ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis of our audited financial condition and results of operations should be read in conjunction with the information presented in “Selected Historical Financial Information” and our Consolidated Financial Statements and the notes thereto included elsewhere in this report. In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity, and capital resources, that involve risks, uncertainties and assumptions that could cause actual results to differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.” We assume no obligation to update any of these forward-looking statements.
The information for the years ended December 31, 2025, 2024 and 2023 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.
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. W e are positioned as a leader in the hospitality-based health and wellness industry. Our highly trained and experienced staff offer guests a comprehensive suite of premium health, wellness, aesthetics and fitness services and products onboard cruise ships and at destination resorts globally. We are the market leader at more than 17x the size of our closest maritime competitor. Over the last 50 years, we have built our leading market position on our depth of staff expertise, broad and innovative service and product offerings, expansive global recruitment, training and logistics platform, as well as decades-long relationships with cruise line and destination resort partners. Throughout our history, our mission has been simple: helping guests look and feel their best during and after their stay.
At our core, we are a global services company. We serve a critical role for our cruise line and destination resort partners, operating a complex and increasingly important aspect of their overall guest experience. Decades of investment and know-how have allowed us to construct an unmatched global infrastructure to manage the complexity of our operations. We have consistently expanded our onboard offerings with innovative and leading-edge service and product introductions, and developed powerful recruiting, training and logistics platforms, increasingly powered by emerging technologies, including generative and agentic artificial intelligence applications, to manage our operational complexity, maintain our industry-leading quality standards, and maximize revenue and profitability per health and wellness center. 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. 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.
Key Performance Indicators
In assessing the performance of our business, we consider several key performance indicators used by management. These key indicators include:
Average Ship Count . The number of ships, on average during the period, on which we operate health and wellness centers. This is a key metric that impacts revenue and profitability and reflects the fact that during the period ships were in and out of service, and is calculated by adding the total number of days that each of the ships generated revenue during the period, divided by the number of calendar days during the period.
Period End Ship Count . The number of ships at period end on which we operate health and wellness centers. This is a key metric that impacts revenue and profitability.
Average Ship Count . A key indicator of productivity per ship. Revenue per ship can be affected by the various sizes of health and wellness centers and categories of ships on which we serve.
Average Weekly Revenue Per Ship . A key indicator of productivity per ship. Revenue per ship can be affected by the various sizes of health and wellness centers and categories of ships on which we serve.
Average Revenue Per Shipboard Staff Per Day . We utilize this performance metric to assist in determining the productivity of our onboard staff, which we believe is a critical element of our operations.
Revenue Days. R evenue days are the days on which the health and wellness centers are open onboard a revenue generating cruise with passengers.
Period End Resort Count . The number of destination resorts at period end on which we operate the health and wellness centers. This is a key metric that impacts revenue and profitability.
Average Resort Count. The number of destination resorts on average during the period in which we operate the health and wellness centers. This is a key metric that impacts revenue and profitability and reflects the fact that during the period destination resort health and wellness centers were in and out of service, and is calculated by adding the total number of days that each destination resort health and wellness center generated revenue during the period, divided by the number of calendar days during the period.
Average Weekly Revenue Per Destination . A key indicator of productivity per destination resort health and wellness center. Revenue per destination resort health and wellness center in a period can be affected by the mix of U.S. and Caribbean and Asian centers for such period because U.S. and Caribbean centers are typically larger and produce substantially more revenues per center than Asian centers. Additionally, average weekly revenue can also be negatively impacted by renovations of our destination resort health and wellness centers.
The following table sets forth the above key performance indicators for the periods presented:
Year Ended December 31,
Period End Ship Count
Average Ship Count
Average Weekly Revenues Per Ship
Average Revenues Per Shipboard Staff Per Day
Revenue Days
Period End Resort Count
Average Resort Count
Average Weekly Revenues Per Destination Resort
Key Financial Definitions
Revenues. Revenues consist primarily of sales of services and sales of products to cruise ship passengers and destination resort guests. The following is a brief description of the components of our revenues:
Service revenues. Service revenues consist primarily of sales of health and wellness, aesthetics and fitness services, including a full range of body care, skin care, hair care, cosmetics, medi-spa, acupuncture, nutrition/weight management and mindfulness services, among others, to cruise ship passengers and destination resort guests. We bill our services at rates which inherently include an immaterial charge for products used in the rendering of such services, if applicable .
