OneSpaWorld Holdings Ltd. Stock

Greetings, and welcome to the OneSpaWorld Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Malkin, partner of ICR. Thank you. Please go ahead.

Thank you. Good morning, and welcome to OneSpaWorld's Second Quarter 2026 Earnings Call and Webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements.

These forward-looking statements reflect our judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our second quarter 2026 earnings release, which was furnished to the SEC today on Form 8-K.

We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. Explanations of these metrics can be found in our earnings release issued earlier this morning.

Joining me today are Leonard Fluxman, Executive Chairman and Chief Executive Officer; and Stephen Lazarus, President, Chief Operating Officer and Chief Financial Officer. Leonard will begin with a review of our second quarter performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and guidance.

Following our prepared remarks, we will turn the call over to the operator to begin the question-and-answer portion of the call. I would now like to turn the call over to Leonard.

Thank you, Allison. Good morning, and welcome to OneSpaWorld's Second Quarter 2026 Earnings Conference Call. It's a pleasure to speak with you all this morning and share another strong performance that delivered our 21st consecutive quarter of record total revenues and adjusted EBITDA to cap an exceptional first half of the year.

Our sustained positive performance continues to reflect our team's innovation mindset and the increasing power of our global operating platform, which combined creates remarkable experiences for our guests, outstanding value for our cruise line and destination resort partners and strong operating and financial performance. This further reinforces our leadership position as a trusted global provider of health and wellness services at sea. I remain proud of our exceptional team members around the world whose dedication and commitment continue to drive our success.

We began the second half of the year with positive momentum and expect to generate double-digit growth in total revenue and adjusted EBITDA at the midpoint of our fiscal year 2026 guidance ranges. Our confidence is buoyed by the impact of increasing innovations across our business, including the emerging impact of AI and growth from new partnerships and new ship introductions.

Turning to the highlights of the second quarter. Total revenues increased 9% and adjusted EBITDA increased 13%. At quarter end, we operated health and wellness centers on 208 ships with an average ship count of 202 for the quarter. This compares with a total of 200 ships and an average ship count of 191 ships at the end of the second quarter of fiscal 2025. Also at quarter end, our cruise ship health and wellness centers were staffed by 4,664 personnel compared with 4,365 personnel on vessels at the end of the second quarter of fiscal 2025.

The quarter marked meaningful progress in our key priorities. And while I'm going to address my favorite four, I'm going to leave probably one with much curiosity is AI will be covered by Stephen in his remarks.

So firstly, we captured high visible new ship growth with current cruise line partners. During the quarter, we launched our state-of-the-art health and wellness center onboard Royal Caribbean's Legend of the Seas and expanded our partnership with Azamara Cruises. We remain on track to introduce health and wellness centers on three additional new ship builds later this year.

Second, we continue to expand higher-value services and products. These services, including our innovative offerings of Thermage, truSculpt and CoolSculpting, IV therapy, Acupuncture LED therapy continue to drive strong double-digit growth in the second quarter. We will continue expanding these services across our fleet while introducing new offerings that address travelers' growing focus on longevity and wellness.

At quarter end, medi-spa services were available on 156 ships, up from 147 ships at the end of the second quarter of 2025. We expect to have medi-spa offerings on 159 ships by year-end 2026. Third, we focused on enhancing health and wellness center productivity. This is best reflected in continued growth in key operating metrics, including revenue per passenger per day, weekly revenue and revenue per staff per day.

Additionally, prebooked revenue grew 14% in total and grew as a percentage of total service revenue with forward bookings looking strong, up 20% as compared to last year. Staff retention continues to deliver impressive gains. At quarter end, staff retention was 81%, rising 4 percentage points over last year. As we have stated in the past, having experienced staff is a key contributor to our consistent gains in operating metrics as these members continue to drive incremental revenue through more effective guest recommendations, cross-selling and upselling. We remain committed to investing in best-in-class training to support productivity and long-term growth in our operating metrics.

Fourth and finally, we maintained a strong and durable balance sheet and generated robust free cash flow. During the quarter, we returned $5.1 million to shareholders through our quarterly dividend and reduced debt by $1.3 million under our term loan facility. We ended the quarter with a strong balance sheet, including $41.6 million in cash and $91.6 million of total liquidity, providing continued flexibility to invest in our business while returning capital to shareholders.

During the quarter, we opportunistically purchased 16,134 shares of our common stock and at quarter end, had $37.1 million available under our share repurchase authorization.

Looking ahead, we remain confident that 2026 will be another record year for this company, backed by our exceptional team, differentiated operating platform, and continued focus on innovation and execution. We believe we are well positioned to extend our leadership in health and wellness services at sea while delivering exceptional value to our cruise line partners, memorable experiences for our guests and long-term value to our shareholders.

With that, I'll turn you over to Stephen, who will provide more details on our second quarter results and guidance. Stephen?

Thank you, Leonard. Good morning, everyone. We are indeed pleased with our second quarter performance with total revenues increasing 9% and adjusted EBITDA increasing 13% compared to the second quarter of 2025, driven by increases across our key operating and financial metrics. Our results continue to demonstrate the strength and resilience of our business model and the successful execution by our talented teams.

We generated strong profitability and cash flow during the quarter while maintaining a healthy balance sheet, enabling us to continue investing in strategic growth initiatives, return capital to shareholders through our quarterly dividend and share repurchases, and further reduce debt.

Before I review our results, I would like to take a moment to provide details on some of our AI initiatives and the positive impact that this is having across our business. We remain confident these technologies will enhance revenue growth, operating efficiency and longer-term profitability.

AI has been introduced to substantially all of our ships and our corporate office. We have many work streams underway at various stages, some already in production, others still in development or at the concept stage.

Today, I'd like to focus on four areas that are live and generating value. The first relates to revenue enhancement. Amanda, previously referred to as Project Shell, our AI-powered recommendation and yield optimization platform that provides daily yield improvement recommendations to our managers onboard vessels. This is our machine learning algorithmic engine to improve facility and staff utilization to increase revenue. Amanda was launched in March of this year and is currently deployed across 188 vessels.

Service revenue improvement as a result of these recommendations is most evident with less experienced managers, where we are seeing a 4% service revenue uplift from the implementation of the recommendations.

Manager adoption has also grown, reaching nearly 99%. Looking ahead, we'll continue enhancing the platform, incorporating manager feedback, adding new services and post-voyage recommendations.

Second, we continue to expand our operational AI capabilities. AVA, our artificial intelligence virtual assistant, which is a task executing Agentic app supports managers with ship operations and was launched in August of 2025. This has a proven ROI autonomously resolving 96% of support tickets without human intervention. Based on this, we've begun implementing new use cases and will extend AVA to all onboard staff.

Third, as it relates to automating automation and streamlining work, at the end of May, we launched Serena, our guest-facing conversational assistant, a generative AI-enabled chatbot for our e-commerce platform, a natural extension to our customer service team with nearly half of all sessions occurring outside normal business hours utilizing Serena to date.

We plan to introduce new Serena capabilities to further increase efficiency while maintaining our high customer relations standards through seamless human handoff and guest satisfaction tracking.

Finally, Claude, our enterprise-wide AI system continues to be adopted across the organization to improve productivity and streamline day-to-day workflows. In parallel, we completed the implementation of a modernized ERP system across the organization this quarter, bringing our teams onto a single platform that further supports our AI initiatives and positions us for continued efficiency gains. While we remain in the initial stages of these initiatives with many others to follow, we are increasingly encouraged by the measurable benefits we are seeing and believe our investments in AI will continue to strengthen our competitive position and create long-term value for our shareholders.

I will now share further details about our second quarter results that we reported earlier this morning. Total revenues increased 9% to $261.2 million compared to $240.7 million for the second quarter of 2025, driven by a 4% increase in revenue days, health and wellness center expansion from 2026 new ship builds and a 1.2% increase in average guest spend, contributing $14.5 million, $4.8 million and $2.7 million, respectively, to the increase in total revenues, of which $4.7 million was attributable to increased guest prebooked services.

Growth in our maritime total revenues was offset by $1.3 million decrease in destination resorts total revenue, partially due to the closure of hotels where we had previously operated. The decrease in product revenue was driven by the previously announced reorganization of operations in the United Kingdom and Italy, which accounted for $1 million of product revenue in the second quarter of 2025.

Cost of service increased $15.6 million attributable to the $21.1 million increase in service revenue compared to the second quarter of prior year. Cost of product decreased $200,000 attributable to the $500,000 decrease in product revenue compared to the second quarter of last year.

Administrative expenses were $7.2 million compared to $4.4 million in the second quarter of 2025. The increase was primarily due to $2 million in third-party fees for certain management and logistics services as a result of our previously announced reorganization of operations in the United Kingdom and Italy, pursuant to which services previously performed internally by company personnel and related costs have shifted from salary benefits and payroll taxes to administrative expenses. Salary benefit and payroll taxes were flat at $8.8 million.

Net income was $23.2 million or net income per diluted share of $0.23 as compared to net income of $19.9 million or net income per diluted share of $0.19 for the second quarter of 2025. The increase was attributable primarily to a $2.4 million increase in income from operations and a benefit from a $300,000 decrease in interest expense. The $300,000 decrease in interest expense net was attributable primarily to lower net balances and lower effective interest rates.

Adjusted net income was $29.8 million or adjusted net income per diluted share of $0.29 compared to adjusted net income of $25.8 million or adjusted net income per diluted share of $0.25 for the second quarter of 2025.

Adjusted EBITDA was $34.4 million compared to adjusted EBITDA of $30.5 million in the second quarter of last year.

