 through 2019, and post-pandemic, in fiscal 2022, we converted approximately 90% of our Adjusted EBITDA to Unlevered After-Tax Free Cash Flow. Seasoned and Proven Leadership Team OneSpaWorld is led by a management team that has operated the Company for nearly 20 years.
Annually, from fiscal 2017 through 2019, and post-pandemic, in fiscal 2023, we converted approximately 89% of our Adjusted EBITDA to Unlevered After-Tax Free Cash Flow. Seasoned and Proven Leadership Team OneSpaWorld is led by a management team that has operated the Company for nearly 20 years.
OneSpaWorld is an equal opportunity employer, and we promote and celebrate diversity and inclusion in the workplace. Our employees are sourced globally and represent 88 nationalities, speaking 27 languages. In addition, at our corporate offices in the U.S. and U.K. and our North America health and 13 wellness centers, our employee base is comprised of eight distinct ethnicities.
OneSpaWorld is an equal opportunity employer, and we promote and celebrate diversity and inclusion in the workplace. Our employees are sourced globally and represent 88 nationalities, speaking 27 languages. In addition, at our corporate offices in the U.S. and our North America health and wellness centers, our employee base is comprised of seven distinct ethnicities.
The combination of our attractive tax rate and asset-light operating model leads to a financial profile that delivers comparatively high Unlevered After-Tax Free Cash Flow. Annually, from fiscal 2017 through 2019, and post-pandemic, in fiscal 2022, we converted approximately 90% of our Adjusted EBITDA to Unlevered After-Tax Free Cash Flow.
The combination of our attractive tax rate and asset-light operating model leads to a financial profile that delivers comparatively high Unlevered After-Tax Free Cash Flow. Annually, from fiscal 2017 through 2019, and post-pandemic, in fiscal 2023, we converted approximately 89% of our Adjusted EBITDA to Unlevered After-Tax Free Cash Flow.
Guests that received these customized promotions were responsible for approximately 11% of revenues generated during the year ended December 31, 2022. 7 • Utilize Technology to Increase Utilization and Enhance Service Mix —We have recently begun to successfully introduce and expand technology-enabled dynamic pricing initiatives with selected cruise line partners.
Guests that received these customized promotions were responsible for approximately 9% of revenues generated during the year ended December 31, 2023. • Utilize Technology to Increase Utilization and Enhance Service Mix —We have recently begun to successfully introduce and expand technology-enabled dynamic pricing initiatives with selected cruise line partners.
Sustainability and Social Responsibility We strive daily to effect a positive impact on the environment and the lives of our employees, our guests, and the people and cultures of the communities we visit, where we operate, and where we call home.
Sustainability and Social Responsibility We strive to impart a positive impact on the environment and the lives of our employees, our guests, and the people and cultures of the communities we visit, where we operate, and where we call home.
Guests purchasing medi-spa services spend on average up to 5x more than on traditional health, beauty and wellness services. We continue to roll out incremental revenue opportunities, including the Capillus® Laser Therapy Cap and Hyperice percussion and vibration therapy products and related services.
Guests purchasing medi-spa services spend on average up to 5x more than on traditional health, beauty and wellness services. We continue to roll out incremental revenue opportunities, including Hyperice percussion and vibration therapy products and related services.
In addition to conventional personal care services, we offer the latest in fitness, a full range of 5 massage treatments, nutrition/weight management consultations, teeth whitening, acupuncture, and innovative, higher-ticket medi-spa services at sea, including BOTOX® Cosmetic, Dysport, Restylane, CoolSculpting, Thermage and dermal fillers, among our broad and ever-expanding spectrum of choices.
In addition to conventional personal care services, we offer the latest in fitness, a full range of massage treatments, nutrition and weight management consultations, teeth whitening, acupuncture, and innovative, higher-ticket medi-spa services at sea, including Dysport, Restylane, CoolSculpting, Thermage, IV nutrient therapy, and dermal fillers, among our broad and ever-expanding spectrum of choices.
We believe that the use of our trademarks is important in establishing and maintaining our reputation for providing high quality health and wellness services, as well as cosmetic goods, and we are committed to protecting these trademarks by all appropriate legal means.
Our most recognized health and wellness products and services trademarks are for Mandara and Chavana. We believe that the use of our trademarks is important in establishing and maintaining our reputation for providing high quality health and wellness services, as well as cosmetic goods, and we are committed to protecting these trademarks by all appropriate legal means.
Most senior corporate positions are served by employees who began their careers as members of our shipboard health and wellness center teams. In our 15 offices, employees receive annual career development training through the Company’s state of the art learning management system featuring subject-specific learning modules relevant to our globally complex operations and diverse organization.
Most senior corporate positions are served by employees who began their careers as members of our shipboard health and wellness center teams. In our offices, employees receive annual career development training through the Company’s learning management system, which features subject-specific learning modules relevant to our globally complex operations and diverse organization. • Health and Safety.
Focus on Enhancing Health and Wellness Center Productivity Cruise lines have become increasingly focused on growing onboard revenue as a way to enhance revenue beyond traditional cabin ticket sales. Between 2013 and 2019, onboard spend on the three largest cruise operators we serve increased by $2.6 billion, from $6.5 billion to $9.1 billion.
Focus on Enhancing Health and Wellness Center Productivity Cruise lines have become increasingly focused on growing onboard revenue as a way to enhance revenue beyond traditional cabin ticket sales. Between 2013 and 2023, onboard spend on the three largest cruise operators we serve increased by $8.2 billion, from $6.5 billion to $14.7 billion.
Growth Strategies Our management plans to continue growing the business through the following strategies: Capture Highly Visible New Ship Growth with Current Cruise Line Partners We expect to continue to benefit long-term from a return to the cruise industry’s capacity for growth, with a consistent and visible pipeline of new ships commissioned annually by our cruise line partners.
Growth Strategies Capture Highly Visible New Ship Growth with Current Cruise Line Partners We expect to continue to benefit long-term from a return to the cruise industry’s capacity for growth, with a consistent and visible pipeline of new ships commissioned annually by our cruise line partners.
Most of our cruise line agreements cover all of the then-operating ships of a cruise line and typically new ships are added to ships in service through an amendment to the agreement. The agreements have specified terms ranging from three to 9.4 years, with an average remaining term per ship of approximately 3.7 years as of December 31, 2022.
Most of our cruise line agreements cover all of the then-operating ships of a cruise line and typically new ships are added to ships in service through an amendment to the agreement. The agreements have specified terms ranging from three to 8.6 years, with an average remaining term per ship of approximately three years as of December 31, 2023.
The numbers of ships served as of December 31, 2022 under cruise line agreements with the respective cruise lines are listed below: Cruise Line Ships Served Royal Caribbean (2) 26 Carnival (1) 24 Norwegian (3) 18 Princess (1) 15 Celebrity (2) 12 Costa (1) 10 Holland America (1) 11 Silversea (2) 10 Oceania (3) 6 P&O (1) 7 Windstar 6 Regent (3) 5 Seabourn (1) 6 Disney 5 Azamara 4 Cunard 3 Marella 4 Saga 2 Carnival Australia (1) 3 Virgin 2 Total 179 (1) Carnival Corporation, the parent company of Carnival Cruise Line, also owns Carnival Australia, Costa, Holland America, P&O, Princess, and Seabourn.
The numbers of ships served as of December 31, 2023 under agreements with the respective cruise lines are listed below: Cruise Line Ships Served Royal Caribbean (2) 27 Carnival (1) 26 Norwegian (3) 19 Princess (1) 15 Celebrity (2) 13 Holland America (1) 11 Costa (1) 10 Silversea (2) 10 Oceania (3) 7 P&O (1) 7 Seabourn (1) 7 Regent (3) 6 Windstar 6 Disney 5 Marella 5 Azamara 4 Cunard 3 Carnival Australia (1) 3 Virgin 3 Saga 2 Adora 2 Crystal 2 Total 193 (1) Carnival Corporation, the parent company of Carnival Cruise Line, also owns Carnival Australia, Costa, Holland America, P&O, Princess, and Seabourn.
We have developed a fully integrated pre-booking platform, which allows guests to book health and wellness treatments six to eight weeks prior to the voyage. Pre-booked and pre-paid guests on average spend approximately 30% more than guests who book services once already onboard.
We have developed a fully integrated pre-booking platform, which allows guests to book health and wellness treatments up to 12 months prior to the voyage. Pre-booked guests on average spend approximately 30% more than guests who book services once already onboard.
We have one general manager in each cruise ship and destination resort health and wellness center, typically an assistant manager training to become a general manager, and up to 79 total staff depending on the scale of the health and wellness center.
On each cruise ship and in every destination resort health and wellness center, we have a general manager and typically an assistant manager training to become a general manager, along with up to 83 total staff, depending on the scale of the health and wellness center.
We offer a specialized suite of massage and body care services and therapies, together with a broad range of beauty treatments, including facials, hair cutting and styling, manicures and pedicures, and teeth whitening services, among other services custom-designed for our cruise line and destination resort partners. • Thermal suites.
We offer a specialized suite of massage and body care services and therapies, together with a broad range of beauty treatments, including facials, hair cutting and styling, manicures and pedicures, and teeth whitening services, among other services custom-designed for our cruise line and destination resort partners. • Medi-spa. We offer medi-spa services on the majority of our ships.
(3) Oceania and Regent are owned by Norwegian Cruise Lines. 10 Destination Resort Locations and Partners As of December 31, 2022, we provided health and wellness services at destination resorts in the following locations: Country Number of Destination Resort Spas Maldives 13 United States (1) 12 Malaysia 9 Indonesia 2 Bahamas 3 Palau 2 Russia 2 United Arab Emirates 2 Japan 2 Oman 1 Aruba 1 Egypt 1 Total 50 (1) Includes Puerto Rico.
(3) Oceania and Regent are owned by Norwegian Cruise Line. 10 Destination Resort Locations and Partners As of December 31, 2023, we provided health and wellness services at destination resorts in the following locations: Country Number of Destination Resort Spas Maldives 16 United States (1) 12 Malaysia 8 Bahamas 3 Indonesia 2 Palau 2 Russia 2 Aruba 1 Japan 1 Egypt 1 Oman 1 Thailand 1 United Arab Emirates 1 Total 51 (1) Includes Puerto Rico.
Our commitment to our onboard and destination resort staff has proven to be an essential element of our successful return to service performance. • Supply Chain and Logistics —We managed the complex delivery of all products and supplies to our health and wellness centers onboard 177 vessels operating 3,407 itineraries around the world during 2022, leveraging proprietary data to accurately forecast and stock each health and wellness center.
Our commitment to our onboard and destination resort staff has proven to be an essential element of our successful return to service performance. • Supply Chain and Logistics —We managed the complex delivery of all products and supplies to our health and wellness centers onboard 193 vessels operating 8,500 voyages around the world during 2023, leveraging proprietary data to accurately forecast and stock each health and wellness center.
Being a Bahamian international business company and earning a significant portion of our revenue in low-tax or no-tax jurisdictions, including international waters, our effective cash tax rate had been approximately 2% over the three years preceding the near cessation of our operations due to COVID-19. This combination translates to exceptional after-tax free cash flow.
Being a Bahamian international business company and earning a significant portion of our revenue in low-tax or no-tax jurisdictions, including international waters, our effective cash tax rate had been approximately 2% over the three years preceding the onset of the recent pandemic. This combination translates to exceptional after-tax free cash flow.
We are focused on collaborating with cruise line partners to increase passenger penetration and maximize revenue yield through the following initiatives: • Increase Pre-Booking and Pre-Payment Capture Rate —We are working with our cruise line partners to expand our marketing efforts to engage guests upon booking their vacation experience, well before boarding a ship, through pre-booking.