Product revenues. Product revenues consist primarily of sales of health and wellness products, such as facial skincare, body care, orthotics and detox supplements to cruise ship passengers, destination resort guests and timetospa.com customers.
Cost of services. Cost of services consists primarily of an allocable portion of payments to cruise line partners (which are derived as a percentage of service revenues or a minimum annual rent or a combination of both), an allocable portion of wages paid to shipboard employees, an allocable portion of staff-related shipboard expenses, wages paid directly to destination resort employees, payments to destination resort partners, the allocable cost of products consumed in the rendering of services, and health and wellness center depreciation. Cost of services has historically been highly variable; increases and decreases in cost of services are primarily attributable to corresponding increases or decreases in service revenues. Cost of services has remained generally consistent as a percentage of service revenues.
Cost of products. 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 and an allocable portion of payments to cruise line 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 has historically been highly variable; increases and decreases in cost of products are primarily attributable to corresponding increases or decreases in product revenues and includes impairment of the carrying value of inventories. Cost of products has remained generally consistent as a percentage of product revenues.
Administrative. Administrative expenses are comprised of expenses associated with corporate and administrative functions that support our business, including fees for professional services, insurance, headquarters rent and other general corporate expenses.
Salaries, benefits and payroll taxes. Salaries, benefits and payroll taxes are comprised of employee expenses associated with corporate and administrative functions that support our business, including fees for employee salaries, bonuses, stock-based compensation, payroll taxes, 401(k) and other employee costs.
Amortization of intangible assets. 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).
Restructuring expenses. Restructuring expenses are comprised of expenses related to the reorganization of operations in the United Kingdom and Italy and the exiting of certain resort health and wellness center operations in Asia.
Long-lived assets impairment. Long-li ved assets impairment is comprised of destination resort agreements-intangible assets, property and equipment charges, operating lease right-of-use assets charges and licensing agreement-intangible charges.
Other income (expense), net. Other income (expense) consists of interest income, interest expense, changes in the fair value of warrant liabilities and other expense.
Income tax expense (benefit). Income tax expense (benefit) includes current and deferred federal income tax expenses, as well as state and local income taxes.
Net income (loss). Net income (loss) consists of income (loss) from operations less other income (expense) and income tax expense (benefit).
Revenue Drivers and Business Trends
Our revenues and financial performance are impacted by a multitude of factors, including, without limitation:
The number of health and wellness centers we operate on cruise ships and in destination resorts . 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, ships temporarily out of service undergoing enhancements to their facilities and operations, including enhancements to our health and wellness centers, ships and itineraries impacted by temporary adverse weather conditions, and ships prevented from sailing due to outbreaks of illnesses, among other factors. The number of destination resorts in which we operate during each period is primarily attributable to renewal of existing agreements with destination resort partners, certain of our health and wellness centers undergoing renovations to enhance operations, and destination resorts temporarily prevented from operating due to adverse weather conditions and outbreaks of illnesses, among other factors.
The size and offerings of new health and wellness centers. 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. As our cruise line partners continue to invest in new ships and enhancing existing vessels 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.
Expansion of value-added services and products and increased pricing across modalities in existing health and wellness centers. 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, light therapies and advanced skin care services, among other services and products innovations, resulting in higher guest demand and spending. In addition, we have increased effecting pricing selectively across our services and products.
The mix of ship count across contemporary, premium, luxury and budget categories. 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. 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, and implementation of proprietary technologies to increase our health and wellness center utilization via pre-booking and pre-payment of health and wellness services. We directly market and promote to onboard passengers as a result of increasing collaboration with 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. 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. Our health and wellness centers onboard cruise ships and in select destination resorts may be 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 season, from August through 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 ”.
The effect of each of these factors on our revenues and financial performance varies from period to period.