Turning to the balance sheet. We continue to possess a strong balance sheet at quarter end with total cash of $41.6 million after giving effect to the payments of $10.2 million in quarterly dividends and repaying $2.5 million of our term loan facility during the first 6 months of June of 2026.

In addition, we had full availability of our $50 million revolving loan facility, giving us total liquidity of $91.6 million as of June 30. Total debt, net of deferred financing costs was $81.6 million at June 30.

Also at quarter end, we had $37.1 million remaining on our $75 million share repurchase program, which was adopted in April 2025. We intend to utilize this remaining authorization this year.

We remain focused on disciplined capital allocation, supported by our strong cash flow generation and balance sheet flexibility. We will continue to prioritize investing in the business, returning capital to shareholders through our share repurchase program, our quarterly dividend and debt reduction while maintaining the flexibility to pursue additional opportunities to enhance long-term shareholder value.

As it relates to guidance, based on our positive momentum and the impact of innovation across our businesses, we are increasing our full year 2026 guidance to total revenue in the range of $1.018 billion to $1.038 billion and adjusted EBITDA in the range of $130 million to $140 million. This represents growth of 10% at the midpoint of the guidance ranges for both metrics compared with actual fiscal 2025 results, excluding exited and reorganized operations and marks our fourth consecutive fiscal year of record performance.

Please keep in mind that fiscal 2025 reported total revenue included $23 million associated with the reorganization of operations in the United Kingdom and Italy and the exit of land-based operations in Asia.

For the third quarter of 2026, we are introducing guidance for total revenue in the range of $268 million to $273 million and adjusted EBITDA in the range of $35 million to $37 million. This guidance reflects our confidence in our ability to deliver sustained momentum and the visibility of our growth pipeline while acknowledging the dynamic environment. With that, we will open the call for questions. Marie, if you could please open the call.

[Operator Instructions] Thank you. Our first question comes from Steve Wieczynski with Stifel.

So look, it seems pretty clear that the onboard, the spend levels on board remain incredibly strong at this point. And even yesterday, we heard from Royal Caribbean, they specifically called out how strong their onboard metrics have been. So I guess what I'm wondering is with only five months left here in the year and onboard trends still remaining pretty healthy, to us, I would say your guidance range is still probably pretty elongated. So I'm just wondering what would get you maybe more towards the low end versus the high end? Or is there something in the fourth quarter that we should be watching that could skew that quarter one way or the other?

As of today, we feel good about the guidance that we've provided and the range. Obviously, as you're aware, revenue, our second quarter beat was $300,000. We've taken the full year up by $4 million on EBITDA. The beat was $400,000, and we've taken the full year up $5 million. So we feel comfortable with where we're guiding to the extent that there are improvements in the environment or innovations or activities that we're working on that accelerate at a faster pace, then you could see the numbers towards the upside.

Okay. Got you. And then Stephen, thanks for all the color around the AI initiatives. And maybe I'm reading into this wrong, but it seems like for now, the AI benefits are at least for now coming more on the revenue side and then the expense benefits will follow later on. I just want to make sure I'm kind of thinking about that the right way. And I doubt you're ready to provide this. But at this point, do you have any idea of what all this AI technology could eventually do to your margin profile? Or is it still just a total work in progress?

The response to the first question is correct. And as it relates to the second part of the question, and by the way, for the first part, obviously, as you know, Steve, after all these years, we run a very, very lean organization. And so further reducing costs, et cetera, will happen, but the impact we feel ultimately is more on the revenue side than on the cost side. That is indeed still too early to quantify exactly what that means and what it does to margins. And I would also frankly say this, there is so much happening and so much innovation and continued innovation in this arena. that I hope we always have projects in the pipeline and therefore, continue to see small incremental benefits coming through as opposed to getting to a point in time where we're done and we can quantify really what it means. So too soon to tell. We're working on it. I mean some of these things have literally only been in place for a month or two, maybe six. So when we get there, we will, but we're happy to continue to report whatever we know.

Our next question comes from Sharon Zackfia with William Blair.

I wanted to ask about product revenue because even if I adjust for the reorg, it looks like it did kind of decelerate quite a bit in the growth rate. And I'm wondering kind of what you're seeing with product attach on the ships or if there's something else that would help explain that decel?

Yes. So when you take into account the amount due to the reorg, it was, in fact, positive, but you're correct at a slower rate than previously. One of the things to bear in mind is that we continue to see our medi-spa modalities growing overall at a faster rate than we're seeing overall revenue growth. In the second quarter, for example, our medi-spa functionalities grew at a 17% which is exceeding what other things are growing at, although recognizing it's still a small proportion, less than 10% of our service revenue. And those today have virtually no retail attachment to them. And so as you see those portions continue to grow, it does weigh in on the numbers.

We're not concerned at this point in time, to be honest, about any sort of attachment or takeaway issues on board. It does remain a focus for us. We did have significantly more retail promotional activity in the prior year as we were moving out some older inventory at significantly discounted prices. So having said that, we will continue to focus on it, have been focusing on it, but I'm not calling it out as an issue at this point.

And then a second question on the third quarter itself. We've heard a lot of companies talk about particularly for MED deployment that they're going to have maybe a higher mix than normal of European customers, which I know tend to kind of spend less at the spot than American passengers. Is that something you've already contemplated in the third quarter guide, particularly just given the seasonality of MED?

Yes. We've taken all of that into what we guided.

Our next question comes from Randy Konik with Jefferies.

You talked about early days, I think, one month or a couple of months of AI deployment. Have you kind of done this from a perspective of implementing some of the strategies in an experimental versus control setting where you were able to kind of discern what your uplift is in the portion of your business or areas where you've kind of put in these processes. Just curious because if we're early days and you're starting to see progress yet still early days, it feels like the revenue upside could accelerate and uplift from here. Just kind of curious on your thoughts there.

So from a process standpoint, Randy, the way you're describing it is the way we are doing -- have done and continue to do all of these projects, i.e., we roll them out in a smaller group. We make sure that they're working still in the loop, et cetera, et cetera, and then ultimately roll them out further. We do, as these are literally these agents or learning algorithms learn from themselves, we naturally do expect that they will get better over time. the recommendations that are implemented on board, for example, are literally at the end of every week, the machine goes back and looks at and says, okay, we made these recommendations, how successful were they? And then if they were good, is we recommending them? If they weren't, might be calling our ops team back into the loop to say what other sorts of things could be providing. So hopefully, over time, there is continued improvement. We definitely think that some of the other projects, we wouldn't talk about them again today because they are still in early, early stages like dynamic pricing will have the ability to help us continue to improve driver revenue.

Got it. And then just in terms of expanding upon, you gave a metric of a little over 1%, I believe it was, increase in average guest spend. How should we be thinking about that in the go-forward guidance for the balance of the year? What's that metric looking like from your standpoint for the balance of 2026? I think it's going to be about that, Randy.

It's about 1%, 2% growth is kind of what we're expecting through the back half, might be able to do a little better fourth quarter, but that's kind of where we're settling in.

[Operator Instructions] Our next question comes from Max Rakhlenko with TD Cowen.

So with the AI progress that is still in the earlier innings, how are you thinking about the evolution of your growth algorithm? Historically, you spoke to high single-digit revenue growth and a bit of margin expansion. What do you think that the go forward could be as we think about the next couple of years given all the progress that you've already made and will continue to make on the AI front?

We'd love to give you that specificity, Max, but the reality is that it just is too soon. I mean we are seeing revenue grow at a slightly higher rate than that high single-digit rate. And we have and do see margin improvement at the EBITDA level. So we're just not really, frankly, we don't have enough conviction around sample sizes, et cetera, to be able to talk specifically to answer your question, I think we're trying to avoid it. But for now, we will continue with our long-term algo as it has been in the past, single-digit revenue growth, slightly better EBITDA. Sorry, I keep going.

So, then separately, it's great to hear about the pickup in prebooking. Obviously, that's something that we've all been focused on for quite a while here. So given the acceleration, do you think your prior targets that we've spoken to in the past are achievable? And where do you think that mix can go in both the near as well as the medium term? And then just lastly, is the bigger spend continuing to hold at a similar rate? Or has there been any evolution to that?

As it relates to the spend, it generally continues to hold at a plus 30% or above. So we have seen no degradation in the incremental spend from those guests who prebook. We do continue to think that there is still the opportunity for that number to drive significantly higher. Obviously, we see that with some cruise lines, and that gives us that confidence. And frankly, in order to spend the money on yield optimization, AI activities or tools that we're looking at, we would have to have that conviction. Otherwise, why put the money into the project. So we do think that there's still upside in that number.

Yes. And Max, one other thing that's going to start kicking in that we just started now sort of at the end of the second quarter, is we started offering medi-spa and acupuncture on the pre-book platform, which we didn't have before. And that was a missing opportunity. We think that's going to also start to elevate that prebook percentage.

Our next question comes from Gregory Miller with Truist Securities.

Thought I'd start off with asking about how your progress is on expanding your resort operations portfolio in the U.S. and Caribbean. I'm curious if you could provide an update in terms of how the pipeline is looking and progress there.

Yes. No, good question, Greg. Thanks for asking. We, as you know, we brought this person on a little over 90 days or so ago. The pipeline is really looking strong. I mean there are a lot of opportunities that have been indicated that have interest, we've sent out two or three answers to an RFP. Inbounds are still continuing to grow. And I got to tell you for the first time, we're in a proactive looking for opportunities, getting our name out there, building the brand and recognition. So I'm very excited that we've been able to cultivate this interest in a very short period of time. Now we're just going to convert them, and I'm confident we will.