We are focused on collaborating with cruise line partners to increase passenger penetration and maximize revenue yield through the following initiatives: • Increase Pre-Booking and Pre-Payment Capture Rate —We are collaborating proactively with our cruise line partners to employ increased and enhanced marketing and promotion campaigns to engage guests upon booking their vacation experience, well before boarding a ship, through pre-booking.
Historically, with the exception of the adverse impact of the recent pandemic discussed elsewhere herein, and since the resumption of our spa operations on cruise ships and in destination resorts, we have driven strong financial performance and believe our leading market position in a growing industry, differentiated business model, and entrenched cruise line and destination resort partner relationships position our business for continued growth.
Historically, with the exception of the adverse impact of the recent pandemic discussed elsewhere herein, and since the resumption of our health and wellness center operations on cruise ships and in destination resorts, we have driven strong financial performance and believe our leading market position in a growing industry, differentiated business model, and mutually accretive partnerships with our cruise line and destination resort partners position our business for continued growth.
As of December 31, 2022, our employees had the following attributes: Female Male Employees (non-management) 3,374 728 Manager Staff 256 66 Senior Management 11 14 Executive Officers 1 2 We educate employees, managers, and leadership on our essential objectives, strategies and initiatives to achieve broad diversity and inclusion across every element of our business.
As of December 31, 2023, our employees had the following attributes: Female Male Employees (non-management) 3,756 859 Manager Staff 303 78 Senior Management 11 14 Executive Officers 1 2 13 We educate employees, managers, and leadership on our essential objectives, strategies and initiatives to achieve broad diversity and inclusion across every element of our business.
Health and Wellness Centers As of December 31, 2022, we operated state-of-the-art health and wellness centers on 179 ships, including virtually all of the major cruise lines globally, and 50 land-based destination resorts, principally in the United States, the Caribbean and Asia.
Health and Wellness Centers As of December 31, 2023, we operated state-of-the-art health and wellness centers on 193 ships, including substantially all of the major cruise lines globally, and 51 land-based destination resorts, principally in the United States, the Caribbean and Asia.
As of December 31, 2022, we had 36 health and wellness centers under the Mandara brand, eight centers under the Chavana brand, and one center under our destination resort health and wellness brand, “Glow ®, a Mandara Spa.” Principal Cruise Line Customers A significant portion of our revenue is generated from the following cruise lines, each of which accounted for more than 10% of our total revenues in 2022, 2021 and 2020, respectively: Carnival (including Carnival, Carnival Australia, Costa, Cunard, Holland America, P&O, Princess, and Seabourn cruise lines): 41.0%, 43.4%, and 46.7%, Royal Caribbean (including Royal Caribbean, Celebrity Cruises, Pullmantur, Azamara and Silversea cruise lines): 28.0%, 20.9%, and 23.1%, and Norwegian Cruise Line (including Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises): 15.6%, 16.3%, and 14.7%.
As of December 31, 2023, we had 36 health and wellness centers under the Mandara brand, 11 centers under the Chavana brand, and one center under our destination resort health and wellness brand, “Glow ®, a Mandara Spa.” Principal Cruise Line Partners A significant portion of our revenue is generated from operating health and wellness centers under long-term contracts with the following cruise line partners, each of which accounted for more than 10% of our total revenues in 2023, 2022 and 2021, respectively: Carnival (including Carnival, Carnival Australia, Costa, Cunard, Holland America, P&O, Princess, and Seabourn cruise lines): 41.1%, 41.0%, and 36.7%, Royal Caribbean (including Royal Caribbean, Celebrity Cruises, Azamara and Silversea cruise lines): 27.9%, 28.0%, and 22.8%, and Norwegian Cruise Line (including Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises): 16.4%, 15.6%, and 11.4%.
By the end of 2025, our existing cruise line partners are expected to introduce 21 new ships.
By the end of 2026, our existing cruise line partners are expected to introduce 16 new ships.
We also offer our guests access to leading beauty and wellness brands including ELEMIS ®, Kérastase ®, BOTOX® Cosmetic, Dysport ®, Restylane®, Perlane®, Thermage®, CoolSculpting®, truSculpt® 3D, and truSculpt® iD, with many brands offered exclusively by us in the cruise market. On average, during the year ended December 31, 2022, guests spent approximately $270 per visit.
We also offer our guests access to leading beauty and wellness brands including ELEMIS ®, Grown Alchemist®, Kérastase ®, Dysport ®, Restylane®, Thermage®, CoolSculpting®, truSculpt® 3D, truSculpt® iD, Good Feet®, and Hyperice®, among others, with many brands offered exclusively by us in the cruise market. On average, during the year ended December 31, 2023, guests spent approximately $286 per visit.
To the extent necessary, we will continue to pursue other opportunities to improve our liquidity. Our Business 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.
Our Business 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.
Our Strengths Despite the recent impacts of COVID-19 on the travel leisure industry and our business, we believe that our competitive strengths historically have positioned us, and will continue to position us, as a leader in the hospitality-based health and wellness industry and the category dominant leader in the cruise industry.
Our Strengths We believe that our competitive strengths historically have positioned us, and will continue to position us, as a leader in the hospitality-based health and wellness industry and the category dominant leader in the cruise industry.
Our shipboard employees and their families and friends enjoy discounts on the services and products we offer for sale, as well as personalized fitness and wellness programs. We have continuously improved staff retention, resulting in a more experienced staff across our fleet.
Our shipboard employees and their families and friends enjoy discounts on the services and products we offer for sale, as well as personalized fitness and wellness programs. We continuously strive to improve staff retention, resulting in staff across our fleet being comprised of more than 63% experienced personnel.
We also operate in areas that are subject to regulation and licensing. To respond to these challenges, we have developed extensive training and licensing practices.
We operate in areas that are subject to specific regulation and licensing, and have developed extensive training and certification practices.
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.
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.
ITEM 1. B USINESS 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 20x the size of our closest maritime competitor.
ITEM 1. B USINESS General At our core, we are a global services company. We are the market leader in the highly attractive outsourced maritime health and wellness market, with a market share we estimate exceeds 90%.
We are also subject to anti-corruption and bribery laws and government economic sanctions, including applicable regulations under the U.S. Treasury’s Office of Foreign Asset Control and the U.S. Foreign Corrupt Practices Act (“FCPA”).
Such laws, regulations and policies impact areas of our business, including securities, anti-discrimination, anti-fraud, data protection and security. We are also subject to anti-corruption and bribery laws and government economic sanctions, including applicable regulations under the U.S. Treasury’s Office of Foreign Asset Control and the U.S. Foreign Corrupt Practices Act (“FCPA”).
The OneSpaWorld management team’s deep experience and proven track 6 record in managing the business in both public and private markets positions OneSpaWorld as an attractive vehicle for future long-term growth within the global hospitality-based health and wellness industry.
Bonner now lead an internally developed senior management team with over 150 years of combined industry experience. The OneSpaWorld management team’s deep experience and proven track record in managing the business in both public and private markets positions OneSpaWorld as an attractive vehicle for future long-term growth within the global hospitality-based health and wellness industry.
All our employees are required to complete sexual harassment training, and our shipboard employees also complete health and safety training upon boarding the vessels on which they serve. Certain shipboard employees also complete additional training on safe practices in providing our services, and training on cleaning and sanitization of our equipment and spa facilities.
The health and safety of our employees is one of our highest priorities. Our shipboard employees complete health and safety training upon boarding the vessels on which they serve. Certain shipboard employees also complete additional training on safe practices when providing our services, and training on cleaning and sanitization of our equipment and spa facilities.
On land, we have longstanding relationships with the world’s leading destination hotel and resort operators, including Marriott, Hilton, Wyndham, Atlantis, ClubMed, Caesars Entertainment, Lotte, Loews, Four Seasons, and Mohegan Sun, among others.
In June 2023, we entered into a new agreement with Crystal Cruises through May 2028. On land, we have longstanding relationships with the world’s leading destination hotel and resort operators, including Marriott, Hilton, Wyndham, Atlantis, ClubMed, Caesars Entertainment, Lotte, Loews, Four Seasons, and Mohegan Sun, among others.
As of December 31, 2022, we had a total of 4,452 full-time employees, of which 3,415 worked in health and wellness center operations on cruise ships and in destination resorts around the world, 976 represented corporate management and operational support staff, and 61 were involved in recruiting and training.
As of December 31, 2023, we had a total of 5,024 full-time employees, of which 4,762 worked primarily in health and wellness center operations, including management, sales, and support positions on cruise ships and in destination resorts around the world, 213 represented corporate management and operational support staff, and 49 were involved primarily in recruiting and training.
As a global operation, we have diverse teams of employees representative of the partners and markets we serve and in which we operate.
As a global operation, we have diverse teams of employees representative of the partners and markets we serve and in which we operate. We believe our employee relationships are strong across our business.
In 2022, we embarked on over 6,500 voyages that welcomed over 15 million passengers at more than 193 ports of embarkation, and placed over 4,800 individuals, more than 60% of whom were previously employed by OneSpaWorld, in various positions at our shipboard health and wellness centers.
In 2023, we embarked on over 8,500 voyages that welcomed over 23 million passengers at more than 245 ports of embarkation, and placed over 5,900 individuals, more than 63% of whom were previously employed by OneSpaWorld, in various positions at our shipboard health and wellness centers.
For the year ended December 31, 2022, we achieved revenues of $546.3 million, Adjusted EBITDA of $50.4 million, Net Income of $53.2 million and Unlevered After-Tax Free Cash Flow of $45.1 million. Attractive Market Opportunity We operate at the intersection of the historically attractive health and wellness and travel leisure industries.
For the year ended December 31, 2023, we achieved Revenues of $794.0 million, Adjusted EBITDA of $89.2 million, Net Loss of $(3.0) million and Unlevered After-Tax Free Cash Flow of $79.1 million. Attractive Market Opportunity We operate at the intersection of the historically attractive health and wellness and hospitality and travel industries.
We believe our employee relationships are strong across our business, as evidenced by the promotion of 100% of our health and wellness center general managers to their roles, an average tenure of nine years for employees at our Coral Gables office, and 20-30 year tenures of our senior leaders, many of whom started with the Company as shipboard health and wellness center team members and advanced to positions at our Coral Gables office and London Wellness Academy. • Culture and Ethics.
We have a 100% promotion rate for our health and wellness center general managers, an average tenure of ten years for employees at our Coral Gables office, and tenures of 20 to more than 30 years for our senior leaders, many of whom started with the Company as shipboard health and wellness center team members and advanced to positions at our Coral Gables office and London Wellness Academy. • Culture and Ethics.
Our health and pain management offerings present one of our largest and most profitable categories. Our offerings include acupuncture, electro acupuncture, cupping, posture and gait analysis, GoodFeet Arch Supports, physical therapy, and NormaTec® recovery. Our services are enhanced by our retail sale of our product offerings associated with the services. • Mind-Body and Wellness.
Our offerings include acupuncture, electro acupuncture, cupping, posture and gait analysis, GoodFeet Arch Supports, physical therapy, and NormaTec® recovery. Our services are enhanced by our retail sale of our product offerings associated with the services. • Fitness.
We offer guests the option to purchase passes for dedicated thermal suite areas on many of the ships where we operate health and wellness centers.
We offer our guests yoga, Tai Chi and sound therapy in addition to meditation and biofeedback. • Thermal suites. We offer guests the option to purchase passes for dedicated thermal suite areas on many of the ships where we operate health and wellness centers.