Results of Operations
Comparison of Results for the Years Ended December 31, 2025 and 2024
Year Ended December 31,
($ in thousands, except per share data)
% of Total Revenue
% of Total Revenue
REVENUES
Service revenues
Product revenues
Total revenues
COST OF REVENUES AND OPERATING EXPENSES
Cost of services
Cost of products
Administrative
Salary, benefits and payroll taxes
Amortization of intangible assets
Restructuring expenses
Long-lived assets impairment
Total cost of revenues and operating expenses
Income from operations
OTHER (EXPENSE) INCOME, NET
Interest expense
Interest income
Change in fair value of warrant liabilities
Other expense
Total other expense, net
Income before income tax expense
INCOME TAX EXPENSE
NET INCOME
NET INCOME PER VOTING AND NON-VOTING SHARE DILUTED
Revenues. Total revenues increased 7% to $961.0 million compared to $895.0 million for the year ended December 31, 2024, principally driven by fleet expansion due to 2025 new ship builds, a 3% increase in average guest spend, and a 2% increase in revenue days contributing $27.9 million, $25.7 million, and $17.0 million, respectively, of the increase in Total revenues for the period, of which $10.7 million was attributable to increased guest pre-booked services. Growth in our Maritime Total revenues was offset by a $4.8 million decrease in our destination resorts Total revenues, partially due to the closure of hotels where we had previously operated.
The break-down of Revenue between Service and Product revenues was as follows:
Service revenues. Service revenues for the year ended December 31, 2025 were $777.3 million, an increase of $54.0 million, or 7%, compared to $723.3 million for the year ended December 31, 2024.
Product revenues. Product revenues for the year ended December 31, 2025 were $183.7 million, an increase of $12.0 million, or 7%, compared to $171.7 million for the year ended December 31, 2024.
Cost of services. Cost of services were $645.4 million compared to $599.8 million in the year ended December 31, 2024. The $45.6 million increase was primarily attributable to the $54.0 million increase in Service revenues compared to the year ended December 31, 2024.
Cost of products. Cost of products were $156.5 million compared to $145.8 million for the year ended December 31, 2024. The $10.7 million increase was primarily attributable to the $12.0 million increase in Product revenues and $0.3 million of nonrecurring inventory write-off charges in 2025 related to our exit from certain land-based health and wellness center operations in Asia compared to the year ended December 31, 2024.
Administrative. Administrative expenses for the year ended December 31, 2025 were $18.1 million, a decrease of $0.8 million, or 4%, compared to $18.8 million for the year ended December 31, 2024. The decrease was primarily attributable to higher professional fees incurred in the prior-year, including approximately $0.6 million related to incremental public company costs such as Sarbanes-Oxley compliance.
Salary, benefits and payroll taxes. Salary, benefits and payroll taxes for the year ended December 31, 2025 were $37.1 million, an increase of $1.5 million, or 4%, compared to $35.6 million for the year ended December 31, 2024. The increase was attributable primarily to expenses associated with the termination of employment of the Company’s former Chief Commercial Officer in the first quarter of 2025, including $1.1 million of severance expense and $1.4 million of expense related to vesting treatment with respect to restricted stock units and performance stock units. The increase was partially offset by a decrease of approximately $1.0 million in incentive-based compensation expense compared to the prior year.
Amortization of intangible assets. Amortization of intangible assets for the year ended December 31, 2025 and 2024 were $16.5 million and $16.6 million, respectively.
Restructuring expenses. Restructuring expenses were $2.7 million in the year ended December 31, 2025, attributable to the reorganization of operations in the United Kingdom and Italy and the exiting of certain resort health and wellness center operations in Asia.
Long-lived assets impairment. Long-lived assets impairment charges for the year ended December 31, 2025 were $3.1 million compared to $0.4 million for the year ended December 31, 2024. During 2025, due to exiting certain of our resort operations in Asia, we recorded $2.8 million in impairment charges with respect to the value of associated long-lived assets, including $2.2 million attributable to intangible assets and $0.6 million to property and equipment, and right-of-use-assets. The 2024 impairment was related to the closure in 2024 of one of our destination resort health and wellness centers as a result of the hotel operator deciding to no longer offer spa operations.
Other expense, net. Other expense, net includes Interest expense, Changes in fair value of the warrant liabilities and Other expense. Interest expense, net for the year ended December 31, 2025, was $5.2 million, a decrease of $3.7 million, or 42%, compared to $8.9 million for the year ended December 31, 2024. The decrease in Interest expense, net was pri marily from lower debt balances including a prepayment of $10.0 million of the Term Loan Facility . Since the year ended December 31, 2024, we have repaid a total of $15.0 million in debt instruments. The change in fair value of the outstanding warrants during the year ended December 31, 2025 was zero compared to a gain of $7.7 million during the year ended December 31, 2024. The Company had no outstanding warrants during the year ended December 31, 2025; accordingly, there was no impact on the consolidated statement of operations during this period.