Terrific. Well, look forward to hearing the news when it happens. Separately, I want to ask about GLP-1s that are using the products. And I'm curious what you're seeing in terms of any changing trends in terms of service or products, different types of usage of the spa menu as consumers are adapting to using the GLP-1s.

So we have not introduced GLP-1s on board yet. That's not to say we won't or let's just say, I think the emerging regulatory control around peptides will change favorably such that we'll be able to start offering peptides hopefully, in 2027, if the regulations are such that we can support it, then we'll do it. In that respect, there's a very good competitive advantage in tirzepatide and some of the other exciting peptides out there that we're looking to roll out as soon as we have the approval to do so. So if it's not GLP-1, it will be in another format or it could be GLP-1. I think there's sufficient confidence out there that these weight, fat reducing peptides, GLP-1s, which is a form of a peptide will effectively be mainstream in the next couple of years. So we will follow suit.

Our next question comes from Andrew May with Northcoast Research.

So I wanted to ask the Europe question a little bit differently. So I think historically, Europe has been a little lower yielding for you guys versus like the bread and butter Caribbean. And one of the cruise operators had mentioned maybe a little lower occupancy for Europe this year. So I wanted to see how you guys kind of think about that. Is lower occupancy on these lower-yielding itineraries kind of hurt you more? Is it kind of net out to neutral?

Yes. It hasn't really, I'm sure this was spoken about yesterday on the call with respect to Royal. Maybe there's some softness there due to geopolitical pressures, people being scared to maybe fly into the Mediterranean with the war going on. We certainly didn't see load factors dip significantly enough to impact any of our revenues. That being said, there's Alaska as well as the Caribbean that are happening at the same time, and those continue to be executed very well.

Got it. Okay. And then separately, I wanted to ask, there was a recent announcement from the Norwegian banner. The Jade and Gem ship got some thermal suite upgrades. I wanted to see, is there any way to quantify what these dry dock upgrades can do for you guys? Or any additional color you can give about what a dry dock refurb typically represents for you?

It's a couple of things, right, because they're always scheduled to do it. We try and prepare as much in advance with the business folks, the dry dock, newbuild folks. Firstly, we want to make sure that the facilities in and of itself, wherever there's required maintenance or improvements, we get that in to the requisition.

But at the same time, as we mentioned before, we look at any areas, not just including our areas, but any area ship wide or on the Promenade or anything else, underutilized space, which we can use for any of the purposes or some of the new modalities. And where we can get that moved and we have done that in the past, we focus on that heavily. So it's an opportunity not just to repurpose underutilized space, but also perhaps to improve the existing.

Our next question comes from Assia Georgieva with Infinity Research.

Great job on Q2. I had basically, my question is now sort of a follow-up to what was just discussed. Through our sort of weekly pricing surveys, we were seeing a lot of strength in the Caribbean and Alaska, just as you mentioned, Leonard, it's not just Europe during the summer. And it seems that especially some of the destinations, the shorter cruises that are sort of new to cruise, which I think are probably the better passenger for you are really strong in price. Obviously, demand is there. So is that also something that you're already seeing in Q2 and building into the Q3 part of the model? Or do you expect just a more regular Caribbean and Alaska season than we are thinking?

Yes. Look, there's significant capacity still in the Caribbean. And as you know, Assia, the Caribbean we love, always good, short cruises, long cruises, seven-day being the sweet spot. So yes, you're right, three- and four-day always introduces that new passenger you might just want to try cruise for the first time. While it doesn't give us the breadth of time to do as well as we do in the seven-day, the three-, four-day combined typically comes close, but obviously, the three-day gives us a shorter period of time to penetrate the guest spend.

So, we love it all, and we won't say no to any more Caribbean because it doesn't impact us adversely, perhaps from a capacity perspective that it does others. But for us, it's always good because it brings along a lot of North American focus and spend, which is always healthy.

We might get another 6% or 7% capacity increase there next year still. More to come, I think, Leonard.

We've reached the end of our question-and-answer session. So I'd now like to turn the floor back over to Leonard Fluxman for closing comments.

Great. Thank you again for joining us today, and we look forward to speaking with many of you at the upcoming investor conferences that we'll be attending and presenting and we report our third quarter results in October.

Thanks for joining today. Bye-bye. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to OneSpaWorld First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Allison Malkin, partner with ICR. Thank you. You may begin.

Thank you. Good morning, and welcome to OneSpaWorld's First Quarter 2026 Earnings Call and Webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements.

These forward-looking statements reflect our judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made on this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter 2026 earnings release, which was also furnished to the SEC today on Form 8-K.

We do not undertake any obligation to update or alter any information regarding forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. Explanation of these metrics can be found in our earnings release issued earlier this morning.

Joining me today are Leonard Fluxman, Executive Chairman and Chief Executive Officer; and Stephen Lazarus, President, Chief Operating Officer and Chief Financial Officer. Leonard will begin with a review of our first quarter of 2026 performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and guidance. Following our prepared remarks, we will turn the call over to the operator to begin the question-and-answer portion of the call. I would now like to turn the call over to Leonard.

Thank you, Allison. Good morning, and welcome to OneSpaWorld's First Quarter 2026 Earnings Conference Call. We began the year with continued strong momentum in the first quarter, reporting better-than-expected top and bottom line results. The period marked our 20th consecutive quarter of record total revenues and adjusted EBITDA, evidencing the strength of our global operations and the disciplined execution of our strategy by our outstanding team.

Our highly trained and motivated staff delivered exceptional experiences for our health and wellness center guests, driven by ongoing innovation in our product and service offerings. The long-standing strength reinforces our leading position in the global operations of health and wellness services at sea. I continue to be very proud of our exceptional team members worldwide for their unwavering commitment and the outstanding performance, which has led to our ongoing strong results.

As outlined in our earnings release, based on our first quarter performance and favorable momentum, we currently expect to deliver 10% growth in total revenues and adjusted EBITDA for the second quarter at the midpoint of our guidance ranges, excluding the results of exited and reorganized operations.

Turning to the highlights of the quarter. Total revenues increased 13% to $247.6 million. Income from operations increased 36% to $22.9 million. Net income increased 40% to $21.3 million and adjusted EBITDA increased 21% to $32.2 million. At quarter end, we operated health and wellness centers on 208 ships with an average ship count of 202 for the quarter. This compares to a total of 199 ships and an average ship count of 193 ships at the end of the first quarter of fiscal 2025.

Also at quarter end, our cruise ship health and wellness centers were staffed with 4,585 personnel compared with 4,240 personnel on vessels on March 31, 2025. We continue to focus on 4 key priorities to deliver this growth, delivering meaningful progress on each quarter to -- on each during the quarter. Let me share some of those highlights. First, we captured highly visible new ship growth with current cruise line partners. During the quarter, we introduced health and wellness centers on 2 new shipbuilds, Norwegian Cruise Line's Luna and Disney Adventure, which launched their maiden voyages in March.

These launches reinforce our strong positioning alongside leading global cruise operators and our commitment to elevating and differentiating our health and wellness centers to bring innovative and breakthrough technology to our guests. To this end, on NCL's Luna, we introduced TrueFlex, the new noninvasive muscle sculpting minispa service. As mentioned, we remain on track to introduce health and wellness centers on 6 new shipbuilds this year.

Second, we continue to expand high-value service and products. Our higher-value services, including MediSpa, IV therapy and Acupuncture continue to enhance onboard productivity and expand our addressable market. To this end, the quarter saw us deliver breakthrough innovation in our MediSpa services with the continued rollout of next-generation technology, including thermas, transculpt, CoolSculpting, IV therapy and Acupuncture LED light therapy. These new technologies generated strong double-digit growth for those treatments in Q1.

We will continue to scale these services across additional ships while introducing new offerings in support of travelers' increasing commitment towards longevity and wellness. Based on the success of TrueFlex on NCL Luna, we plan additional rollouts. During the quarter, we accelerated the rollout of NIAGEN plus NAD boosting intravenous solution across all 90-plus ships offering IV services following strong initial pilot results.

At quarter end, MediSpa services were available on 155 ships, up from 148 ships at the end of the first quarter of 2025. We expect to have MediSpa services on 157 ships by year-end 2026. Third, we focused on enhancing health and wellness center productivity. This is best reflected in the delivery of across-the-board increases in key operating metrics, including revenue per passenger per day, weekly revenue and revenue per staff per day.

Additionally, prebooked revenues grew 17% and remain a driver of sales productivity with these appointments, continuing to generate 30% more guest spend than services booked on board. Finally, staff retention at 77% improved, increasing 5 percentage points from Q1 of 2025, reflecting the strength of our onboarding engagement and retention initiatives. We're proud of our reputation as an employer of choice and strive to create an environment that fosters retention.

These and other onboard employee initiatives have contributed to the improved retention. Importantly, expense staff generates significantly higher revenue per day versus first staff contract. We continue to invest in developing our future onboard leadership and enhancing training programs, which are key drivers of sales productivity and overall onboard performance.

Fourth, we remain -- we maintained our strong and durable balance sheet and generated robust free cash flow. During the quarter, we returned $5.1 million to shareholders through our quarterly dividend and reduced debt by $1.3 million under our term loan facility. Our consistent free cash flow generation continued to support both our capital allocation priorities and investment in future growth.

Overall, we remain confident that 2026 will reflect another year for our company as we execute our proven and highly visible growth strategies by our exceptional team. We believe we are well positioned to further establish our leadership as the preeminent global operator of health and wellness services at sea, delivering value for our cruise line partners, elevated experience for our guests and strong returns for our shareholders. With that, I'll turn the call over to Stephen, who will provide more details on our first quarter results and guidance. Stephen?