With respect to governance, we maintain policies intended to assure ethical trading, confidential and non-public personal information, anti-fraud, anti-corruption, third party risk management, trade control compliance, data transfers, internal auditing services, global privacy, and global regulatory compliance, among others.
See “Human Capital,” below, for further description of our social responsibility objectives and initiatives. With respect to governance, we maintain policies to address ethical trading, confidential and non-public personal information, anti-fraud, anti-corruption, third party risk management, trade control compliance, data transfers, internal auditing services, global privacy, and global regulatory compliance, among others.
Additionally, our Chief Commercial Officer, Susan Bonner, has over 20 years of experience in the cruise line sector and is a seasoned executive with a proven track record and significant background in strategy, revenue management, operations management, sales, and marketing. We benefit from Haymaker’s investing and operational experience at Fortune 500 companies, particularly in the consumer and hospitality sectors.
Additionally, our Chief Commercial Officer, Susan Bonner, has over 20 years of experience in the cruise line sector and is a seasoned executive with a proven track record and significant background in strategy, revenue management, operations management, sales, and marketing. Mr. Fluxman, Mr. Lazarus and Ms.
These companies, combined, accounted for 160 of the 179 ships served by OneSpaWorld as of December 31, 2022. Our contracts are signed at the cruise line-level, not with the parent operator, giving OneSpaWorld a diverse customer base despite parent-level consolidation. Our contracts average five years in duration.
These companies, combined, accounted for 168 of the 193 ships served by OneSpaWorld as of December 31, 2023. Our contracts are executed at the individual cruise line brand level, not with the parent company, giving OneSpaWorld a diverse customer base despite parent company aggregated revenue mix. Our contracts average six years in duration.
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 a broad range of offerings centered on providing specific health, fitness, beauty, and wellness solutions to meet our guests’ lifestyle routines or objectives.
We curate and deliver a broad range of offerings centered on providing specific health, fitness, beauty, and wellness solutions to meet our guests’ lifestyle routines or objectives.
Medi-spa services are administered by medically licensed professionals. By the end of 2023, we expect to offer medi-spa services on 134 ships. • Fitness. We offer guests use of premier fitness centers, featuring industry leading brands, programming and equipment, as well as personalized training services and expert consultation by our fitness professionals.
We offer guests use of premier fitness centers, featuring industry leading brands, programming and equipment, as well as personalized training services and expert consultation by our fitness professionals.
We have successfully evolved the onboard health, fitness, beauty and wellness category from what was once a consumer-centric amenity for passengers to a key onboard revenue driver for our cruise line partners. In 2015, a consortium led by L Catterton acquired Steiner Leisure, the holding company of OneSpaWorld at that time.
We have successfully evolved the onboard health, fitness, beauty and wellness category from what was once a consumer-centric amenity for passengers to a key onboard revenue driver for our cruise line partners.
During the 2 year ended December 31, 2022, centers employed up to 79 highly trained professionals and ranged in size up to over 30,000 square feet, depending on the cruise line or destination resort partner’s needs.
During the year ended December 31, 2023, centers employed up to 83 highly trained professionals and ranged in size up to over 30,000 square feet, depending on the cruise line or destination resort partner’s needs. We are recognized by our cruise line and destination resort partners and our guests for our comprehensive suite of services and products.
Differentiated Business Model That Would Be Difficult and Uneconomic to Replicate For more than 50 years, our business model has been built through investment in global infrastructure, supply chain logistics and training, decades-long relationships with our cruise line and destination resort partners and our reputation for offering our guests a best-in-class health, fitness, beauty and wellness experience.
As a result of our scale, our captive consumer audience, and consumers’ increasing desire for more health, fitness, beauty and wellness services and products, we are well-positioned in the global health and wellness industry and have a large and highly attractive addressable consumer market at sea and on land. 5 Differentiated Business Model That Would Be Difficult and Uneconomic to Replicate For more than 50 years, our business model has been built through investment in global infrastructure, supply chain logistics and training, decades-long relationships with our cruise line and destination resort partners and our reputation for offering our guests a best-in-class health, fitness, beauty and wellness experience.
Our state-of-the-art health, fitness, beauty and wellness centers are designed and branded for each cruise line and destination resort to optimize the guest experience, align with our partners’ overall hospitality atmosphere and maximize productivity.
Health 9 and wellness centers are designed and branded for each cruise and destination resort partner to optimize the guest experience, maximize revenues and align with our partners’ brands and hospitality environment.
Our Executive Chairman, President and Chief Executive Officer, Leonard Fluxman, and our Chief Financial Officer and Chief Operating Officer, Stephen Lazarus, together led OneSpaWorld's predecessor company, Steiner Leisure, as a public company for more than a decade. Mr. Fluxman and Mr. Lazarus now lead an internally developed senior management team with over 150 years of combined industry experience.
Our Executive Chairman, President and Chief Executive Officer, Leonard Fluxman, and our Chief Financial Officer and Chief Operating Officer, Stephen Lazarus, together led OneSpaWorld's predecessor company, Steiner Leisure, as a public company for more than a decade.
Accordingly, the third quarter and holiday periods generally result in the highest revenue yields for us. Further, cruises and destination resorts have been negatively affected by the frequency and intensity of hurricanes, which may be impacted by climate change. The negative impact of hurricanes in the Northern Hemisphere is highest during peak hurricane season from August to October.
Further, cruises and destination resorts have been negatively affected by the frequency and intensity of hurricanes, which may be impacted by climate change. The negative impact of hurricanes in the Northern Hemisphere is highest during peak hurricane season from August to October. Trademarks We hold or control numerous trademarks in the United States and a number of other countries.
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.
Most of our cruise line agreements encompass 100% of a partner cruise line’s existing fleet and all new ships with spas introduced by the cruise line during the term of the agreement.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our existing facilities are adequate for our current and planned levels of operations and that alternative sites are readily available on competitive terms in the event that any of our material leases are not renewed. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. PART II
Biggest changeWe believe that our existing facilities are adequate for our current and planned levels of operations and that alternative sites are readily available on competitive terms in the event that any of our material leases are not renewed. ITEM 3. LEG AL PROCEEDINGS None. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 32 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES 32 PART II 32 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 32 ITEM 6. SELECTED FINANCIAL DATA 34 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 37 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 47 ITEM 8.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 32 PART II 33 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 33 ITEM 6. SELECTED FINANCIAL DATA 35 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 37 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 48 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHowever, as a result of the impact of the COVID-19 pandemic on our business, our Board of Directors re-evaluated our current dividend program and has determined, in order to increase our financial flexibility and reallocate our capital resources, to defer the previously authorized and declared quarterly dividend to be paid on May 29, 2020 and to temporarily suspend the dividend program until further notice. 32 Repurchases and Sales of Unregistered Securities We have no recent repurchases of any securities or sales of any unregistered securities. 33 Stock Performance Graph The following graph compares the change in the cumulative total shareholder return on our common shares against the cumulative total return (assuming reinvestment of dividends) of the Nasdaq Composite® (United States and Foreign) Index, and the Dow Jones U.S.
Biggest changeHowever, as a result of the impact of the COVID-19 pandemic on our business, our Board re-evaluated our current dividend program and has determined, in order to increase our financial flexibility and reallocate our capital resources, to defer the previously authorized and declared quarterly dividend to be paid on May 29, 2020 and to temporarily suspend the dividend program until further notice.
Travel and Leisure Index for the period beginning March 19, 2019 and ending December 31, 2022. The graph assumes that $100.00 was invested on March 19, 2019 in our common shares and in each of the comparative indices. The share price performance on the following graph is not necessarily indicative of future share price performance.
Travel and Leisure Index for the period beginning March 19, 2019 and ending December 31, 2023. The graph assumes that $100.00 was invested on March 19, 2019 in our common shares and in each of the comparative indices. The share price performance on the following graph is not necessarily indicative of future share price performance.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHA REHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common shares are traded on The Nasdaq Capital Market under the symbol “OSW.” As of February 17, 2023, there were 19 registered holders of our common shares and one registered holder of non-voting common shares.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHA REHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common shares are traded on The Nasdaq Capital Market under the symbol “OSW.” As of February 27, 2024, there were 20 registered holders of our common shares.
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COMPARISON OF CUMULATIVE TOTAL RETURN Among OneSpaWorld Holdings Limited, the Nasdaq Composite Index, and the Dow Jones US Travel & Leisure Index OneSpaWorld Holdings Limited Nasdaq Composite Dow Jones U.S.
Added
Repurchases and Sales of Unregistered Securities On November 30, 2023, we entered into a Shares Repurchase Agreement with Steiner Leisure Limited (the “Seller”), pursuant to which we purchased 789,046 of our common shares from the Seller at a purchase price of $11.46 per common share (the “Repurchase”). The Repurchase closed on December 4, 2023.
Removed
Travel & Leisure March 19, 2019 $ 100.00 $ 100.00 $ 100.00 August 31, 2019 128.06 103.09 107.58 January 31, 2020 122.72 118.47 109.20 June 30, 2020 39.00 130.23 78.34 November 30, 2020 72.28 157.93 101.28 April 30, 2021 87.12 180.77 117.94 September 30, 2021 81.52 187.06 113.83 February 28, 2022 84.54 178.04 108.16 July 31, 2022 58.95 160.42 96.00 December 31, 2022 76.28 135.51 97.57
Added
In determining the sizing, timing and benefit of the Repurchase, we analyzed a number of different factors, including market signaling, dilution mitigation, the discounted price of the shares, potential improvement to the Company’s capital structure, and the reduction of the Seller’s ownership of the Company’s outstanding shares.
Added
We have no other recent repurchases of any securities or sales of any unregistered securities. 33 Stock Performance Graph The following graph compares the change in the cumulative total shareholder return on our common shares against the cumulative total return (assuming reinvestment of dividends) of the Nasdaq Composite® (United States and Foreign) Index, and the Dow Jones U.S.
Added
COMPARISON OF CUMULATIVE TOTAL RETURN Among OneSpaWorld Holdings Limited, the Nasdaq Composite Index, and the Dow Jones US Travel & Leisure Index Dates OneSpaWorld Holdings Limited Nasdaq Composite Dow Jones Mar-21-2019 $ 100.00 $ 100.00 $ 100.00 Aug-30-2019 $ 128.06 $ 101.58 $ 106.95 Jan-31-2020 $ 122.43 $ 116.74 $ 108.56 Jun-30-2020 $ 38.91 $ 128.32 $ 77.88 Nov-30-2020 $ 72.10 $ 155.62 $ 100.68 Apr-30-2021 $ 86.91 $ 178.12 $ 117.25 Sep-30-2021 $ 81.32 $ 184.32 $ 113.16 Feb-28-2022 $ 84.34 $ 175.42 $ 107.52 Jul-29-2022 $ 58.81 $ 158.07 $ 95.43 Dec-30-2022 $ 76.10 $ 133.52 $ 97.00 Mar-31-2023 $ 97.80 $ 155.91 $ 111.48 Oct-31-2023 $ 85.48 $ 163.94 $ 104.44 Dec-31-2023 $ 115.01 $ 191.50 $ 118.86 34

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeYear Ended December 31, 2022 2021 2020 (In thousands) REVENUES Service revenues $ 446,518 $ 115,945 $ 93,682 Product revenues 99,741 28,086 27,243 Total revenues 546,259 144,031 120,925 COST OF REVENUES AND OPERATING EXPENSES Cost of services 375,136 108,939 107,258 Cost of products 87,555 26,646 31,976 Administrative 15,777 15,526 18,957 Salary, benefits and payroll taxes 35,830 28,151 20,138 Amortization of intangible assets 16,823 16,829 16,823 Goodwill and tradename intangible assets impairment — — 190,777 Total cost of revenues and operating expenses 531,121 196,091 385,929 Income (loss) from operations 15,138 (52,060 ) (265,004 ) OTHER (EXPENSE) INCOME, NET Interest expense (15,755 ) (13,488 ) (16,089 ) Interest income — 55 30 Change in fair value of warrant liabilities 54,400 (2,600 ) (6,100 ) Total other income (expense), net 38,645 (16,033 ) (22,159 ) Income (loss) before income tax expense 53,783 (68,093 ) (287,163 ) INCOME TAX EXPENSE 624 429 814 NET INCOME (LOSS) $ 53,159 $ (68,522 ) $ (287,977 ) Adjusted EBITDA (1) $ 50,384 $ (18,946 ) $ (42,748 ) Unlevered After-Tax Free Cash Flow (1) $ 45,125 $ (21,974 ) $ (45,015 ) % Conversion 89.6 % 116.0 % 105.3 % December 31, 2022 2021 2020 Balance Sheet Data (In thousands): Working Capital (2) $ 15,068 $ 4,249 $ 1,659 Total Assets 717,435 688,868 702,279 Total Liabilities 351,626 394,964 381,451 Total Shareholders' Equity 365,809 293,904 320,828 (1) We define Adjusted EBITDA as Net Income plus Provision for Income Taxes, Other Income, Noncontrolling Interest, Interest Expense and Warrant Issuance Costs, Change in Fair Value of Warrant Liabilities and Depreciation & Amortization, with adjustments for non-recurring items, related party transactions, contribution from the historical timetospa.com channel, purchase price accounting adjustments, discrepancies between cash and booked Provision for Income Taxes and non-cash contract expenses.