Income tax expense. Income tax expense for the year ended December 31, 2025 was an expense of $4.5 million, an increase of $0.5 million, or 13%, compared to an expense of $4.0 million for the year ended D ecember 31, 2024. The increase was primarily driven by an increase in foreign taxes driven by factors such as liquidation activities, accrued liabilities for unrepatriated earnings, regulatory changes, and withholding taxes on dividends. This increase was partially offset by a reduction in U.S. taxes of $1.0 million.
Net income. Net income was $71.6 million, or Net income per diluted share of $0.69, as compared to Net income of $72.9 million or Net income per diluted share of $0.69 for the year ended December 31, 2024. The decrease was primarily attributable to the recognition of restructuring expenses and long-lived asset value impairment charges totaling $5.8 million, offset by the nonrecurring $7.7 million gain recognized in fiscal 2024 related to changes in the fair value of warrant liabilities, an increase in Income from operations and a decrease in Interest expense, net. Income from operations increased by $9.0 million year over year, after excluding restructuring and impairments. Interest expense, net, decreased by $3.7 million, primarily due to lower average debt balances and lower effective interest rates.
Comparison of Results for the Years Ended December 31, 2024 and 2023
Year Ended December 31,
($ in thousands, except per share data)
% of Total Revenue
% of Total Revenue
REVENUES
Service revenues
Product revenues
Total revenues
COST OF REVENUES AND OPERATING EXPENSES
Cost of services
Cost of products
Administrative
Salary, benefits and payroll taxes
Amortization of intangible assets
Long-lived assets impairment
Total cost of revenues and operating expenses
Income from operations
OTHER (EXPENSE) INCOME, NET
Interest expense
Interest income
Change in fair value of warrant liabilities
Total other expense, net
Income before income tax expense
INCOME TAX EXPENSE (BENEFIT)
NET INCOME (LOSS)
NET INCOME (LOSS) PER VOTING AND NON-VOTING SHARE DILUTED
Revenues. Total revenues increased 13% to $895.0 million compared to $794.0 million for the year ended December 31, 2024. The increase in each of Service revenues and Product revenues was driven by (i) a 4% increase in our Revenue Days of the existing fleet, which positively impacted revenue by $39.3 million, (ii) a 4% increase in our guest spend, which led to a $32.4 million increase in revenue, and (iii) fleet expansion, which contributed $31.8 million in revenue. Contributing to the increased volume and spend was $20.3 million in increased pre-booked revenue on health and wellness centers included in our ship count as of December 31, 2024.
The break-down of Revenue between Service and Product revenues was as follows:
Service revenues. Service revenues for the year ended December 31, 2024 were $723.3 million, an increase of $75.2 million, or 12%, compared to $648.1 million for the year ended December 31, 2023.
Product revenues. Product revenues for the year ended December 31, 2024 were $171.7 million, an increase of $25.8 million, or 18%, compared to $146.0 million for the year ended December 31, 2023.
Cost of services. Cost of services were $599.8 million compared to $541.4 million in the year ended December 31, 2023. The increase was primarily attributable to costs associated with increased Service revenues of $723.3 million for the year ended December 31, 2024, compared with Service revenues of $648.1 million for the year ended December 31, 2023.
Cost of products. Cost of products were $145.8 million compared to $125.6 million for the year ended December 31, 2023. The increase was primarily attributable to costs associated with increased Product revenues of $171.7 million for the year ended December 31, 2024, compared to Product revenues of $146.0 million for the year ended December 31, 2023.
Administrative. Administrative expenses for the year ended December 31, 2024 were $18.8 million, an increase of $1.7 million, or 10%, compared to $17.1 million for the year ended December 31, 2023. The increase was attributable to increased professional fees of $1.7 million primarily incurred in connection with public company costs including Sarbanes-Oxley compliance work.
Salary, benefits and payroll taxes. Salary, benefits and payroll taxes for the year ended December 31, 2024 were $35.6 million, a decrease of $1.2 million, or 3%, compared to $36.8 million for the year ended December 31, 2023. The decrease was primarily attributable to $1.1 million lower stock-based compensation expense for the year ended December 31, 2024.