Thank you, Leonard. Good morning, everyone. We had an outstanding start to the year with total revenues and adjusted EBITDA increasing 13% and 21%, respectively, from the 2025 first quarter. We set first quarter records for total revenues and adjusted EBITDA, and our performance included broad-based strength across all key operating and financial metrics, underscoring our unique capabilities in the operations of health and wellness centers at sea and destination resorts on land.

In addition, our asset-light business model and ongoing successful growth continue to deliver robust cash flow generation, which we utilized to invest in our future, further strengthen our balance sheet and return value to shareholders. Of particular note, we continue to accelerate investments by integrating AI technologies into our health and wellness center and shoreside operations intended to drive incremental revenue, cash flow and earnings growth.

Let me provide an update on these activities, beginning with revenue enhancement. We continue to refine our machine learning algorithmic engine to improve revenue and utilization, which is progressing well and is now available on 190 vessels. In addition, work continues on the implementation of a true dynamic price optimization model that we will start to introduce with prebooking of services for voyages.

We remain confident that adding these AI tools will improve utilization and yields by leveraging advanced recommendations and algorithmic optimization. As it relates to operational efficiency and scalability, we continue to experience early success with our AI assistant, which helps our managers receive and respond immediately to questions. This maritime agent is autonomously resolving 94% of tickets with response times in seconds and has now been deployed on 191 vessels.

Our work will continue with upcoming projects that relate to customer-facing chatbots. These will address, for example, guest product and service inquiries and automate certain customer service activities. Finally, automation and streamlining is part of our broad-based efficiency initiative to continue to explore and develop solutions to reduce repetitive work, simplify operations shoreside and improve scalability at our corporate locations.

While early, we continue to be very excited about the work we are doing, which is another example of our commitment to leverage cutting-edge technology to strengthen our market position and deliver value to shareholders. I will now share further details about our first quarter results that we reported earlier this morning.

Total revenues increased 13% to $247.6 million compared to $219.6 million for the first quarter of 2025, driven by a 4% increase in revenue days and a 2% increase in average guest spend and by fleet expansion from 2026 new shipbuilds, contributing $23.1 million, $5 million and $1.2 million, respectively, to the increase in total revenues, of which $5.4 million was attributable to increased guest prebooked services.

Growth in our maritime total revenues was offset by a $1.2 million decline in destination resorts total revenue, partially due to the closure of hotels where we had previously operated. Cost of services increased $20.2 million attributable to the $25 million increase in service revenue compared to the first quarter of 2025. Cost of product increased $2.5 million attributable to the $2.9 million increase in product revenues compared to the first quarter of 2025.

Administrative expenses were $6.2 million compared to $4.2 million in the first quarter of 2025. This increase was primarily due to $1.9 million in third-party fees for certain management and logistics services as a result of our previously announced restructuring, which were previously performed internally by company staff and as such, the related costs have shifted from salary benefit and payroll taxes to administrative expenses. Salary benefit and payroll taxes were $8.4 million compared to $11 million in the first quarter of 2025.

The decrease was primarily attributable to the nonrecurrence of $2.5 million in separation-related expenses incurred during the first quarter of 2025 associated with the termination of the company's former Chief Commercial Officer. The variance also reflects a reduction in internal personnel costs in the first quarter of 2026, resulting from the transition of certain management and logistics services to third-party providers, as I just noted, partially offset by higher merit and incentive-based compensation.

Net income was $21.3 million or net income per diluted share of $0.21 as compared to net income of $15.3 million or net income per diluted share of $0.15 for the first quarter of 2025. This increase was primarily attributable to a $6 million improvement in operating income and the nonrecurrence of the aforementioned $2.5 million.

Adjusted net income was $28 million or adjusted net income per diluted share of $0.27 as compared to adjusted net income of $22.6 million or adjusted net income per diluted share of $0.22 for the first quarter of last year. Adjusted EBITDA was $32.2 million compared to adjusted EBITDA of $26.6 million in the first quarter of 2025. 2025 included $1.1 million of nonrecurring cash severance expense.

Turning to the balance sheet. We continue to possess a strong balance sheet at quarter end with total cash of $17.3 million after giving effect to paying $5.1 million in quarterly dividends and repaying $1.3 million of our term loan facility. In addition, we had full availability of our $50 million revolving line facility, giving us total liquidity of $67.3 million as of March 31, 2026. Total debt, net of deferred financing costs was $82.8 million at quarter end. Also at quarter end, we had $37.5 million remaining on our $75 million share repurchase program adopted in April 2025.

We remain focused on disciplined capital allocation, supported by our strong cash flow generation and balance sheet flexibility. We will continue to prioritize investing in the business, returning capital to shareholders through our quarterly dividend, opportunistically repurchasing our common shares and reducing debt while maintaining the flexibility to pursue additional opportunities to enhance shareholder value over time.

As it relates to guidance, for the full year 2026, we now expect total revenue in the range of $1.014 billion to $1.034 billion and adjusted EBITDA in the range of $129 million to $139 million. This represents growth of 9% at the midpoint of the guidance ranges for both metrics. Please keep in mind that fiscal 2025 reported total revenues includes $23 million associated with the reorganization of operations in the United Kingdom and Italy, and the exit of land-based operations in Asia, all previously announced.

For the second quarter of 2026, we are introducing guidance for total revenue in the range of $257 million to $262 million and adjusted EBITDA in the range of $32.5 million to $34.5 million. This represents growth of 10% at the midpoint of the guidance ranges for both metrics. This guidance reflects our confidence in our ability to deliver sustained momentum and the visibility of our growth pipeline while acknowledging the dynamic environment we find ourselves in. With that, we shall open the call for questions. Robert, if you could please take over. Thank you.

[Operator Instructions] Our first question comes from Randy Konik with Jefferies.

I guess, first, I just want to get some perspective on the rise in higher-value services that you talked about. I know you've added more MediSpas to more ships over time. But can you give us some perspective on what -- how that penetration has changed, let's say, high value versus low value or traditional services? How that's kind of morphed over the last couple of years? And are there any particular high-value services that the consumer is choosing?

And when you look at the penetration today versus maybe where it was a year or 2 ago on a same-store basis, where could we take high-value services from a penetration standpoint as a percent of total services given? Where do you think that goes from here? And because that could provide some nice lift in AUR going forward?

Yes. Thanks, Randy. I mean, obviously, some good observations there. We continue to innovate and stack new services into MediSpa services, which are having and are being very well received and the spend continues to improve across specifically the new technologies, which I mentioned like the LUNA, the [ Trueflex ], some of the Sage, the FLX and certainly the NAD, IVs that we've introduced, all of this is helping to produce better spend in our MediSpas.

And as you know, we continue to roll out another 5 or 6 this year, and we will continue to add some of these higher-end services. So extensively, we've moved away from just offering injectables and fillers to a complete menu of IVs and other aesthetic services, but it still shows that even at the higher price points, some of these new technology-driven services are having a very high impact in terms of demand, and we're very thrilled with it. So we continue to roll out as fast as we can.

Super helpful. Just one last question. You made a leadership addition in -- for the resort spas, I guess, a couple of months ago. Maybe give us some perspective on that individual and what your plans are long term for that piece of the business?

Yes. So we added a new person in resorts to drive business development and strategy. And thus far, only 60 days in, we've seen a potential pipeline that she's working on, which is very exciting. Hopefully, we can convert some of these leads that we have in the pipeline, which is much more than we had before.

And so the strategy in bringing her on board was now to take a look -- a much harder look and put much more energy and investment behind finding new opportunities within the U.S. and Caribbean, not the Asian market, which we're winding down. And so we're very excited with the early results and early indications of some of the leads that she's brought to the business. And I think that's going to be a decent driver. We saw resorts certainly perform better in the first quarter versus Q1 of 2025. So yes, all around, very encouraged by the early results since she joined.

Our next question comes from Steve Wieczynski with Stifel.

So Leonard, I want to ask about the improvement in productivity, especially around that revenue per staff per day. Wondering if you can give a little bit more detail as to what are some of the things that are actually driving that metric right now? And maybe help us think about how much more upside do you think you can kind of extract from a productivity perspective moving forward?

Yes. Steve, look, I certainly think some of the newer ships that we introduced last year, plus similar ships in the fleet with these incredible spas, many spa facilities, thermal suites, are all helping to drive that additional revenue per passenger per day as well as the average revenue spend from guests. So it seems that all the innovation is taking well, and we pilot these, obviously, to make sure they do.

So I think it shows that even at the high end of the range of some of these med spa service, Acupuncture red light therapy, we continue to see high demand. So it's a healthy increase, 6% productivity increase. We're thrilled with that, but I think a large part of it is the bigger spas, larger spas and certainly, our innovation platform continues to drive additional spend.

Okay. Got you. And then I want to ask about guidance, probably more so for the back half of the year. I guess what we started to see at this point is some softness. And I think the cruise lines would say this is your cruise partners would say this as well in terms of some softness in that North American to Europe demand and a slight uptick in cancellations again from that North American to Europe guest. So wondering if you guys have contemplated any slowdown in that European demand in the back half of the year or in your guidance? Or it's something you're just not overly concerned with at this point?

We're certainly cognizant of the geopolitical backdrop, which is certainly not improving. And I'm sure concerns have caused some people perhaps to cancel or hold off until they book versus last year. So I think we're certainly hearing from the cruise lines, and I'm sure you are as well that there have been cancellations, which is understandable.

But I don't know. It seems like it can still continue to book through the end of May or June. We'll see. I mean maybe the geopolitical situation changes. But we've thought about this and included it as part of the guidance in the back half. So it's not that we didn't consider that there could be some potential drop-off in demand, but our guidance includes that.