Biggest changeYear Ended December 31, 2023 2022 2021 (In thousands) REVENUES Service revenues $ 648,091 $ 446,518 $ 115,945 Product revenues 145,954 99,741 28,086 Total revenues 794,045 546,259 144,031 COST OF REVENUES AND OPERATING EXPENSES Cost of services 541,356 375,136 108,939 Cost of products 125,649 87,555 26,646 Administrative 17,111 15,777 15,526 Salary, benefits and payroll taxes 36,805 35,830 28,151 Amortization of intangible assets 16,823 16,823 16,829 Long-lived assets impairment 2,129 — — Total cost of revenues and operating expenses 739,873 531,121 196,091 Income (loss) from operations 54,172 15,138 (52,060 ) OTHER (EXPENSE) INCOME, NET Interest expense (21,395 ) (15,755 ) (13,488 ) Interest income 280 — 55 Change in fair value of warrant liabilities (37,557 ) 54,400 (2,600 ) Total other (expense) income, net (58,672 ) 38,645 (16,033 ) (Loss) Income before income tax (benefit) expense (4,500 ) 53,783 (68,093 ) INCOME TAX (BENEFIT) EXPENSE (1,526 ) 624 429 NET (LOSS) INCOME $ (2,974 ) $ 53,159 $ (68,522 ) Adjusted EBITDA (1) $ 89,192 $ 50,384 $ (18,946 ) Unlevered After-Tax Free Cash Flow (1) $ 79,061 $ 45,125 $ (21,974 ) % Conversion 88.6 % 89.6 % 116.0 % December 31, 2023 2022 2021 Balance Sheet Data (In thousands): Working Capital (2) $ 16,961 $ 15,068 $ 4,249 Total Assets 706,140 717,435 688,868 Total Liabilities 272,071 351,626 394,964 Total Shareholders' Equity 434,069 365,809 293,904 (1) We define adjusted EBITDA as net (loss) Income plus income tax (benefit) expense, interest income, interest expense, depreciation and amortization, long-lived assets impairment, stock-based compensation, change in fair value of warrant liabilities and business combination costs.
ITEM 6. SELECTED FINANCIAL DATA 34 The following tables contain selected historical financial data for the Company. The information below should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements of the Company, and the notes related thereto, included elsewhere in this report.
ITEM 6. SELECTED FINANCIAL DATA The following tables contain selected historical financial data for the Company. The information below should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements of the Company, and the notes related thereto, included elsewhere in this report.
Adjusted EBITDA and Unlevered After-Tax Free Cash Flow have limitations as profitability measures in that they do not include total amounts for interest expense and warrant issuance costs on our debt, change in fair value of warrant liabilities and provision for income taxes, and the effect of our expenditures for capital assets and certain intangible assets.
Adjusted EBITDA and Unlevered After-Tax Free Cash Flow have limitations as profitability measures in that they do not include total amounts for interest expense on our debt, change in fair value of warrant liabilities and provision for income taxes, and the effect of our expenditures for capital assets and certain intangible assets.
(d) Unlevered After-Tax Free Cash Flow Conversion is calculated as Adjusted EBITDA less Capital Expenditures and Provision for Income Taxes, divided by Adjusted EBITDA Note Regarding Non-GAAP Financial Information We believe that these non-GAAP measures, when reviewed in conjunction with GAAP financial measures, and not in isolation or as substitutes for analysis of our results of operations under GAAP, are useful to investors as they are widely used measures of performance and the adjustments we make to these non-GAAP measures provide investors further insight into our profitability and additional perspectives in comparing our performance to other companies and in comparing our performance over time on a consistent basis.
(b) Unlevered After-Tax Free Cash Flow Conversion is calculated as Adjusted EBITDA less Capital Expenditures and Cash Taxes, divided by Adjusted EBITDA Note Regarding Non-GAAP Financial Information We believe that these non-GAAP measures, when reviewed in conjunction with GAAP financial measures, and not in isolation or as substitutes for analysis of our results of operations under GAAP, are useful to investors as they are widely used measures of performance and the adjustments we make to these non-GAAP measures provide investors further insight into our profitability and additional perspectives in comparing our performance to other companies and in comparing our performance over time on a consistent basis.
We define Unlevered After-Tax Free Cash Flow as Adjusted EBITDA minus capital expenditures and cash taxes paid.
We define Unlevered After-Tax Free Cash Flow as adjusted EBITDA minus capital expenditures and cash taxes.
(2) Working capital calculated as current assets less current liabilities, less cash and cash equivalents and restricted cash. 35 The following table reconciles Net Income (Loss) to Adjusted EBITDA and Unlevered After-Tax Free Cash Flow for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, (In thousands) 2022 2021 2020 Net Income (Loss) $ 53,159 $ (68,522 ) $ (287,977 ) Provision (Benefit) for Income Taxes 624 429 814 Interest Income — (55 ) (30 ) Interest expense and warrant issuance costs 15,755 13,488 16,089 Goodwill and trade name impairment charges — — 190,777 Depreciation & Amortization 22,353 22,468 24,453 Stock-based Compensation 12,893 10,646 4,950 Business Combination Costs (a) — — 1,619 Addback for Non-Cash Prepaid Expenses (b) — — 457 Change in fair value of warrant liabilities (54,400 ) 2,600 6,100 Adjusted EBITDA $ 50,384 $ (18,946 ) $ (42,748 ) Capital Expenditures (4,825 ) (2,868 ) (2,132 ) Cash Taxes (c) (434 ) (160 ) (135 ) Unlevered After-Tax Free Cash Flow $ 45,125 $ (21,974 ) $ (45,015 ) % Conversion (d) 89.6 % 116.0 % 105.3 % (a) Business Combination costs refers primarily to legal and advisory fees incurred by OneSpaWorld in connection with the Business Combination.
(2) Working capital calculated as current assets less current liabilities, less cash and cash equivalents and restricted cash. 35 The following table reconciles Net (Loss) Income to Adjusted EBITDA and Unlevered After-Tax Free Cash Flow for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, (In thousands) 2023 2022 2021 Net (loss) Income $ (2,974 ) $ 53,159 $ (68,522 ) Income tax (benefit) expense (1,526 ) 624 429 Interest Income (280 ) — (55 ) Interest expense 21,395 15,755 13,488 Depreciation and amortization 22,040 22,353 22,468 Long-lived assets impairment 2,129 — — Stock-based compensation 10,138 12,893 10,646 Change in fair value of warrant liabilities 37,557 (54,400 ) 2,600 Business combination costs (a) $ 713 $ — $ — Adjusted EBITDA $ 89,192 $ 50,384 $ (18,946 ) Capital expenditures (5,415 ) (4,825 ) (2,868 ) Cash paid during the year for income taxes (4,716 ) (434 ) (160 ) Unlevered After-Tax Free Cash Flow $ 79,061 $ 45,125 $ (21,974 ) % Conversion (b) 88.6 % 89.6 % 116.0 % (a) Business combination costs refers to legal and advisory fees incurred by OneSpaWorld in connection with the secondary offering and warrant conversion.
Removed
(b) Addback for Non-Cash Prepaid Expenses refers to non-cash expenses incurred in connection with certain contracts. (c) Cash Taxes refers to cash taxes paid or payable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, (in thousands) 2022 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 53,159 $ (68,522 ) (287,977 ) Depreciation and amortization 22,353 22,468 24,453 Goodwill and trade name impairment charges — — 190,777 Stock-based compensation 12,893 10,646 4,950 Amortization of deferred financing costs 1,103 1,026 1,026 Warrant issuance costs — — 1,386 Change in fair value of warrant liabilities (54,400 ) 2,600 6,100 Provision for doubtful accounts 18 453 172 Inventories impairment charges — 3,977 6,000 Loss from write-offs of property and equipment 10 177 90 Deferred income taxes (181 ) 89 1,575 Change in working capital (10,192 ) (8,018 ) 14,898 Net cash provided by (used in) operating activities 24,763 (35,104 ) (36,550 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,825 ) (2,868 ) (2,132 ) Net cash used in investing activities (4,825 ) (2,868 ) (2,132 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from 2020 private placement, net of issuance costs paid — — 68,602 Proceeds from At-the Market Equity Offering, net of issuance costs paid — 27,474 11,090 Proceeds from the term loan and revolver facilities — — 20,000 Proceeds from exercise of public warrants 59 — — Repayment on term loan and revolver facilities (18,776 ) — (13,000 ) Dividend paid on common stock — — (2,445 ) Purchase of public warrants — — (879 ) Distribution to noncontrolling interest — — (4,011 ) Cash paid to acquire noncontrolling interest — — (10,810 ) Net cash provided (used in) by financing activities (18,717 ) 27,474 68,547 Effect of exchange rate changes on cash (792 ) (117 ) (280 ) Net increase (decrease) in cash and cash equivalents and restricted cash 429 (10,615 ) 29,585 Cash and cash equivalents and restricted cash, Beginning of period 32,833 43,448 13,863 Cash and cash equivalents and restricted cash, End of period $ 33,262 $ 32,833 $ 43,448 Comparison of Results for the Years Ended December 31, 2022 and 2021 Operating activities .
Biggest changeYear Ended December 31, (in thousands) 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (2,974 ) $ 53,159 $ (68,522 ) Depreciation and amortization 22,040 22,353 22,468 Long-lived assets impairment 2,129 — — Stock-based compensation 10,138 12,893 10,646 Amortization of deferred financing costs 1,463 1,103 1,026 Income tax benefit from change in reserve of uncertain tax positions (3,440 ) — — Change in fair value of warrant liabilities 37,557 (54,400 ) 2,600 Provision for doubtful accounts 59 18 453 Inventories impairment charges — — 3,977 Loss from write-offs of property and equipment 14 10 177 Deferred income taxes (2,092 ) (181 ) 89 Change in working capital (1,518 ) (10,192 ) (8,018 ) Net cash provided by (used in) operating activities 63,376 24,763 (35,104 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,415 ) (4,825 ) (2,868 ) Net cash used in investing activities (5,415 ) (4,825 ) (2,868 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from At-the Market Equity Offering, net of issuance costs paid — — 27,474 Proceeds from exercise of warrants 2,426 59 — Repurchase of common shares (9,042 ) — — Repayment on term loan and revolver facilities (56,042 ) (18,776 ) — Net cash (used in) provided by financing activities (62,658 ) (18,717 ) 27,474 Effect of exchange rate changes on cash 337 (792 ) (117 ) Net (decrease) increase in cash and cash equivalents and restricted cash (4,360 ) 429 (10,615 ) Cash and cash equivalents and restricted cash, Beginning of period 33,262 32,833 43,448 Cash and cash equivalents and restricted cash, End of period $ 28,902 $ 33,262 $ 32,833 Comparison of Results for the Years Ended December 31, 2023 and 2022 Operating activities .