Amortization of intangible assets. Amortization of intangible assets for the year ended December 31, 2025 and 2024 were $16.5 million and $16.6 million, respectively.
Long-lived assets impairment. Long-lived assets impairment charges for the year ended December 31, 2024 were $0.4 million compared to $2.1 million for the year ended December 31, 2023. The 2024 impairment was related to the closure in 2024 of one of our destination resort health and wellness centers as a result of the hotel operator deciding to no longer offer spa operations. The 2023 impairment 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. The impairment was primarily related to the expected closure in 2024 of destination resort health and wellness center as a result of the expected demolition of the hotel where the health and wellness center was located.
Other (expense) income, net. Other (expense) income, net includes Interest expense and Changes in fair value of the warrant liabilities. Interest expense, net for the year ended December 31, 2024, was $8.9 million, a decrease of $12.2 million, or 58%, compared to $21.1 million for the year ended December 31, 2023. The decrease in Interest expense, net was pri marily from lower debt balances and a one-time $5.4 million deleveraging fee incurred during the fourth quarter on 2023. Since the year ended December 31, 2023, we have repaid a total of $59.6 million in debt instruments. The Change in fair value of warrant liabilities was the result of the remeasurement to fair value of the warrants exercised during the year ended December 31, 2024 reflecting changes in market prices of our Common stock and other observable inputs deriving the value of these financial instruments . T he Company has no outstanding warrants as of December 31, 2024; accordingly, there will be no impact on the Consolidated Statement of Operations in future periods.
Income tax expense (benefit). Income tax expense (benefit) for the year ended December 31, 2024 was an expense of $4.0 million, an increase of $5.5 million, or 362%, compared to a benefit of ($1.5) million for the year ended December 31, 2023. The increase was primarily driven by the recognition of a discrete tax benefit of approximately $3.4 million in uncertain tax benefits during the third quarter of 2023 related to foreign tax exposures as a result of our participation in a tax amnesty program in Italy that settled such liability in August 2023, offset by an increase in the taxable income, the change in valuation allowance and the decrease in availability of net operating losses.
Net income (loss). Net income was $72.9 million, or Net income per diluted share of $0.69, as compared to Net loss of ($3.0) million or Net loss per diluted share of ($0.03) for the year ended December 31, 2023. The change was primarily attributable to a $45.2 million positive Change in fair value of warrant liabilities reflected in Other income (expense), a $12.2 million decrease in Interest expense, net and a $23.9 million increase in Income from operations. All warrants were exercised or cancelled in 2024. The Change in fair value of warrant liabilities was the result of the remeasurement to fair value of the warrants exercised during fiscal year 2023 reflecting changes in market prices of our Common stock and other observable inputs deriving the value of these financial instruments. The $12.2 million decrease in Interest expense, net was primarily due to lower debt balances, offset by a one-time $5.4 million deleveraging fee incurred during the fourth quarter of 2023. The $23.9 million change in Income from operations primarily derived from the increase in the number of health and wellness centers onboard ships operating during the year and increased productivity of our Maritime health and wellness centers.
Liquidity and Capital Resources
Overview
We fund our operations principally with cash flow from operations. Our principal uses for our liquidity have been funding the operations of our health and wellness centers onboard 206 cruise ships and in 47 destination resorts , which involve investments in working capital and capital expenditures for technology, infrastructure, and our global operating platform. During the year ended December 31, 2025, liquidity was also utilized for debt service, including a $15.0 million payment on our Term Loan Facility; the payment of $17.5 million in dividends to shareholders; and $75.4 million for the repurchase of 3,878,873 common shares under our 2024 and 2025 Share Repurchase Programs, among other uses.
We have concluded that our existing cash and available credit facilities, combined with cash flow from operations, will be sufficient to satisfy our existing and planned capital requirements and to comply with all debt covenants as required by our debt agreements over the next twelve months and for the foreseeable future beyond that period. Additional information regarding our revolving loan facility, letter of credit capacity, and debt covenants is included in the notes to our consolidated financial statements.
Cash Flows
The following table shows summary cash flow information for the years ended December 31, 2025, 2024 and 2023.