Steve, obviously, bear in mind, as you're very well aware, generally, we're servicing about 11% of the guests on board. And so that provides us with a layer of insulation against some of that softness should it occur on the one hand. And then on the other hand, the reality is we've seen over time that no matter what happens in the world, the cruise lines are excellent marketers and they fill their ships to capacity day in and day out. So while we are aware of it and we have taken it into account, I think we'll get through it.

Our next question comes from Max Rakhlenko with TD Cowen.

On a really nice quarter. So I just want to touch on first the callout in seemingly improving prebooking revenues. So what was the unlock in the quarter? And what does it inform you of where it can go over the medium term? And then if you can tie just comments on AI, as I know that, that's something that you're working on for prebooking as well.

Yes. So prebooking services, as I mentioned, were up 17%. The reason it's kind of flattish at the 22% is fundamentally just because we don't include some of the services in men's spa, acupuncture in there, which we're starting to consider whether we can include some of that in the prebooking menu. And we probably will move to that as we start to move towards a more dynamic pricing, AI-driven discount dynamic model over time, which Stephen mentioned earlier on. So that's certainly helping drive that additional spend because it's up so much more than it was last year, but it's still flat, which means the rest of the business continues to grow nicely as well.

And Max, by way of clarification, the AI initiative specifically as it relates to dynamic pricing on prebooking is not yet in play. So anything that you're seeing thus far is not influenced by that.

Right. Yes. That's helpful. And then...

Go ahead, Mak. Sorry.

I was just going to ask, so you guys touched on looking to do seemingly more in wellness and longevity. Obviously, that's a key theme across a number of verticals. So just curious, what do you see as the top opportunities? And I know that we've long discussed potentially getting in some services where a customer starts something on the ship and then they potentially continue using it once their vacation ends. So just curious if you could touch on both of those topics and what we could see ahead.

We remain very focused on the longevity and health and wellness vertical of our business, which is included right now in MediSpa. I think there are things that we're working on trying seeing and testing to see if, in fact, we can layer it in. If and when we do, we'll tell you about it, but there's certainly a lot of things and opportunities that we're looking at with respect to engaging with the passenger on board through seminars, et cetera, on the longevity side and then continuing with certain therapies, supplementation, et cetera, post cruise.

I think that's certainly the direction we will go in. We're just sorting through what the right opportunity is and the right vehicle to do it in. It does not mean we need to do M&A to do that. We can do it through a joint venture or a partnership. So those are the things that we're looking at right now, but we're just not ready to execute or pull the trigger on any one of them that we're considering. But I can tell you it's very exciting.

Our next question comes from Gregory Miller with Truist Securities.

I'd like to ask a couple of questions as it relates to the geographies of where your ships are located this year. And to start off with 1Q, there is a greater concentration with Caribbean routes. And I'm curious how impactful was a higher concentration of Caribbean itineraries to your 1Q performance?

Yes. So we love Caribbean performance. It's the best for us. North American passengers, definitely the best spenders on a global basis. So concentration, as we've mentioned before, in the Caribbean is not a negative for us. Now how that impacts, obviously, the different cruise line banners is different to us, but we certainly love being in the Caribbean because it gives us the 7-day program model, which is the most effective for us.

Okay. Shifting region -- Stephen, did you want to say something?

No, go ahead.

Shifting to Europe. I'm curious, I'm not sure if this has been discussed in prior earnings calls. But when I think about what's going on in the Middle East today and if there are cruise passengers that might shift from, say, an Eastern Med itinerary to a Western Med or Northern Med or Northern Europe, is there any material difference in terms of the quality of earnings from, say, Eastern Mediterranean itineraries versus Western or Northern Europe?

The short answer is there's no difference to us.

[Operator Instructions] Our next question comes from Assia Georgieva with Infinity Research.

Congratulations on a fantastic quarter. Just to kind of follow up on that up 17% prebooked. Do you expect that to again be up in Q2 and possibly in Q3, you have Legend of the Seas coming in. So I imagine newer ships may create more excitement. They may attract people who are more experienced and willing to pay the premium for a new ship and therefore, kind of help the mix. Do you think that would be part of the plan?

I'll say, yes, it's definitely the strategy, and we continue to focus through every business quarterly review that we do with our banners on the opportunities within prebooking, improving the journey for the guest as they come on to the site. I think together with the fact that once we develop the AI dynamic component of this, it will also help us from a yield perspective. But our real focus is obviously getting the cruise lines as focused and providing the resources possible to help us with this, but it's improving. So they get it. It's just a question of resource allocation.

So we can expect a continuation of the year-on-year growth in sort of the mid-teens, that would be a reasonable...

I'm not sure whether it continues at this clip. Obviously, if it stayed at the same kind of double-digit rate that it's improving, certainly over the last 3 quarters, we'd be very, very happy with that.

Okay. I think that's fair enough. And sort of a related question. As you probably know, we track about 40,000 voyages every week. And what we noticed is in week 3, so March 20 or so, a significant price cut for World Caribbean International, to some extent, celebrity for European voyages for Q2. And of course, one concern is that as the quality of passenger comes down despite this being North American passengers in Europe, that it may impact you somewhat. Have you seen any of that during the month of April? I just wondered if -- and it seems to be very much a Q2 phenomenon. Q3 seems much better. So I just wondered if you saw any of that.

Yes. No, we've certainly read the same headlines and sort of the analyst reports on what's going on with Europe second quarter. We have not -- the ships -- a lot of the ships have started to reposition to Alaska and Europe at this point. And the early indications are is that we're certainly using every marketing tool necessary when necessary, if not necessary, we're not going to discount any more than we need to. And so we're monitoring it very closely, but thus far, we've seen no impact of a lower passenger perhaps not going to Europe. But then again, as we mentioned, we focus on the best 11% every single week, week in and week out to produce the results that we do. So I think we're going to be fine.

Fair enough. And last question, again, kind of a follow-up to Europe. One of your banners is moving away from the longer 10, 11, 14-night itineraries. And you just mentioned the sweet spot of 7 nights, especially in the Caribbean. Should that help somewhat? Or is Europe a different animal given how port of the itineraries are? Or is it still marginally helpful, I wonder?

Marginally helpful. I mean we think that 7 days is the best sweet spot because over the years and certainly the data suggests that the spend doesn't improve on a longer cruise. It's just the same wallet spread out over more days. So we love 7-day cruising.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Leonard Fluxman for closing comments.

All right. Thank you again for joining us today. We look forward to speaking with many of you at upcoming investor conferences and when we report our second quarter results in July. Thank you for joining us today.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Good morning, and welcome to the OneSpaWorld Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Allison Malkin, Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to OneSpaWorld's Fourth Quarter and Fiscal Year 2025 Earnings Call and Webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements.

These forward-looking statements reflect our judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our fourth quarter and fiscal year 2025 earnings release, which was furnished to the SEC today on Form 8-K.

We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. An explanation of these metrics can be found in our earnings release issued earlier this morning. Joining me today are Leonard Fluxman, Executive Chairman and Chief Executive Officer; and Stephen Lazarus, President, Chief Operating Officer and Chief Financial Officer.

Leonard will begin with a review of our fourth quarter 2025 performance and provide an update on our key priorities for 2026. Then Stephen will provide more details on the financials and guidance. Following our prepared remarks, we will turn the call over to the operator to begin the question-and-answer portion of the call.

I would now like to turn the call over to Leonard.

Thank you, Allison. Good morning, and welcome to OneSpaWorld's Fourth Quarter and Fiscal Year 2025 Earnings Call. It's a pleasure to speak with you all today about our record fourth quarter. The period capped a year of exceptional performance underpinned by innovation across our global operating platform and the delivery of extraordinary guest experiences and excellent results for our cruise line and destination resort partners.

During the quarter, we advanced our strategic priorities, driving growth in key operating metrics and introducing 2 new ship builds. This served to further cement our market leadership and resulted in double-digit growth in total revenues and adjusted EBITDA. Our unique capabilities and the successful execution of our strategy have produced 19 consecutive quarters of year-over-year growth or fourth consecutive year our record performance of both metrics.

We continue to identify ways to elevate our positioning, increase efficiency and accelerate growth. Innovation, AI and the reorganization of certain operations that year held included the strategic decision to exit land-based health and wellness centers in Asia and reorganized operations in the United Kingdom and Italy have us poised to achieve this objective. We begin 2026 even more strongly positioned to maximize our powerful standing as the preeminent operator of health and wellness centers at sea.

I'm extremely proud of the team that assisted in delivering the year-end equally confident that the year ahead will represent another year of outstanding performance. At year-end, we operated health and wellness centers on 206 ships with an average ship count of 199 for the quarter. This compares with a total of 999 ships at year-end and an average ship count of 188 ships in fiscal 2024. We -- also at year-end, we had 4,582 cruise ship personnel on vessels compared with 4,352 cruise ship personnel and vessels at year-end in fiscal 2024.

Along with our strong financial results, the quarter year and year included noteworthy progress towards our key strategic priorities. Let me share some of those highlights with you. First, we captured highly visible new ship growth with current cruise line partners. We continue to solidify our market leadership, introducing 2 new health well centers, the board 2 new shipbuilds Disney Destiny and Star Sika during the quarter, which brought our total ship build to 8 for the year.

In 2026, we'll introduce health and wellness centers on 6 new ship builds 3 of which are expected to commence voyages in the first half of the year. Second, we continue to expand higher-value services and products. These higher-value services include medispa and acupuncture, to name a few, increases our addressable market and help to grow some shipper revenue performance. We continue to introduce these services to more ships and expand offerings with the latest innovations and adding to our growth.