We make certain assumptions to allocate cost of revenues, which includes: • Cost of services.
Cost of Revenues. We make certain assumptions to allocate cost of revenues, which includes: • Cost of services.
However, public demand for activities, including cruises, is influenced by general economic conditions, including inflation, global health, including epidemics or pandemics, and customer preferences. Periods of economic softness could have a material adverse effect on the cruise industry and hospitality industry upon which we are dependent. Such a slowdown could adversely affect our results of operations and financial condition.
However, public demand for activities, including cruises, is influenced by general economic conditions, including inflation, global health epidemics/pandemics and customer preferences. Periods of economic softness could have a material adverse effect on the cruise industry and hospitality industry upon which we are dependent. Such a slowdown could adversely affect our results of operations and financial condition.
The establishment of inventory reserves involved estimating the amount of inventories that would be sold at or used in health and wellness services on cruises when they returned to sailing, which was uncertain and dependent on our cruise line partners and its customers that use our services and purchase our products. There was no incremental impairment during 2022.
The establishment of inventory reserves involved estimating the amount of inventories that would be sold at or used in health and wellness services on cruises when they returned to sailing, which was uncertain and dependent on our cruise line partners and its customers that use our services and purchase our products. There was no incremental impairment during 2023 or 2022.
In the year ended December 31, 2021, the Company incurred a deficit in net cash provided by (used in) operating activities, as the Company had substantially reduced revenues from operations onboard cruise ships and substantially reduced revenues from operations in destination resorts due to the COVID-19 pandemic, while still incurring operating expenses. Investing activities .
In the year ended December 31, 2021, the Company incurred a deficit in net cash provided by (used in) operating activities, as the Company had 45 substantially reduced revenues from operations onboard cruise ships and substantially reduced revenues from operations in destination resorts due to the COVID-19 pandemic, while still incurring operating expenses. Investing activities .
We may also elect to bypass the qualitative assessment and proceed directly to the quantitative test. The qualitative assessment evaluates factors including macro-economic conditions, industry and company-specific factors, and historical company performance in assessing fair value. Our trade name would be considered impaired if its carrying value exceeds their estimated fair value.
We may also elect to bypass the qualitative assessment and proceed directly to the quantitative test. The qualitative assessment evaluates factors including macro-economic conditions, industry and company-specific factors, and historical company performance in assessing fair value. Our trade name would be considered impaired if its carrying value exceeds its estimated fair value.
The increase was primarily attributable to costs associated with increased product revenues of $99.7 million in the year ended December 31, 2022, compared to product revenues of $28.1 million in the year ended December 31, 2021 from our operating health and wellness centers at sea and on land. Administrative.
The increase was primarily attributable to costs associated with increased product revenues of $99.7 million in the year ended December 31, 2022, compared to product revenues of $28.1 million in the year ended December 31, 2021 from our operating health and wellness centers at sea and on land. 43 Administrative.
OneSpaWorld Holdings Limited (“OneSpaWorld,” the “Company,” “we,” “our, “us” and other similar terms refer to OneSpaWorld Holdings Limited and its consolidated subsidiaries) 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.
Overview OneSpaWorld Holdings Limited (“OneSpaWorld,” the “Company,” “we,” “our, “us” and other similar terms refer to OneSpaWorld Holdings Limited and its consolidated subsidiaries) 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.
The change in fair value of the outstanding warrants during the year ended December 31, 2022 was a gain of $54.4 million compared to a loss of $2.6 41 million during the year ended December 31, 2022. The change in fair value of warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
The change in fair value of the outstanding warrants during the year ended December 31, 2022 was a gain of $54.4 million compared to a loss of $2.6 million during the year ended December 31, 2022. The change in fair value of warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (asset group) to future undiscounted cash flows expected to 46 be generated by the asset (asset group).
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (asset group) to future undiscounted cash flows expected to be generated by the asset (asset group).
The information for the years ended December 31, 2022, 2021 and 2020 is derived from OneSpaWorld’s audited consolidated financial statements and the notes thereto included elsewhere in this report. Any reference to “OneSpaWorld” refers to OneSpaWorld Holdings Limited and our consolidated subsidiaries on a forward-looking basis.
The information for the years ended December 31, 2023, 2022 and 2021 is derived from OneSpaWorld’s audited consolidated financial statements and the notes thereto included elsewhere in this report. Any reference to “OneSpaWorld” refers to OneSpaWorld Holdings Limited and our consolidated subsidiaries on a forward-looking basis.
Our highly trained and experienced staff offered guests a comprehensive suite of premium health, fitness, beauty and wellness services and products onboard cruise ships and at destination resorts globally. We are the market leader at more than 20x the size of our closest maritime competitor.
Our highly trained and experienced staff offer guests a comprehensive suite of premium health, fitness, beauty and wellness services and products onboard cruise ships and at destination resorts globally. We are the market leader at more than 20x the size of our closest maritime competitor.
As of December 31, 2022, our operations have resumed on 177 cruise ships and in 48 destination resorts, as compared to 118 cruise ships and 48 destination resorts as of December 31, 2021. Revenues. Total revenues for the year ended December 31, 2022 were $546.3 million compared to $144.0 million in the year ended December 31, 2021.
As of December 31, 2022, our operations had resumed on 177 cruise ships and in 48 destination resorts, as compared to 118 cruise ships and 48 destination resorts as of December 31, 2021. Revenues. Total revenues for the year ended December 31, 2022 were $546.3 million compared to $144.0 million in the year ended December 31, 2021.
Results of Operations Comparison of Results for the Years Ended December 31, 2022 and 2021 Year Ended December 31, ($ in thousands) 2022 % of Total Revenue 2021 % of Total Revenue REVENUES Service revenues $ 446,518 81.7 % $ 115,945 80.5 % Product revenues 99,741 18.3 % 28,086 19.5 % Total revenues 546,259 100.0 % 144,031 100.0 % COST OF REVENUES AND OPERATING EXPENSES Cost of services 375,136 68.7 % 108,939 75.6 % Cost of products 87,555 16.0 % 26,646 18.5 % Administrative 15,777 2.9 % 15,526 10.8 % Salary, benefits and payroll taxes 35,830 6.6 % 28,151 19.5 % Amortization of intangible assets 16,823 3.1 % 16,829 11.7 % Total cost of revenues and operating expenses 531,121 97.2 % 196,091 136.1 % Income (loss) from operations 15,138 2.8 % (52,060 ) -36.1 % OTHER (EXPENSE) INCOME, NET Interest expense (15,755 ) -2.9 % (13,488 ) -9.4 % Interest income — 0.0 % 55 0.0 % Change in fair value of warrant liabilities 54,400 10.0 % (2,600 ) -1.8 % Total other income (expense), net 38,645 7.1 % (16,033 ) -11.1 % Income (loss) before income tax expense 53,783 9.8 % (68,093 ) -47.3 % INCOME TAX EXPENSE 624 0.1 % 429 0.3 % NET INCOME (LOSS) $ 53,159 9.7 % $ (68,522 ) -47.6 % The results of operations for the year ended December 31, 2022 recovered from the material adverse impacts of COVID-19, which at its peak resulted in the cessation of operations of all of the Company’s health and wellness centers on board cruise ships and the closing of or substantial restrictions imposed on the operation of substantially all of the destination resort health and wellness 40 centers at the end of first quarter 2020.
The change in fair value of the outstanding warrants during the year ended December 31, 2023 was a loss of ($37.6) million compared to a gain of $54.4 million during the year ended December 31 2022. 42 Comparison of Results for the Years Ended December 31, 2022 and 2021 Year Ended December 31, ($ in thousands) 2022 % of Total Revenue 2021 % of Total Revenue REVENUES Service revenues $ 446,518 81.7 % $ 115,945 80.5 % Product revenues 99,741 18.3 % 28,086 19.5 % Total revenues 546,259 100.0 % 144,031 100.0 % COST OF REVENUES AND OPERATING EXPENSES Cost of services 375,136 68.7 % 108,939 75.6 % Cost of products 87,555 16.0 % 26,646 18.5 % Administrative 15,777 2.9 % 15,526 10.8 % Salary, benefits and payroll taxes 35,830 6.6 % 28,151 19.5 % Amortization of intangible assets 16,823 3.1 % 16,829 11.7 % Total cost of revenues and operating expenses 531,121 97.2 % 196,091 136.1 % Income (loss) from operations 15,138 2.8 % (52,060 ) -36.1 % OTHER (EXPENSE) INCOME, NET Interest expense (15,755 ) -2.9 % (13,488 ) -9.4 % Interest income — 0.0 % 55 0.0 % Change in fair value of warrant liabilities 54,400 10.0 % (2,600 ) -1.8 % Total other income (expense), net 38,645 7.1 % (16,033 ) -11.1 % Income (loss) before income tax expense 53,783 9.8 % (68,093 ) -47.3 % INCOME TAX EXPENSE 624 0.1 % 429 0.3 % NET INCOME (LOSS) $ 53,159 9.7 % $ (68,522 ) -47.6 % The results of operations for the year ended December 31, 2022 recovered from the material adverse impacts of COVID-19, which at its peak resulted in the cessation of operations of all of the Company’s health and wellness centers on board cruise ships and the closing of or substantial restrictions imposed on the operation of substantially all of the destination resort health and wellness centers at the end of first quarter 2020.
The combination of our renowned recruiting and training platform, deep proprietary labor pool, global logistics and supply chain infrastructure and proven health and wellness center and revenue management capabilities represents a significant competitive advantage that we believe is not economically feasible to replicate. A significant portion of our revenues are generated from our cruise ship operations.
The combination of our personnel recruiting and training platform, deep proprietary global labor pool, global logistics and supply chain infrastructure, and proven health and wellness center operating, revenue, and profitability management capabilities represents a significant competitive advantage that we believe is not economically feasible to replicate. A significant portion of our revenues are generated from our cruise ship operations.
As our cruise line partners continue to invest in new ships with enhanced health and wellness centers that allow for more advanced treatment rooms and larger staff sizes, we are able to increase the availability of these services, driving an overall shift towards a more attractive service mix. • Expansion of value-added services and products across modalities in existing health and wellness centers .
As our cruise line partners continue to invest in new ships with enhanced health and wellness centers that allow for more advanced treatment rooms and larger staff sizes, we are able to increase the availability of these services, driving an overall shift towards a more profitable service mix. 39 • Expansion of value-added services and products and increased pricing across modalities in existing health and wellness centers.
Trade name represents our identifiable intangible asset not subject to amortization and is assessed for impairment annually each October or, more frequently, when events or circumstances dictate an interim test is necessary.
Indefinite-Lived Intangible Assets. Trade name represents our identifiable intangible asset not subject to amortization and is assessed for impairment annually each October or, more frequently, when events or circumstances dictate an interim test is necessary.