Year Ended December 31,
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Depreciation and amortization
Long-lived assets impairment
Loss on divestitures and liquidations, net
Stock-based compensation
Amortization of deferred financing costs
Income tax benefit from change in reserve of uncertain tax positions
Losses on early extinguishment of debt
Change in fair value of warrant liabilities
Provision for doubtful accounts
Loss from write-offs of property and equipment
Noncash lease expense
Deferred income taxes
Change in working capital
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Cash disposed of in connection with divestiture
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants
Repurchase of common shares
Proceeds from term loan facility
Repayment on first and second lien term loan facilities
Payment of deleveraging fee on first lien term loan facilities
Dividends
Payment of deferred financing costs
Net cash used in financing activities
Effect of exchange rate changes on cash
Net increase(decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash, Beginning of period
Cash and cash equivalents and restricted cash, End of period
Comparison of Results for the Years Ended December 31, 2025 and 2024
Operating activities . Our net cash provided by operating activities for the year ended December 31, 2025 and 2024 were $83.5 million and $78.8 million, respectively. This increase of $4.7 million was due to a change in working capital of ($5.7) million offset by an increase in Net income, net of non-cash items of $10.4 million. The increase in Net income, net of non-cash items was primarily attributable to: (i) increased revenues from a higher number of health and wellness center guests on our existing fleet, expansion of our fleet, and higher guest spend, and (ii) reduced interest expense, which was attributable to lower debt balances. For further discussion, see “Results of Operations”, above. The ($5.7) million change in working capital was attributable to cash outflows of $28.6 million and $22.9 million for the year ended December 31, 2025 and 2024, respectively.
For the year ended December 31, 2025, cash outflows from working capital totaled $28.6 million, driven by a $12.8 million increase in inventories to secure favorable pricing and support procurement for new wellness centers, a $10.1 million decrease in accrued expenses due to payment timing, a $3.7 million increase in capitalized contract costs, a $2.7 million cash outflow for prepaid expenses, and a $2.6 million increase in accounts receivable linked to revenue growth. These outflows were partially offset by a $2.8 million increase in accounts payable due to vendor payment timing.
For the year ended December 31, 2024, cash outflows from working capital of $22.9 million were primarily driven by a $22.1 million increase in other non-current assets, reflecting capitalized contract costs incurred to enter into or renew long-term contracts, which was partially offset by a $7.3 million increase in other long-term liabilities related to accrued fees to cruise line partners. Additional drivers included a $5.5 million increase in accounts receivable, net, primarily reflecting revenue growth, and a $2.0 million decrease in accounts payable related to the timing of vendor payments.
Investing activities . Our Net cash used in investing activities for the year ended December 31, 2025 and 2024 were $(16.7) million and $(6.7) million, respectively. During the year ended December 31, 2025, our investing activities primarily consisted of investments in leasehold improvements for certain health and wellness centers operated in destination resorts, technology hardware and software, including artificial intelligence applications, and medi-spa equipment to support strategic expansion and enhance operational capabilities. Additionally, we reflected a $1.6 million decrease in cash related to the divestiture of certain non-material subsidiaries.
Financing activities . Our Net cash provided by financing activities for the year ended December 31, 2025 and 2024 were $(107.9) million and $(42.2) million, respectively. For the year ended December 31, 2025, the Company utilized $75.4 million to repurchase 3,878,873 shares of its common stock, repaid $15.0 million on the Term Loan Facility and paid Dividends of $17.5 million. For the year ended December 31, 2024, the Company received proceeds from the exercise of public and private warrants of $51.7 million, received proceeds from the Term Loan Facility of $100.0 million, repaid $159.6 million on the First Lien Term Loan Facility, paid a $5.4 million deleveraging fee on the First Lien Term Loan Facility, paid Dividends of $8.3 million, utilized $19.0 million to repurchase 1,351,688 of our common shares, and paid $1.5 million in deferred financing costs.
Comparison of Results for the Years Ended December 31, 2024 and 2023
Operating activities . Our net cash provided by operating activities for the year ended December 31, 2024 and 2023 were $78.8 million and $63.4 million, respectively. In the year ended December 31, 2024, net operating cash flows continued to increase from the comparable 2023 period, as the Company grew total revenue by 13% and income from operations by 44% and reduced interest expense, net by 58%, which interest expense reduction was attributable to repayment of indebtedness, further enhancing our balance sheet.