In addition, we continue to elevate the innovation in our MedSpa services with the expansion of further rollout of next-generation technology with [ the March ] FLX CoolSculpting Elite and acupuncture LED, which offer improved results and reduced treatment time by up to 50%. These new technologies generated between 23% and 40% revenue growth in Q4 versus last year.

In addition, the adoption of LED light therapy with acupuncture remains a high conversion add on to treatment. At year-end, Medi-spa services were available on 150 seeships, up from 147 ships at year-end of fiscal '24. We expect to have medispa offerings on 157 ships by year-end 2026. Thirdly, we focused on enhancing health and wellness center productivity. This is best reflected in the delivery of across-the-board increases in key operating metrics, including revenue per passenger per day, weekly revenue, pre-cruise revenue and revenue per staff per day.

Our unique ability to identify onboard and retain staff is leading to this performance. We continue to be known as a great place to work and take pride in being a desired employer striving to create an environment that fosters retention. These and other onboard employee initiatives have led to a 4 percentage point increase in staff retention versus 2024. Importantly, experienced staff generates significantly higher revenue per day versus first stop contract.

And lastly, we possess a strong and durable balance sheet, which, combined with our ongoing successful growth enabled us to advance each of our capital allocation objectives in the quarter. These are invest in our future growth, return value to our shareholders and reduce debt. During the year, we returned nearly $93 million to shareholders during the year through our stock buyback and quarterly dividend and reduced outstanding debt.

Our asset-light business model delivers consistent after tax free cash flow. With this, combined with our positive long-term growth prospects, has made us poised to continue to advance our value creation objectives going forward. We remain confident in our ability to continue our strong performance in 2026. Our positive outlook is supported by the continued innovation of our product and service offerings and the unwavering commitment to service excellence by outstanding staff, further buoyed by the implementation of emerging AI technologies that enhance our unique global positioning.

These growth drivers are complemented by the contribution from the annualization of new ships that entered service in 2025, 6 of which commenced [ voyages ] in the second half of the year as well as the introduction of 6 new health and wellness centers beginning voyages in 2026. In summary, we believe our highly visible revenue growth, along with the continued discipline with which we execute our asset-light business model, positions us very well to deliver strong results for our stakeholders and shareholders in the near and long term.

As Stephen will share momentarily, we have reiterated our 2026 guidance and expect total revenues, excluding revenues associated with restructured operations and adjusted EBITDA to increase high single digits at the midpoint of the range.

With that, I will turn the call over to Stephen, who will provide more details on our third quarter financial results and guidance. Stephen?

Thank you, Leonard. Good morning, everyone. We ended the year on a high note, delivering record performance in total revenues and adjusted EBITDA in the fourth quarter and continued strong and predictable cash flow generation. This record performance reflects our investment in breakthrough technology applications across our business, reinforcing our market-leading strengths and deepening our cruise line and resort partnerships.

At year-end, we implemented strategic actions to focus operational and capital investment on our highest growth and most profitable operations, exiting land-based health and wellness centers in Asia and reorganizing operations in the United Kingdom and Italy. In addition, our initiatives in AI will serve to accelerate our strategic growth initiatives and increase efficiency, further building our revenue and profitability growth potential. Let me provide some highlights prior to reviewing our financials and guidance. First, as it relates to revenue enhancements. As I mentioned with our Q3 results, we have implemented a machine-learning algorithmic engine to improve revenue and utilization, which is progressing well.

In addition, we recently began work and allows us to implement a true dynamic price optimization model that we will start to introduce with prebooking. Today, we have over 11,500 itineraries that are open for prebooking, which makes it virtually impossible to have true dynamic pricing with only humans involved.

And we're confident that adding these genetic AI tools will improve utilization and yields. By leveraging advanced recommendations and algorithmic optimization, this initiative aims to unlock additional revenue and improve utilization. Second, on the operational efficiency and scalability side, we are seeing early success with our rollout of our onboard virtual assistant. This AI assistant, helps our managers receive and respond to questions immediately and meaningfully reduce health desk hours.

For example, this tool enables our managers to close voyages and start booking the next cruise faster than before. Currently, 80% of all questions are answered within seconds by the virtual assistant, which is compared to perhaps a day or more if only humans were involved. Our virtual assistance tool has now been deployed across 180 vessels, up from 40 vessels in the third quarter.

Third, automation and streamlining is part of our broad efficiency initiative to continue to explore and develop solutions to reduce manual work simplify operations shoreside and improved scalability at our corporate locations. Although still in the early stages, our steering committee needs regularly to analyze different metrics such as time to implementation, cost of implementation, potential impact and difficulty, return on investment and the prioritization of where to focus next.

This is very exciting work for all of us, has strong buying across our organization, and we hope will further enhance productivity, operational scalability and our key operating metrics over time. Overall, our AI initiatives demonstrate our commitment to leveraging cutting-edge technology to strengthen our market position and deliver value for our shareholders.

Turning now to a review of the fourth quarter and fiscal year, starting with the quarter. Total revenue increased 11% to $242.1 million compared to $217.2 million for the fourth quarter of 2024. Growth was driven by fleet expansion from 2025 new ship builds, a 2% increase in revenue days and a 1% increase in average gas spend contributing $15.5 million, $8.7 million and $2.1 million, respectively, the increase in total revenues. Of this $2.8 million was attributable to increased gas spend from prebook services. Growth in our Maritime total revenue was offset by a $1.3 million decrease in destination resorts total revenue partially due to the closure of hotels where we had previously operated.

Cost of services increased $18.5 million attributable to the $21.5 million increase in service revenues compared to the fourth quarter of 2024. Cost of product increased $3.4 million attributable to the $3.4 million increase in product revenue compared to the fourth quarter of 2024. -- a $0.3 million quarter-over-quarter increase in freight expense related to the timing of purchases and $0.3 million of nonrecurring inventory write-off charges in the fourth quarter of 2025 related to the exit from its -- from our land-based health and wellness centers in Asia.

Admin expenses were $4.9 million compared to $5.8 million in the fourth quarter of 2024, with the decrease being primarily attributable to higher professional fees incurred in the prior year quarter, including approximately $700,000 related to incremental public company costs such as Sobeys [ Oly ] compliance. Salaries, benefits and payroll taxes were $8.9 million compared to $9.3 million in the fourth quarter of 2024.

This decrease was primarily attributable to lower incentive-based compensation of approximately $500,000 in compared to the fourth quarter of prior year. Restructuring expenses were $2.7 million in the fourth quarter of 2025 attributable to the aforementioned reorganization of operations in the United Kingdom and Italy and the exiting of resort health and wellness operations in Asia. Long-lived asset impairment was $3 million compared to $400,000 in the fourth quarter of 2024. due to exiting resort operations in Asia, the fourth quarter of 2025 included a $2.8 million impairment charge with respect to the value of associated long-lived assets. $2.2 million attributable to intangible assets and $600,000 attributable to property and equipment and right-of-use assets.

Net income was $12.1 million or net income per diluted share of [ 12p ] as compared to net income of $14.4 million or net income per diluted share of [ 14p ] for the prior year. The decrease was primarily attributable to the recognition of these restructuring expenses and on of asset impairments totaling $5.7 million during the current quarter. partially offset by $4.4 million improvement in income from operations.

Adjusted net income was $24.3 million or adjusted net income per diluted share of [ 24p ] as compared to adjusted net income of $21.4 million or adjusted net income per diluted share of [ 20p ] in the fourth quarter of prior year. And finally, adjusted EBITDA was $31.2 million compared to adjusted EBITDA of $26.7 million in the fourth quarter of 2024.

For the fiscal year, total revenue of $961 million increased 7% compared to $895 million from the prior year. Adjusted net income rose 15% to $102.9 million. or multiline per diluted share from adjusted net income of $89.7 million or $0.85 per diluted share in 2024. And adjusted EBITDA increased 10% in to $123.3 million as compared to adjusted EBITDA of $112.1 million in fiscal 2024.

Our strong balance sheet included total cash of $17.5 million at year-end, reflecting the disbursement of $17.5 million throughout the year in quarterly dividend payments, investment of $75.4 million to repurchase $3.9 million of our common shares and payment of $50 million on our term loan. In addition, we had full availability of our $50 million revolving line of credit, giving us total liquidity of $67.5 million at year-end.

Total debt, net of deferred financing costs was $84 million at December 31, 2025, compared to $96 million at December 31, 2024. Also at quarter end, we had $37.5 million remaining on our prior $75 million share repurchase authorization. We expect the disciplined execution of our growth initiatives and strong cash flow generation driven by our asset-light business model to enable the payment of our ongoing quarterly dividend while evaluating opportunities to repurchase our shares and retire debt. We believe this positions us well to create long-term value for our shareholders.

Turning now to guidance. We are reaffirming our fiscal 2026 outlook and begin the year with strong momentum and confidence to deliver another record performance. Based on our market outlook, outstanding team proven strategies and execution, scaling innovations, new ship builds and strong capitalization, we expect fiscal 2026 total revenues to exceed the $1 billion mark for the first time.

Total revenues are expected in the range of $1.01 billion to $1.03 billion, representing high single-digit increases at the midpoint of our guidance range from actual 2025 results, excluding exited and reorganized operations mentioned previously. Adjusted EBITDA continues to be expected in the range of $128 million to $138 million, representing high single-digit increases at the midpoint of our guidance from actual fiscal 2025 results.

And for the first quarter of 2026, we expect total revenue in the range of $241 million to $246 million, with adjusted EBITDA expected in the range of $30 million to $32 million. Please bear in mind that exited and reorganized revenue contributed $5.3 million to first quarter 2025 revenue and $23 million to fiscal 2025 revenues.

And with that, we will open the call up for questions. Gary, if you could take over, please.