Liquidity and Capital Resources Overview With the onset of COVID-19, we took prudently aggressive actions to increase our financial flexibility by securing and reallocating capital resources, including: (i) eliminating all non-essential operating and capital expenditures, (ii) withdrawing the Company dividend program until further notice, (iii) deferring payment of a dividend declared on February 26, 2020 until approved by the Board of Directors, (iv) the completion of the 2020 Private Placement on June 12, 2020; (v) borrowing $7 million, net, on our first lien revolving facility, leaving $13 million available and undrawn; and (vi) entering into an agreement to allow for the Company to operate its ATM Program, which permitted the Company to sell, from time to time, common shares up to an aggregate offering price of $50.0 million, pursuant to which, as of July 31, 2022, shares representing approximately $10 million remained available for sale under the Agreement, and which Agreement was terminated by the Company on August 1, 2022.
Upon the onset of the pandemic in March 2020, we took prudently aggressive actions to increase our financial flexibility by securing and reallocating capital resources, including: (i) eliminating all non-essential operating and capital expenditures, (ii) withdrawing the Company dividend program until further notice, (iii) deferring payment of a dividend declared on February 26, 2020 until approved by the Board, (iv) completing the 2020 Private Placement on June 12, 2020; (v) borrowing $7 million, net, on our First Lien Revolving Facility, leaving $13 million available and undrawn; and (vi) entering into an agreement to allow for the Company to operate its ATM Program, which permitted the Company to sell, from time to time, common shares up to an aggregate offering price of $50.0 million, pursuant to which, as of July 31, 2022, shares representing approximately $10 million remained available for sale under the Agreement, and which Agreement was terminated by the Company on August 1, 2022.
Cost of products consists primarily of the cost of products sold through our various methods of distribution, an allocable portion of wages paid to shipboard employees, an allocable portion of payments to cruise lines and destination resort partners (which are derived as a percentage of product revenues or a minimum annual rent or a combination of both).
Cost of products consists primarily of the cost of products sold through our various methods of distribution, with exception to timetospa.com , an allocable portion of wages paid to shipboard employees, an allocable portion of payments to cruise lines and destination resort partners (which are derived as a percentage of product revenues 46 or a minimum annual rent or a combination of both).
The COVID-19 pandemic negatively impacted our business, operations, results of operations and financial condition in 2021.
The COVID-19 pandemic substantially negatively impacted our business, operations, results of operations and financial condition in 2022 and 2021.
We have consistently expanded our onboard offerings with innovative and leading-edge service and product introductions, and developed the powerful back-end recruiting, training and logistics platforms to manage our operational complexity, maintain our industry-leading quality standards, and maximize revenue and profitability per center.
We have consistently expanded our onboard offerings with innovative and leading-edge service and product introductions, and developed powerful recruiting, training and logistics platforms to manage our operational complexity, maintain our industry-leading quality standards, and maximize revenue and profitability per health and wellness center.
During the years ended December 31, 2021 and 2020, we recorded inventory impairment charges of $4.0 million (of which approximately $2.0 million was recorded in the three months ended December 31, 2021) and $6.0 million, respectively, for the decline in the net realizable value of inventories, which is included in Cost of products in the accompanying consolidated statement of operations.
During the year ended December 31, 2021, we recorded inventory impairment charges of $4.0 million (of which approximately $2.0 million was recorded in the three months ended December 31, 2021) for the decline in the net realizable value of inventories, which is included in Cost of products in the accompanying consolidated statement of operations.
Revenue generated per shipboard health and wellness center is influenced by each cruise itinerary including the number of sea versus port days, which impacts center utilization, as well as the geographic sailing region which may impact offerings of services and products to best address guest preferences. • Collaboration with cruise line partners, including targeted marketing and promotion initiatives, as well as implementation of proprietary technologies to increase center utilization via pre-booking and pre-payment .
Revenue generated per shipboard health and wellness center is influenced by cruise itinerary, including length of cruise, number of sea days versus port days, which impacts center utilization, and the geographic sailing region, which may impact ship category and offerings of services and products to align with guest socioeconomic mix and preferences. • Collaboration with cruise line partners, including targeted marketing and promotion initiatives, as well as implementation of proprietary technologies to increase center utilization via pre-booking and pre-payment of health and wellness services.
The following table sets forth the above key performance indicators for the periods presented: Year Ended December 31, 2022 2021 Period End Ship Count 179 170 Average Ship Count 146 36 Average Weekly Revenue Per Ship $ 66,494 $ 59,933 Average Revenue Per Shipboard Staff Per Day $ 539 $ 492 Period End Resort Count 50 52 Average Resort Count 47 46 Average Weekly Revenue Per Destination Resort $ 14,946 $ 12,175 Key Financial Definitions Revenues.
The following table sets forth the above key performance indicators for the periods presented: Year Ended December 31, 2023 2022 2021 Period End Ship Count 193 179 170 Average Ship Count 180 146 36 Average Weekly Revenues Per Ship $ 80,013 $ 66,494 $ 59,933 Average Revenues Per Shipboard Staff Per Day $ 555 $ 539 $ 492 Period End Resort Count 51 50 52 Average Resort Count 50 47 46 Average Weekly Revenues Per Destination Resort $ 15,242 $ 14,946 $ 12,175 Key Financial Definitions Revenues.
Recurrence of the more severe aspects of the recent adverse economic conditions, as well as periods of inflation, interest rate increases, and fuel price increases, could have a material adverse effect on our results of operations and financial condition during the period of such recurrence. Weakness in the U.S. Dollar compared to the U.K.
Recurrence of the more severe aspects of the recent adverse economic conditions, increases in inflation rates and interest rates, as well as periods of fuel price increases, could have a material adverse effect on our business, results of operations and financial condition during the period of such recurrence. U.S.
Provision for income taxes includes current and deferred federal income tax expenses, as well as state and local income taxes. See “ —Critical Accounting Policies—Income Taxes ” included elsewhere in this Annual Report on Form 10-K. Net income (loss). Net income (loss) consists of income (loss) from operations less other income (expense) and provision for income taxes.
Other income (expense) consists of royalty income, interest income and interest expense. Income tax (benefit) expense. Income tax (benefit) expense includes current and deferred federal income tax expenses, as well as state and local income taxes. See “ —Critical Accounting Policies—Income Taxes ” included elsewhere in this Annual Report on Form 10-K. Net (loss) income.
We have focused our attention on the innovation and provision of higher value added and price point services such as medi-spa and advanced facial techniques, which require treatment rooms equipped with specific equipment and staff trained to perform these services.
We have focused on innovating and implementing higher value added and price point services such as medi-spa and advanced facial techniques, which require treatment rooms equipped with specific equipment and staff trained to perform these services.
Cost of products has historically been highly variable, increases and decreases in cost of products are primarily attributable to a corresponding increase or decrease in product revenues and includes impairment of inventories. Cost of products has tended to remain consistent as a percentage of product revenues. Administrative.
Cost of products has historically been highly variable, increases and decreases in cost of products are primarily attributable to a corresponding increase or decrease in product revenues and includes impairment of inventories. Cost of products has improved as a percentage of revenue due to higher revenues and cost efficiencies. Administrative.
Revenue generated per shipboard health and wellness center differs across contemporary, premium, luxury and budget ship categories due to the size of the health and wellness centers, services offered, guest demographics and guest spending patterns. • The mix of cruise geography and itinerary .
Revenue generated per shipboard health and wellness center differs across contemporary, premium, luxury and budget ship categories due to the size of the health and wellness centers, services offered and guest socioeconomic factors. • The mix of cruise itineraries.
Cost of services has historically been highly variable; increases and decreases in cost of services are primarily attributable to a corresponding increase or decrease in service revenues. Cost of services has tended to remain consistent as a percentage of service revenues. Cost of products.
Cost of services has historically been highly variable; increases and decreases in cost of services are primarily attributable to a corresponding increase or decrease in service revenues. Cost of services has improved as a percentage of revenue due to higher revenues and cost efficiencies. Cost of products.
Amounts recognized are gross of commissions to cruise line or destination resort partners, which typically withhold commissions from customer payments. We have elected to present sales taxes on a net basis and, as such, sales taxes are excluded from revenue.
Amounts recognized are gross of commissions to cruise line or destination resort partners, which typically withhold commissions from customer payments. We have elected to present sales taxes on a net basis and, as such, sales taxes are excluded from revenue. Revenue is reported net of discounts and net of any estimated refund liability, which is determined based on historical experience.
Seasonality A significant portion of our revenues are generated onboard cruise ships. Certain cruise lines, and, as a result, we have experienced varying degrees of seasonality as the demand for cruises is stronger in the Northern Hemisphere during the summer months and during holidays. Accordingly, the third quarter and holiday periods generally result in the highest revenue yields for us.
As a result, we experience varying degrees of seasonality as the demand for cruises is stronger in the Northern Hemisphere during the summer months and during holidays. Accordingly, the third quarter and holiday periods generally result in the highest revenue yields for us.
We recognized an impairment charge of $0.7 million during the year ended December 31, 2020. As of October 1, 2022 and 2021, we performed our annual trade name indefinite-lived intangible asset impairment quantitative test and determined there was no incremental impairment. The trade name was valued through application of the relief from royalty method.
As of October 1, 2023 and 2022, we performed our annual trade name indefinite-lived intangible asset impairment quantitative test and determined there was no incremental impairment. The trade name was valued through application of the relief from royalty method.
Additionally, the Consolidated Appropriations Act (“CAA”), enacted on December 27, 2020, which extended and modified certain provisions under the CARES Act, introduced new relief provisions, and extended or made permanent certain tax provisions set to expire after December 31, 2020 through 2021. The outcome was not material to the Company’s consolidated financial statements.
As of December 31, 2022, the Company did not have any material deferred employer retention credits available. Additionally, the Consolidated Appropriations Act (“CAA”), enacted on December 27, 2020, which extended and modified certain provisions under the CARES Act, introduced new relief provisions, and extended or made permanent certain tax provisions set to expire after December 31, 2020 through 2021.
This loss principally is the result of excess, slow-moving, expiration of products and damaged inventories held at our Maritime segment caused by the cessation of our cruise line partners’ operations and, consequently, our Maritime segment operations, due to the COVID-19 pandemic.
This loss principally was the result of excess, slow-moving, expiration of products and damaged inventories held in our cruise ship health and wellness centers caused by the cessation of our operations due to the COVID-19 pandemic.
Further, cruises and destination resorts have been negatively affected by the frequency and intensity of hurricanes. The negative impact of hurricanes in the Northern Hemisphere is highest during peak hurricane season from August to October. Critical Accounting Policies Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Further, cruises and destination resorts have been negatively affected by the frequency and intensity of hurricanes, particularly during the August through October period, which may be increasing in frequency and intensity due to climate change. Critical Accounting Policies Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Our net cash used in investing activities for the year ended December 31, 2022 and 2021 were $(4.8) million and $(2.9) million, respectively.
Our net cash used in investing activities for the year ended December 31, 2023 and 2022 were $(5.4) million and $(4.8) million, respectively. Financing activities . Our net cash provided by financing activities for the year ended December 31, 2023 and 2022 were $(62.7) million and $(18.7) million, respectively.
Our net cash provided by financing activities for the year ended December 31, 2022 and 2021 were $(18.7) million and $27.5 million, respectively. For the year ended December 31 2022, the Company repaid $11.8 million on the term loan facilities, $7.0 million on the revolving facility and received proceeds from the exercise of public warrants of $0.059 million.
For the year ended December 31 2022, the Company repaid $11.8 million on the First and Second Term Loan Facilities and $7.0 million on the First Lien Revolving Facility, and received proceeds from the exercise of public warrants of $0.059 million.