Our Net cash provided by operating activities for the year ended December 31, 2024 and 2023, were $78.8 million and $63.4 million, respectively. This increase of $15.4 million was due to a $36.8 million increase in Net income (loss), net of non-cash items offset by a change in working capital of $21.4 million. The increase in Net income (loss), net of non-cash items was primarily attributable to: (i) increased revenues from a higher number of health and wellness center guests on our existing fleet, expansion of our fleet by five ships, and higher guest spend, and (ii) reduced Interest expense which was attributable to lower debt balances. For further discussion see “Results of Operations” above. The $21.4 million change in working capital were cash outflows of $22.9 million and $1.5 million for the years ended December 31, 2024 and 2023, respectively. The cash outflows from working capital for the year ended December 31, 2024, were primarily driven by:
a $22.1 million increase in Other non-current assets reflecting capitalized contract costs incurred to enter into new or to renew long-term contracts partially offset by an increase in other long-term liabilities of $7.3 million which relate to fees accrued to cruise line partners;
a $5.5 million increase in Accounts receivable, net primarily reflecting the growth in Revenues; and
a $2.0 million decrease in Accounts payable primarily related to the timing of vendor payments;
The cash outflows from working capital for the year ended December 31, 2023 were primarily driven by:
a $7.3 million increase in Accounts receivable, net reflecting the growth in Revenues; and
a $7.7 million increase in Inventories, net as a result of increased purchases reflecting the growth in Revenues and anticipation of increased shipments in the first quarter of 2024, offset by a $13.6 million increase in Accounts payable and Accrued expenses driven by inventory purchases and timing of vendor payments.
Investing activities . Our Net cash used in investing activities for the year ended December 31, 2024 and 2023 were $(6.7) million and $(5.4) million, respectively. During the year ended December 31, 2024, we continued to make investments in computer hardware and software (including artificial intelligence) and medi-spa equipment.
Financing activities . Our Net cash provided by financing activities for the year ended December 31, 2024 and 2023 were $(42.2) million and $(62.7) million, respectively. For the year ended December 31, 2024, the Company received proceeds from the exercise of public and private warrants of $51.7 million, received proceeds from the Term Loan Facility of $100.0 million, repaid $159.6 million on the First Lien Term Loan Facility, paid a $5.4 million deleveraging fee on the First Lien Term Loan Facility, paid Dividends of $8.3 million, utilized $19.0 million to repurchase 1,351,688 of shares of its common stock, and paid $1.5 million in deferred financing costs. For the year ended December 31, 2023, the Company repaid $41.0 million on the First Lien Term Loan Facility, repaid the final $15.0 million on the Second Lien Term Loan Facility, thus fully extinguishing this facility, utilized $9.0 million in cash to repurchase 789,046 of our common shares, and received proceeds from the exercise of warrants of $2.4 million.
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. 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. 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 season, from August through October.
Critical Accounting Policies
Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations and that require the most difficult, subjective and complex judgments. This discussion is not intended to be a comprehensive description of all accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP, with no need for management’s judgment in their application. The impact on our business operations and any associated risks related to these policies is discussed under results of operations, below, where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other significant accounting policies, please see Note 2 in the Notes to the Consolidated Financial Statements. Note that our preparation of our Consolidated Financial Statements included in this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will be consistent with those estimates. Our Consolidated Financial Statements include the assets, liabilities, revenues and expenses specifically related to our operations. We believe the assumptions and allocations underlying the accompanying Consolidated Financial Statements and notes to the Consolidated Financial Statements are reasonable, appropriate, and consistently applied for the periods presented.
Revenue Recognition. We recognize revenues when customers obtain control of goods and services promised by the Company. The amount of revenue recognized is based on the amount that reflects the consideration that is expected to be received in exchange for those respective goods and services. 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.
Inventories. Inventories, consisting principally of personal care products, are stated at the lower of cost, as determined on a first-in, first-out basis, or market. All inventory balances are comprised of finished goods used in aesthetics and health and wellness services or held for resale for sale to customers. Inventory reserve is recorded to write down the cost of inventory to the estimated net realizable value. The Company’s evaluation of net realizable value requires judgment and is based on specific assumptions. 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. No inventory reserve was recorded during the years ended December 31, 2025, 2024 and 2023.