[Operator Instructions] Our first question today is from Steve Wieczynski from Stifel.

This is Jackson Gibb on for Steve Wieczynski. I wanted to dig in a little further on the AI integration. And with another quarter under your belt, -- is there any more color you can give on the potential benefits you guys could realize from this investment, whether that's on the cost side or the revenue side?

And any updated thoughts on how that might impact margins? Up to this point, you guys have kind of talked about these initiatives starting to show up meaningfully in the second half of 2026. Is that cadence still accurate? And would we be correct to assume you have not factored in any of this potential impact to current full year guidance? .

Yes, Jackson. As previously mentioned and you reiterated, we did say that we will begin to talk about that after our second quarter results with more specificity. So -- we remain on track to do that. We are encouraged, obviously, by the initial results, and that is reflected in the incremental rollout of these initiatives, 2 vessels and starting of additional initiatives as well. So we remain pleased with where we're at. And to your last point, yes, our current guidance does not include potential impact from these initiatives.

Okay. Got it. And then switching gears for my follow-up. I was hoping to get a little bit more detail around how consumer trends are shaping up, specifically attachment rates and how you're going about discounting. Are you seeing any differences worth calling out in these metrics or anything that stands out as far as changes in spend patterns across different brands, geographies, ship sizes, et cetera. And then how are you thinking about your ability to take price throughout 2026 relative to price action taken in 2025?

So I'll address the last part first. as you know, in 2025, we effectively did not take service price increases. We do always continue to evaluate that. And if there's opportunity to do so. In 2026, we will certainly address an actional comments. Again, from a guidance perspective, we are not assuming any service price increases embedded at this point in time. We'll see how things play out.

With regards to the consumer, we had previously mentioned in the fourth quarter of last year, a little bit of softness in November, and we did not see that reoccur in December, which was great. So far year-to-date, we are definitely seeing overall higher prices being accepted by the consumer. So on a net basis, we are selling at a higher price. There may be slightly additional discounting. But at the end of the day, the net that's going to the customer offering, which remains high.

And it's also therefore a reflection of, as you will have noted, our first quarter guidance, which we feel good about and is about consensus, and we think is a reflection of what we anticipate going forward with the consumer.

The next question is from Gregory Miller with Truist.

I'd like to ask first about the dynamic price optimization model that you spoke about in your prepared remarks. Melissa, missed it on the -- in your remarks this morning, have you discussed in terms of detail in terms of the rollout? Are there certain banners or itineraries or vessels that you're going to start this implementation first? Or is this going to be a broader rollout across the fleet.

Specifically as it relates to that initiative, Greg, the first place we will begin with is actually on prebooking -- so effectively, it will cover 94% of the vessels that today are on that prebooking platform. I would like to say it's still relatively early stages. Obviously, we're excited about it because, as mentioned, the share volume of itineraries available on the prebooking platform, make it effectively impossible for humans to have a true dynamic pricing impact that can literally look at day-to-day even ultimately, hour to hour where we might on adjusted.

So are excited about it when we roll it out, the phases will be #1, pre-booking once we get that working and finalized, there will be a relatively quick rollout to the remaining vessels. But realistically, we're talking here into the back half of the year.

Okay. Shifting gears, I was on 1 of your ships recently. And I noticed that the spa menu appeared reformatted. It looked like the offers were perhaps more condensed and just different stylistically than what I've seen in the past. And I'm curious if you have any intentions of a broader rollout of reformatting your spa menus in terms of the offerings that you're presenting to passengers on board.

No. Actually, we took a very proactive approach in doing that. So I'm glad you noticed. We decided to condense and rather focus guest choice on sort of the more popular items versus a full Chinese menu of everything and anything as opposed to the top choices that everybody takes. But also a focus to moving people into specific price points and time slots. So it's a much more manageable and conversion into the higher treatment rates, particularly around face and body -- so I just think narrowing the aperture to the more popular treatments that we want to sell with a higher retail attachments is sort of the strategy and science behind a narrower mainly.

We have no intention of broadening it because at the -- from what we did and looked at it statistically, there was just no purpose in having an extensive menu that we did would have like 3 years ago.

Showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Leonard Fluxman for any closing remarks.

All right. Thank you, everybody, for joining us today. As Stephen mentioned, we've got off to a great start here in the first quarter and look forward to speaking with you all on our next investor call as well as conferences that we may attend through the first quarter entering the second quarter. So thank you, and look forward to speaking to you next time. Thank you.

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

Good day, and welcome to the OneSpaWorld Third Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Allison Malkin of ICR.

Please go ahead.

Thank you. Good morning, and welcome to OneSpaWorld's Third Quarter 2025 Earnings Call and Webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements. These forward-looking statements reflect our judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our third quarter 2025 earnings release, which was furnished to the SEC today on Form 8-K.

We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. An explanation of these metrics can be found in our earnings release issued earlier this morning. Joining me today are Leonard Fluxman, Executive Chairman and Chief Executive Officer; and Stephen Lazarus, President, Chief Operating Officer and Chief Financial Officer. Leonard will begin with a review of our third quarter 2025 performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and guidance. Following our prepared remarks, we will turn the call over to the operator to begin the question-and-answer portion of the call.

I would now like to turn the call over to Leonard.

Thank you, Allison. Good morning, and welcome to OneSpaWorld's Third Quarter 2025 Earnings Conference Call. It's a pleasure to speak with you all today to share our record third quarter results, which were delivered at the high end of guidance, marking our 18th consecutive quarterly period of year-over-year growth in total revenues and adjusted EBITDA. Our sustained rates of growth demonstrates the power of our complex global operating platform and our team's unwavering commitment to deliver exceptional experiences for our guests and outstanding performance for our cruise line and destination resort partners. In addition, our execution of our asset-light business model continues to generate strong free cash flow, enabling us to create significant value for shareholders through an increasing quarterly dividend, share repurchases, accelerated debt paydown and strategic investments across our operations.

Turning now to the highlights of the quarter. Total revenues, income from operations and adjusted EBITDA represented all-time records and net income was a third quarter record. Total revenues increased 7% to $258.5 million compared to $241.7 million in the third quarter of 2024. Income from operations increased 5% to $26.3 million compared to $25 million in the third quarter of 2024. Net income increased 13% to $24.3 million compared to $21.6 million in the third quarter of 2024, and adjusted EBITDA increased 6% to $35 million compared to $33 million in the third quarter of 2024. At quarter end, we operated health and wellness centers on 204 ships with an average ship count of 199 for the quarter. This compares with a total of 196 ships and an average ship count of 195 ships at the end of the third quarter of fiscal 2024. Also at year-end -- at quarter end, sorry, we had 4,466 cruise ship personnel on vessels compared with 4,204 cruise ship personnel on vessels at the end of the third quarter of fiscal 2024.

The quarter marked meaningful progress in our key priorities. Let me share some of those highlights. First, we captured highly visible new ship growth with current cruise line partners. We continue to solidify our market leadership during the quarter, introducing new health and wellness centers on board for new ship builds during the quarter, Royal Caribbean Star of the Seas, Virgin Brilliant Lady, Princess Cruises, Star Princess and Celebrity Xcel. For the year, we remain on track to introduce health and wellness centers on to 2 additional new ships commencing voyages in the fourth quarter, giving us a total of 8 new ship builds in 2025. Second, we continue to expand higher-value services and products. These higher-value services, including MedSpa, IV therapy and Acupuncture to name a few, helped to grow sales productivity with strong double-digit increases in the quarter. We continue to introduce these services to more ships and expand offerings with the latest innovations in adding to our growth.

In addition, we continue to elevate the innovation in our medi-spa services with the expansion of our rollout of next-generation technology with the Thermage FLX and CoolSculpting Elite, which offer improved results and reduced treatment time by up to 50%. These new technologies generated between 40% and 60% growth for these treatments in Q3 versus last year. In addition, Acupuncture remains in high demand with equally strong growth rates. The adoption of LED light therapy within this service remains a high conversion add-on treatment. At quarter end, Medi-Spa services were available on 150 ships, up from 144 ships at the end of the third quarter last year. We continue to expect to have Medi-Spa offerings on 151 ships this year. Third, we focused on enhancing health and wellness center productivity. This is best reflected in the delivery of across-the-board increases in key operating metrics, including revenue per passenger per day, weekly revenue, pre-cruise revenue and revenue per staff per day. Without a doubt, our unsurpassed ability to identify, onboard and retain staff is leading to this performance.

In fact, staff retention remains a key contributor to our consistent gains in operating metrics as experienced team members are driving incremental revenue through more effective customer recommendation. The quarter saw a 5-point increase in staff retention versus Q3 2024 with experienced staff generating significantly higher revenue per day versus first contract staff. We continue to take pride in being a desired employer and strive to create an environment that fosters retention. In addition, we continue to invest in best-in-class training and have recently redesigned our talent management processes to further support productivity and long-term growth in our operating metrics across all of our staff members.

Our enhanced sales training continues to fuel increases in the number of guests using the spa, service frequency, service spend and retail and average guest spend per guest. Fourth, we possess a strong and durable balance sheet, which, combined with our ongoing successful growth, enabled us to advance each of our capital allocation objectives in the quarter. These are to invest in future growth, return value to our shareholders and reduce debt. To this point, in the third quarter, we were active on our stock buyback. We paid our quarterly dividend and reduced outstanding debt. Additionally, as Stephen will share, the Board approved a 25% increase in our quarterly dividend payment to $0.05 per share, which reflects our company's consistent after-tax free cash flow generation and positive long-term growth prospects. As we close out the year, we remain confident in our outlook with our business continuing its favorable momentum at the start of the fourth quarter.