Investing activities . Our net cash used in investing activities for the year ended December 31, 2021 and 2020 were $(2.9) million and $(2.1) million, respectively. In the years ended December 31, 2021 and 2020, the Company incurred low capital expenditures due to the COVID-19 pandemic and eliminating all non-essential capital expenditures.
Our net cash used in investing activities for the year ended December 31, 2022 and 2021 were $(4.8) million and $(2.9) million, respectively. In the year ended December 31, 2022, the Company incurred more capital expenditures than in the year ended December 31, 2021, during which the Company incurred more limited capital expenditures due to the COVID-19 pandemic.
The negative impact of hurricanes is highest during peak hurricane season from August to October. • Other risks and uncertainties. Our revenues and financial performance may be impacted by other risks and uncertainties, including, without limitation, those set forth under the section entitled “ Risk Factors ”.
Our revenues and financial performance may be impacted by other risks and uncertainties, including, without limitation, those set forth under the section entitled “ Risk Factors ”.
We continue to expand our higher value added and price point offerings in existing health and wellness centers, including introducing premium medi-spa services, resulting in higher guest spending. 39 • The mix of ship count across contemporary, premium, luxury and budget categories .
We continue to introduce and expand our higher value added and price point offerings in existing health and wellness centers, including introducing premium medi-spa, acupuncture, and advanced facial services, resulting in higher guest demand and spending.
An asset group is the lowest level of assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
An asset group is the lowest level of assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. As part of the process, we exercise judgment to: • Determine if there are indicators of impairment present.
Amortization of intangible assets are comprised of the amortization of intangible assets with definite useful lives (e.g. retail concession agreements, destination resort agreements, licensing agreements) and amortization expenses associated with the 2015 and 2019 Transactions. Other income (expense), net. Other income (expense) consists of royalty income, interest income, interest expense and noncontrolling interest expense. Provision for income taxes.
Amortization of intangible assets are comprised of the amortization of intangible assets with definite useful lives (e.g., retail concession agreements, destination resort agreements, licensing agreements) and amortization expenses associated with the 2019 Transaction. Long-lived assets impairment . Long-lived assets impairment is comprised of destination resort agreements-intangible asset, property and equipment charges, and licensing agreement-intangible charges. Other income (expense), net.
We are now directly marketing and distributing promotions to onboard passengers as a result of enhanced collaboration with select cruise line partners. We have also begun to implement proprietary pre-booking and pre-payment technology platforms that interface with our cruise line partners’ pre-cruise planning systems.
We directly market and promote to onboard passengers as a result of enhanced collaboration with certain of our cruise line partners. We also utilize our proprietary health and wellness services pre-booking and pre-payment technology platforms integrated with certain of our cruise line partners’ pre-cruise planning systems.
Income tax expense (benefit). Income tax expenses for the year ended December 31, 2021 were $0.4 million, a decrease of $0.4 million, or 47%, compared to $0.8 million for the year ended December 31, 2020.
Income tax (benefit) expense. Income tax (benefit) expense for the year ended December 31, 2023 were a benefit of ($1.5) million, a decrease of $2.2 million, or 345%, compared to an expense of $0.6 million for the year ended December 31, 2022.
The establishment of inventory reserves involves the estimate of the amount of inventories that will be used in health and wellness services on cruises when they return to sailing, which is uncertain and dependent on our cruise line partners and their customers who use our services. No inventory reserve was recorded during the year ended December 31, 2022.
The establishment of inventory reserves principally involves the estimate of the amount of inventories that will be used in health and wellness services we provide in our health and wellness centers and that will be sold to our health and wellness center guests, which is uncertain and dependent on our cruise line and destination resort partners and their customers who use our services.
If an asset (asset group) is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset (asset group) exceeds our fair value. When determining the fair value of the asset (asset group), we consider the highest and best use of the assets from a market-participant perspective.
When determining the fair value of the asset 47 (asset group), we consider the highest and best use of the assets from a market-participant perspective.
These areas of increased collaboration with cruise line partners are resulting in higher revenue generation across our health and wellness centers. • The impact of weather . Our health and wellness centers onboard cruise ships and in select destination resorts may be negatively affected by hurricanes, which may be increasing in frequency and intensity due to climate change.
These areas of increased collaboration with cruise line partners are resulting in higher productivity, revenue generation, and profitability across our health and wellness centers. • The impact of weather.
During the year ended December 31, 2021 the change in fair value of the outstanding warrants was a loss of $2.6 million compared to a loss of $6.1 million during the year ended December 31, 2020. The change in fair value of warrants is the result of changes in market prices deriving the value of the financial instruments.
The change in fair value of the outstanding warrants during the year ended December 31, 2023 was a loss of ($37.6) million compared to a gain of $54.4 million during the year ended December 31, 2022.
Administrative. Administrative expenses for the year ended December 31, 2021 were $15.5 million, a decrease of $3.5 million, or 18%, compared to $19.0 million for the year ended December 31, 2020.
Administrative expenses for the year ended December 31, 2023 were $17.1 million, an increase of $1.3 million, or 8%, compared to $15.8 million for the year ended December 31, 2022.
Taking into account the actions described above and our current resources, 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. Our principal uses for liquidity have been debt service and working capital.
Taking into account the actions described above, the magnitude and positive trend of our results of operations, and our current financial condition and resources, we have concluded that we will have sufficient liquidity to satisfy our obligations over the next twelve months and comply with all debt covenants as required by our debt agreements. 44 Cash Flows The following table shows summary cash flow information for the years ended December 31, 2023, 2022 and 2021.
Pound Sterling and the Euro also could have a material adverse effect on our results of operations and financial condition. U.S. Tax Reform and Recent Tax Legislation The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 in response to the COVID-19 pandemic and includes certain business and economic provisions.
Tax Reform and Recent Tax Legislation The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 in response to the COVID-19 pandemic and includes certain business and economic provisions. As a result, during 2020, the Company deferred $421,356 in payroll taxes. During 2021, the Company took the benefit of the employer retention credits.
Revenue is impacted by net new ship growth, ships out of service, unanticipated dry-docks, ships prevented from sailing due to outbreaks of illnesses, such as the recent pandemic, and the number of destination resort health and wellness centers operating in each period. • The size and offerings of new health and wellness centers .
The number of destination resorts in which we operate during each period is primarily attributable to renewal of existing agreements with destination resort partners and destination resorts prevented from operating due to outbreaks of illnesses, such as the recent pandemic, among other factors. • The size and offerings of new health and wellness centers.
Additionally, average weekly revenue can also be negatively impacted by renovations of our destination resort health and wellness centers. Due to the impact of COVID-19 on our operations in 2020, the data for the year ended December 31, 2020 is not meaningful and not included.
Additionally, average weekly revenue can also be negatively impacted by renovations of our destination resort health and wellness centers.
Our net cash used in operating activities for the year ended December 31, 2021 and 2020, were $(35.1) million and $(36.6) million, respectively.
Financing activities . Our net cash provided by financing activities for the year ended December 31, 2022 and 2021 were $(18.7) million and $27.5 million, respectively.
Salary, benefits and payroll taxes for the year ended December 31, 2021 were $28.2 million, an increase of $8.1 million, or 40%, compared to $20.1 million for the year ended December 31, 2020. The increase was primarily attributable to non-cash stock-based compensation expense and by the measured increase in Corporate head count to account for the return to sailing.
Salary, benefits and payroll taxes for the year ended December 31, 2023 were $36.8 million, an increase of $1.0 million, or 3%, compared to $35.8 million for the year ended December 31, 2022. The increase was primarily attributable to measured increases in corporate headcount for the year ended December 31, 2023. Amortization of intangible assets.
For the year ended December 31, 2021, the Company sold 2.6 million common shares under the ATM Program, resulting in $27.5 million in net proceeds.
For the year ended December 31, 2021, the Company sold 2.6 million common shares under the ATM Program, resulting in $27.5 million in net proceeds. Seasonality A significant portion of our revenues are generated onboard cruise ships and are subject to specific individual cruise itineraries as to time of year and geographic location, among other factors.
Cost of services for the year ended December 31, 2021 were $108.9 million, an increase of $1.6 million, or 2%, compared to $107.3 million for the year ended December 31, 2020.
Product revenues for the year ended December 31, 2023 were $146.0 million, an increase of $46.2 million, or 46%, compared to $99.7 million for the year ended December 31, 2022. Cost of services. Cost of services were $541.4 million compared to $375.1 million in the year ended December 31, 2022.
Net loss for the years ended December 31, 2021 was $68.5 million, a decrease in net loss of $219.5 million, or 76%, compared to a net loss of $288.0 million for the year ended December 31, 2020.
Net (loss) income. Net loss for the year ended December 31, 2023 was a loss of ($3.0) million, a change in the income (loss) of $56.1 million, or 1887%, compared to a net income of $53.2 million for the year ended December 31, 2022.
Revenue Drivers and Business Trends Our revenues and financial performance are impacted by a multitude of factors, including, but not limited to: • The impact of COVID-19 .
Net (loss)income consists of income (loss) from operations less other income (expense) and income tax (benefit) expense. Revenue Drivers and Business Trends Our revenues and financial performance are impacted by a multitude of factors, including, but not limited to: • The number of health and wellness centers we operate on cruise ships and in destination resorts .
Cost of products for the year ended December 31, 2021 were $26.6 million, a decrease of $5.4 million, or 17%, compared to $32.0 million for the year ended December 31, 2020.
Cost of products were $125.6 million compared to $87.6 million in the year ended December 31, 2022.
Consequently, our combined historical cash flows may not be indicative of cash flows had we been a separate stand-alone entity, or of our future cash flows. 43 Our results continued to experience significant recovery during the year ended December 31, 2022 when compared to the prior year period, building upon the positive net operating cash flows we began to generate for the first time since the onset of COVID-19 in the second quarter of 2022.
Our results continued to experience significant recovery during the year ended December 31, 2023 when compared to the prior year period, building upon the increasing magnitude of our positive net operating cash flows.
Amortization of intangible assets. Amortization of intangible assets for the year ended December 31, 2021 and 2020 were both $16.8 million, respectively. Goodwill and trade name impairment charges. Goodwill and trade name impairment charges for the year ended December 31, 2020 were $190.8 million.
Amortization of intangible assets for the year ended December 31, 2023 and 2022 were both $16.8 million, respectively. Long-lived assets impairment. Long-lived assets impairment for the year ended December 31, 2023 were $2.1 million. This was comprised of destination resort agreements-intangible asset, property and equipment charges, and licensing agreement-intangible charges of $1.3 million, $0.5 million and $0.4 million, respectively.
Interest expense and warrants issuance cost for the year ended December 31, 2021 were $13.5 million, a increase of $2.6 million, or 16%, compared to $16.1 million for the year ended December 31, 2020. The increase was primarily attributable to the $1.4 million warrant issuance costs during the year ended December 31, 2020.
Other (expense) income , net includes interest expense and changes in the fair value of the warrant liabilities. Interest expense, net for the year ended December 31, 2023 was $21.1 million, an increase of $5.4 million, or 34%, compared to $15.8 million for the year ended December 31, 2022.
Overview During 2022, we continued to execute our resumption of our health and wellness centers operations on cruise ships and in destination resorts. As of December 31, 2022, 179 ships of our cruise line partners and 50 destination resort spas were operating.
During 2021, we initiated our resumption of spa operations on cruise ships and in destination resorts in a phased manner, in concert with our cruise line and resort partners, and have completed such resumption of operations.