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. The impairment assessment for trade name allows us to first assess qualitative factors to determine whether it is necessary to perform a more detailed quantitative trade name impairment test. We would perform the quantitative test if our qualitative assessment determined it was more-likely-than-not tha t t he fair value of the trade name is less than its carrying amount. 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. As of Octob er 1, 2025, 2024 and 2023, we performed our annual trade name indefinite-lived intangible asset impairment quantitative test and determined there was no incremental impairment. However, subsequent to the 2025 annual test, in connection with the implementation of our strategic plan to exit the Company’s land-based destination resort operations in Asia, we updated the quantitative test. As a result of this updated assessment, we determined that the carrying value exceeded its fair value and recognized an incremental charge of $0.1 million during the year ended December 31, 2025. The trade name was valued through application of the relief from royalty method. Under this method, a royalty rate is applied to the revenues associated with the trade name to capture value associated with use of the name as if licensed. The resulting royalty savings are then discounted to present fair value at rates reflective of the risk and return expectations of the interests to derive its fair value as of the testing date.
Definite-Lived Intangible Assets. We review definite-lived assets for impairment whenever events or changes in circumstances indicate, based on estimated future cash flows, that the carrying amount of these assets may not be fully recoverable. 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). 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. Factors we consider when making this determination include assessing historical trends and the overall effect of current trends in and future expectations of the industry and the general economy and regional performance, and other asset-specific information;
Determine the projected undiscounted future cash flows when indicators of impairment are present to determine whether an asset group is recoverable by comparing the expected undiscounted future cash flows to the net carrying value of that asset group. Judgment is required when developing projections of future revenues and expenses to determine the undiscounted cash flows, which are based on estimated performance over the expected useful life of the asset group. Forward-looking estimates of performance are based on historical operating results, adjusted for current and expected future market conditions, as well as various internal projections and external sources; and
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. The fair value measurement is generally determined through the use of independent third-party appraisals or an expected present value technique, both of which may include a discounted cash flow approach, which reflects assumptions of what market participants would utilize to price the asset (asset group). Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Assets to be abandoned, or from which no further benefit is expected, are written down to zero at the time that the determination is made and the assets are removed entirely from service.
Recently Issued Accounting Pronouncements
Refer to Note 2 to the Consolidated Financial Statements in this report for a discussion of recent accounting pronouncements.
Inflation and Economic Conditions
We do not believe that inflation has had a material adverse effect on our business, results of operations or financial condition. However, consumer demand cruises and destination resorts and for our health and wellness services and products is influenced by prevailing economic conditions, including inflation, interest rates, and unemployment, among other economic factors. Accordingly, periods of adverse economic conditions could have a material adverse effect on the cruise industry and hospitality industry upon which we are dependent and could have a material adverse effect on our business, results of operations and financial condition .
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.
Concentration of credit risk. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and accou nts receivable. We maintain cash and cash equivalents with high quality financial institutions. As of December 31, 2025 and 2024, respectively, none of the destination resort spas we served represented greater than 10% of our accounts receivable. As of December 31, 2025 and 2024, respectively, four and three, respectively, 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.
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 and current and forecasted business conditions. Generally, an account receivable balance is written off once it is determined to be uncollectible. 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 as of each of December 31, 2025 and 2024. For each of the years ended December 31, 2025 and 2024, the allowance for credit losses expense was $0.02 million. For the year ended December 31, 2023, the allowance for credit losses expense was $0.06 million. Allowance for credit losses expense is included within administrative operating expenses in the accompanying Consolidated Statements of Operations.
Interest rate risk. We are subject to interest rate risk in connection with borrowing based on a variable interest rate. Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, may be used for the purpose of managing fluctuating interest rate exposures that exist from our variable rate debt obligations that are expected to remain outstanding. 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.
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. Our objective in managing the exposure to interest rate changes is to limit the impact of inte rest 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. 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 $0.6 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. 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. We have mitigated our exposure to fluctuations in the British Pound Sterling and the Euro primarily through the restructuring of our operations in the United Kingdom and Italy. Accordingly, a hypothetical 10% change in the aggregate exchange rate exposure of the British Pound Sterling and the Euro relative to the U.S. Dollar would not be expected to have a material effect on our results of operations .
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and the Notes thereto, together with the report thereon of Ernst & Young LLP dated February 23, 2026, are filed as part of this report, beginning on page F-l.