Removed
Despite the impacts of the recent pandemic on the travel leisure industry and our business, we believe we have certain strengths that have positioned us as a leader in the hospitality-based health and wellness industry and as a participant in the continued recovery of the cruise and hospitality industries.
Added
In the face of the global impact of the coronavirus (“COVID-19”) pandemic, our cruise line partners paused their guest cruise operations and the majority of our U.S. and Caribbean-based destination resort spas temporarily closed in mid-March 2020.
Removed
Historically, we have been able to renew almost all of our cruise line agreements that expired or were scheduled to expire. In August 2021, we extended our current agreement with Azamara through May 2026. In November 2022, we extended our current agreement with Norwegian Cruise Lines through December 2029 for all ships across their three brands.
Added
As of December 31, 2023, our health and wellness center operations are no longer impacted by closures resulting from COVID-19, and we are positioned as a leader in the hospitality-based health and wellness industry.
Removed
On land, we have longstanding relationships with the world’s leading destination hotel and resort operators, including Marriott, Hilton, Wyndham, Atlantis, ClubMed, Caesars Entertainment, Lotte, Loews, Four Seasons, and Mohegan Sun, among others. 37 Key Performance Indicators In assessing the performance of our business, we consider several key performance indicators used by management.
Added
Historically, we have been able to renew substantially all of our existing cruise line partner agreements and gain new agreements to operate health and wellness centers for new cruise line partners. 37 Key Performance Indicators In assessing the performance of our business, we consider several key performance indicators used by management.
Removed
Our health and wellness centers onboard cruise ships and in select destination resorts were negatively impacted by, and are continuing to recover from, the COVID-19 pandemic. • The number of ships and destination resorts in which we operate health and wellness centers.
Added
The number of cruise ships on which we operate during each period is primarily impacted by our renewal of existing cruise ship partner agreements, introductions of new ships to service under our existing agreements, agreements with new cruise line partners, ships temporarily out of service for maintenance and repair, and ships prevented from sailing due to outbreaks of illnesses, such as the recent pandemic, among other factors.
Removed
The effect of each of these factors on our revenues and financial performance varies from period to period.
Added
In addition, we have increased pricing across our brands for our core services. • The mix of ship count across contemporary, premium, luxury and budget categories.
Removed
Comparison of Results for the Years Ended December 31, 2021 and 2020 Year Ended December 31, ($ in thousands) 2021 % of Total Revenue 2020 % of Total Revenue REVENUES Service revenues $ 115,945 80.5 % $ 93,682 77.5 % Product revenues 28,086 19.5 % 27,243 22.5 % Total revenues 144,031 100.0 % 120,925 100.0 % COST OF REVENUES AND OPERATING EXPENSES Cost of services 108,939 75.6 % 107,258 88.7 % Cost of products 26,646 18.5 % 31,976 26.4 % Administrative 15,526 10.8 % 18,957 15.7 % Salary, benefits and payroll taxes 28,151 19.5 % 20,138 16.7 % Amortization of intangible assets 16,829 11.7 % 16,823 13.9 % Goodwill and tradename intangible assets impairment — 0.0 % 190,777 157.8 % Total cost of revenues and operating expenses 196,091 136.1 % 385,929 319.1 % Loss from operations (52,060 ) -36.1 % (265,004 ) -219.1 % OTHER EXPENSE, NET Interest expense (13,488 ) -9.4 % (16,089 ) -13.3 % Interest income 55 0.2 % 30 0.1 % Change in fair value of warrant liabilities (2,600 ) -1.8 % (6,100 ) -5.0 % Total other expense, net (16,033 ) -11.1 % (22,159 ) -18.3 % Loss before income tax expense (68,093 ) -47.3 % (287,163 ) -237.5 % INCOME TAX EXPENSE 429 0.3 % 814 0.7 % NET LOSS $ (68,522 ) -47.6 % $ (287,977 ) -238.1 % Revenues.
Added
Our health and wellness centers onboard cruise ships and in select destination resorts may be negatively affected by hurricanes, particularly during the August through October period, which may be increasing in frequency and intensity due to climate change. • Other risks and uncertainties.
Removed
Revenues for the years ended December 31, 2021 and 2020 were $144.0 million and $120.9 million, respectively. Results in both 2021 and 2020 were substantially impacted by the COVID-19 pandemic, which resulted in the cancellation of all cruise ship voyages and closure of all destination resort health and wellness centers during mid-March 2020 through December 31, 2020.
Added
The effect of each of these factors on our revenues and financial performance varies from period to period. 40 Results of Operations Comparison of Results for the Years Ended December 31, 2023 and 2022 Year Ended December 31, ($ in thousands) 2023 % of Total Revenue 2022 % of Total Revenue REVENUES Service revenues $ 648,091 81.6 % $ 446,518 81.7 % Product revenues 145,954 18.4 % 99,741 18.3 % Total revenues 794,045 100.0 % 546,259 100.0 % COST OF REVENUES AND OPERATING EXPENSES Cost of services 541,356 68.2 % 375,136 68.7 % Cost of products 125,649 15.8 % 87,555 16.0 % Administrative 17,111 2.2 % 15,777 2.9 % Salary, benefits and payroll taxes 36,805 4.6 % 35,830 6.6 % Amortization of intangible assets 16,823 2.1 % 16,823 3.1 % Long-lived assets impairment 2,129 0.3 % — 0.0 % Total cost of revenues and operating expenses 739,873 93.2 % 531,121 97.2 % Income from operations 54,172 6.8 % 15,138 2.8 % OTHER (EXPENSE) INCOME, NET Interest expense (21,395 ) -2.7 % (15,755 ) -2.9 % Interest income 280 0.0 % — 0.0 % Change in fair value of warrant liabilities (37,557 ) -4.7 % 54,400 10.0 % Total other (expense) income, net (58,672 ) -7.4 % 38,645 7.1 % (Loss) Income before income tax (benefit) expense (4,500 ) -0.6 % 53,783 9.8 % INCOME TAX (BENEFIT) EXPENSE (1,526 ) -0.2 % 624 0.1 % NET (LOSS) INCOME $ (2,974 ) -0.4 % $ 53,159 9.7 % Results of operations for the year ended December 31, 2023 continued to accelerate from 2022 as the Company has returned to normalized operations since the conclusion of the COVID-19 pandemic.
Removed
The twelve months ended December 31, 2021 revenues were derived primarily from the operations of health and wellness centers onboard ships having resumed voyages and our destination resort health and wellness centers having resumed operations primarily during the last two quarters of the year. The break-down of revenue between service and product revenues was as follows: • Service revenues.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+1 added−1 removed2 unchanged
Biggest changeOur policy is to manage interest rate risk through the use of a combination of fixed and floating rate debt and interest rate derivatives based upon market conditions. Our objective in managing the exposure to interest rate changes is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.
Biggest changeOur objective in managing the exposure to interest rate changes is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we have used interest rate swaps to manage net exposure to interest rate changes to our borrowings.
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. We maintain cash and cash equivalents with high quality financial institutions. As of December 31, 2022 and 2021, none of the destination resort spas we served represented greater than 10% of our accounts receivable.
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. We maintain cash and cash equivalents with high quality financial institutions. As of December 31, 2023 and 2022, respectively, none of the destination resort spas we served represented greater than 10% of our accounts receivable.
As of December 31, 2022 and 2021, respectively, three of the cruise lines we served represented greater than 10% of our accounts receivable. We do not normally require collateral or other security to support normal credit sales. We control credit risk through credit approvals, credit limits, and monitoring procedures.
As of December 31, 2023 and 2022, respectively, two of the cruise lines we served represented greater than 10% of our accounts receivable. We do not normally require collateral or other security to support normal credit sales. We control credit risk through credit approvals, credit limits, and monitoring procedures.
We have mitigated the risk relating to fluctuations in the U.K. Pound Sterling and the Euro through the structuring of intercompany debt. If such mitigation proves ineffective, a hypothetical 10% change in the aggregate exchange rate exposure of the U.K. Pound Sterling and the Euro to the U.S. Dollar would change our results of operations by approximately $0.2 million. 48
If such mitigation proves ineffective, a hypothetical 10% change in the aggregate exchange rate exposure of the U.K. Pound Sterling and the Euro to the U.S. Dollar would change our results of operations by approximately $0.2 million. 49
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. We record an allowance for doubtful accounts with respect to accounts receivable using historical collection experience, and generally an account receivable balance is written off once it is determined to be uncollectible.
Accounts receivable are stated at amounts due from customers, net of an allowance for credit losses. The Company records an allowance for credit losses with respect to accounts receivable using historical collection experience, current and forecasted business conditions and generally, an account receivable balance is written off once it is determined to be uncollectible.
Dollars, they also are represented by various other currencies, primarily the U.K. Pound Sterling and the Euro. Accordingly, we face the risk of fluctuations in non-U.S. currencies compared to U.S. Dollars. We manage this currency risk by monitoring fluctuations in foreign currencies and, when exchange rates are appropriate, purchasing amounts of those foreign currencies.
Accordingly, we face the risk of fluctuations in non-U.S. currencies compared to U.S. Dollars. We manage this currency risk by monitoring fluctuations in foreign currencies and, when exchange rates are appropriate, purchasing amounts of those foreign currencies. We have mitigated the risk relating to fluctuations in the U.K. Pound Sterling and the Euro through the structuring of intercompany debt.
Interest rate changes do not affect the market value of such debt, but could impact the amount of our interest payments, and accordingly, our future earnings and cash flows, assuming other factors are held constant.
Interest rate changes do not affect the market value of such debt, but could impact the amount of our interest payments, and accordingly, our future earnings and cash flows, assuming other factors are held constant. 48 Our policy is to manage interest rate risk through the use of a combination of fixed and floating rate debt and interest rate derivatives based upon market conditions.
The allowance for doubtful accounts was $0.1 million and $0.5 million as of December 31, 2022 and 2021, respectively. Bad debt expense is included within administrative operating expenses in the consolidated statements of operations and was zero million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. Interest rate risk.
For the years ended December 31, 2023 and 2022 and 2021, allowance for credit losses expense amounted to $0.06, $0.02 million and $0.5 million, respectively. Allowance for credit losses expense is included within administrative operating expenses in the accompanying consolidated statements of operations. Interest rate risk.
A hypothetical 10% change in our interest rate would change our results of operations by approximately $1.0 million. Foreign currency risk . The fluctuation in currency exchange rates is not a significant risk for us, as most of our revenues are earned and expenses are incurred in U.S. Dollars. While our revenues and expenses are primarily represented by U.S.
The fluctuation in currency exchange rates is not a significant risk for us, as most of our revenues are earned and expenses are incurred in U.S. Dollars. While our revenues and expenses are primarily represented by U.S. Dollars, they also are represented by various other currencies, primarily the U.K. Pound Sterling and the Euro.
To achieve these objectives, we have used interest rate swaps to manage net exposure to interest rate changes to our borrowings. These swaps are typically entered into with a group of financial institutions with investment grade credit ratings, thereby reducing the risk of credit loss.
These swaps are typically entered into with a group of financial institutions with investment grade credit ratings, thereby reducing the risk of credit loss. A hypothetical 10% change in our interest rate would change our results of operations by approximately $0.8 million. Foreign currency risk .
Removed
We review the historical collection experience and consider 47 other facts and circumstances and adjust the calculation to record an allowance for doubtful accounts as appropriate. If our current collection trends were to differ significantly from historic collection experience, we would make a corresponding adjustment to the allowance.
Added
Our expected credit losses are based on historical collection experience, current and forecasted business conditions and other facts and circumstances. The allowance for credit losses was $0.2 million and $0.1 million as of December 31, 2023 and 2022, respectively.

Other OSW 10-K year-over-year comparisons