In addition to the introduction of 2 new health and wellness centers beginning voyages through year-end, we are also excited by our developing initiatives employing emerging AI technologies to enhance our unique global positioning toward delivering increasing exceptional experiences for our guests and service to our partners. We believe this, along with the continued discipline with which we execute our asset-light business model, positions us well to deliver strong results for our stakeholders and shareholders in the near and long term. As Stephen will share momentarily, we have increased our 2025 guidance at the midpoint of our previous ranges for annual revenue and adjusted EBITDA.

With that, I will turn the call over to Stephen, who will provide more details on our third quarter results and guidance.

Stephen?

Thank you, Leonard. Good morning, everyone. We are pleased with our third quarter performance, which included record results in total revenue and adjusted EBITDA and continued strong and predictable cash flow generation. We continue to expand our innovation, products and services and leverage our strong operating platform and technology enhancements to deliver strong revenue and profit growth while employing our balanced capital allocation strategy to reduce capital to shareholders. Fueled by our strong cash flow generation, driven by our capital-efficient asset-light business model that generates predictable strong free cash flow, we returned $4.1 million to our shareholders through our quarterly dividend payment and $17.6 million from the repurchase of 816,000 common shares during the quarter, while repaying $11.3 million on our term loan facility.

Also reflecting our positive long-term outlook, we opportunistically returned an additional $15 million to our shareholders from the repurchase of an additional 722,000 common shares thus far in the fourth quarter. And our Board approved a 25% increase in our quarterly dividend payment to $0.05 per share. Before I provide details on our third quarter results, I would like to provide additional perspective on our AI initiatives.

These initiatives are expected to deliver measurable improvements across key areas of our business with actions in place to enhance revenue, create operational efficiencies to drive greater profitability as we grow while increasing the speed of our decision-making through automation and streamlining of our business processes. Here are some highlights of each initiative. First, as it relates to revenue enhancement, we have implemented a machine learning-powered project designed to optimize yield and revenue, which is actively being tested on 40 vessels. By leveraging advanced recommendations and algorithmic optimization, this initiative aims to unlock additional revenue by optimizing utilization.

Second, operational efficiency. In this regard, we are seeing early success with our automated problem resolution and inquiry tool, which has now been deployed across 180 vessels. This technology has led to dramatic improvements in response times and reduce the need for help desk hours. Third, automation and streamlining, which is part of our broader efficiency initiative to continue to explore and develop automation solutions to reduce manual work and streamline operations. Although still in the early stages, these efforts are expected to enhance productivity and operational scalability over time and are expected to further increase our key operating metrics. Overall, our AI initiatives demonstrate our commitment to leveraging cutting-edge technology to strengthen our market position and deliver value to our shareholders.

Turning now to a review of the fourth quarter -- third quarter. In total, for the third quarter, total revenue increased 7% to $258.5 million compared to $241.7 million for the third quarter of 2024. The increase in service revenue and product revenues were driven by a 4% increase in average guest spend, fleet expansion due to 2025 new builds and a 1% increase in revenue days, which positively impacted revenues by $7.8 million, $6.8 million and $3.2 million, respectively. Contributing to the increased volume and spend was $2.7 million in increased prebooked revenue at health and wellness centers on board, and this was offset by a $1 million decrease in our destination resort revenue, partially due to the close of hotels where we had previously operated. Cost of services increased $12.5 million attributable to the $13.6 million increase in service revenue compared to the third quarter of 2024.

Service margin was a healthy 17.3%, up versus both the first and second quarter of 2025, but marginally below the same quarter a year ago, simply due to mix. Cost of product increased $2.7 million attributable to the $3.2 million increase in product revenue. Salary, benefits and payroll taxes were $8.4 million compared to $8.6 million in the quarter prior year. Net income was $24.3 million or net income per diluted share of $0.23 compared to net income of $21.6 million or net income per diluted share of $0.20 for the third quarter of 2024. The change was primarily attributable to a $1.3 million increase in income from operations and a benefit from a $1.1 million decrease in net interest expense. The $1.1 million decrease in net interest expense was primarily due to lower debt balances and lower effective interest rates.

Adjusted net income was $30.4 million or adjusted net income per diluted share of $0.29 as compared to adjusted net income of $27.3 million or adjusted net income per diluted share of $0.26 for the third quarter of 2024. And adjusted EBITDA was $35 million an improvement from $33 million in the third quarter of 2024. Moving on to the balance sheet. We continue to possess a strong balance sheet at quarter end with total cash of $30.8 million after giving effect to the repayment of $11.3 million in debt, repurchasing $17.6 million of our common shares and paying $4.1 million in support of our quarterly dividend.

In addition, we had full availability of our $50 million revolving line facility, giving us total liquidity of $80.8 million as of September 30, 2025. Total debt was $85.2 million at September 30, 2025, compared to $98.6 million at December 31, 2024. Also, at quarter end, we had $57.4 million remaining on our $75 million share repurchase authorization. And post quarter end, we repurchased an additional 722,000 outstanding common shares, returning another $15 million to shareholders. Therefore, as of today, we have $42.4 million remaining on that $75 million share repurchase program.

We continue to expect the disciplined execution of our growth initiatives and strong cash flow generation driven by our asset-light business model to enable the payment of ongoing quarterly dividends while evaluating opportunities to repurchase our shares and retire debt. We believe this positions us well to create long-term value for our shareholders. Turning now to guidance. As we look ahead, we are excited about our business and continue to expect total revenue for fiscal 2025 to increase in the high single-digit range, reflecting our strong year-to-date performance and our positive outlook as well as the addition of 2 new health and wellness centers on cruise ships beginning voyages during the fourth quarter. Adjusted EBITDA is now expected to increase by 10% at the midpoint of our guidance range as we deliver increasing productivity from our enhanced products and services.

For the full fiscal year 2025, we expect total revenue in the range of $960 million to $965 million, which represents an increase of 8% at the midpoint versus fiscal year 2024 and adjusted EBITDA is expected in the range of $122 million to $124 million, which represents an increase at the midpoint of 10% versus fiscal 2024. For the fourth quarter of 2025, we expect total revenue in the range of $241 million to $246 million and adjusted EBITDA is expected in the range of $30 million to $32 million. And with that, we will open up the call for questions. Bailey, if you could please do that.

[Operator Instructions] Our first question comes from Steven Wieczynski with Stifel.

So Leonard or Stephen, I'm wondering about how we should think about the benefits from some of this AI technology you guys have been implementing. And what I mean by that is, if we look at margins in the second quarter, they were up about 70 basis points year-over-year. And in the third quarter, they were down about 20 basis points. So not sure if you can help us think about maybe the cadence of how margin expansion or contraction should look moving forward as you kind of go through and implement some of this technology.

So as we talked about last quarter when we started talking about some of these initiatives, we've mentioned then and we continue to say today that it's likely the second quarter of next year when we start to become more specific about one of -- what those expected improvements will be. We are encouraged with what we see thus far, but frankly, it's just too early to commit to specific increments, et cetera, but we hope to be able to do that by the second quarter of next year.

So as we think about the fourth quarter and the first quarter, basically assume nothing is in there, correct?

That would be a good assumption to assume that it's consistent with the cadence that it's been tracking at and then improvements thereafter.

Okay. And then, Leonard, I don't know if this is for you or still, Stephen, but I want to understand maybe spend patterns a little bit more on board. Maybe if you could give us some more color on what you're seeing more so in real time in terms of guest spending. I'm wondering if you've seen any changes through October, whether that's through attachment rates, a difference in spending across land-based versus maritime or really any kind of change in demand for higher-end services versus traditional treatments. Just you're just trying to understand and get a feel if guests are starting to change their behaviors at all.

Yes, Steve, I'd tell you our PPDs, our revenue per passenger per day, everything is positive. The spend is up, attachment rates are consistently good, pre-cruise revenue consistently staying strong. I mean we have not seen any kind of material reduction in spend. I mean we also look at what we're deploying in terms of marketing tools, discount rates, additional incentives, and it's very consistent with what we've seen over the past few quarters. So in short, we haven't seen anything materially change for our business so far.

Our next question comes from Sharon Zackfia with William Blair.

I think you mentioned that service margin was down a little bit on mix. Could you kind of clarify what's happening with the mix?

Yes. It's really just a function, Sharon, of where -- which cruise lines are generating slightly different revenue and the agreements that we have with those cruise lines. It's not something that was necessarily unexpected to us and nor is it something that we think based upon what we're seeing in October flows through into October. So we would expect to see margins continue to be strong. And as you know, right, I mean, 17.3% was very healthy. That was versus a second quarter of 16.6% in the first quarter of 17%. So I think we should focus on the positive there, which is that it is higher than both of those quarters, although just marginally down versus the third quarter of prior year.

Yes. I just wanted to clarify that you weren't seeing passengers kind of shift down into kind of lower price point services, but it sounds like it's ship mix, not necessarily the actual...

We're definitely not seeing them shift down. And remember, our model provides us with a degree of insulation in that we're only servicing a small proportion of the customers on board to the extent that those customers that want to spend money, enjoy their vacation and experience the spa, we're still absolutely seeing that.

Great. And then I wanted to ask a follow-up. We've been getting a lot of questions on the global minimum tax. Can you kind of talk about OneSpaWorld and how or if you will be impacted by that beginning next year?

Our expectation remains that we will not be impacted. We are still finalizing and are very deep in the process of doing some reorganizational changes to make sure that, that happens. But upon successful implementation of those changes, at this point in time, we continue to believe that we would not be impacted by global minimum income taxes.

Our next question comes from Max Rakhlenko with TD Cowen.

Nice job in the quarter. So first question, in the release, you noted that you saw a noteworthy increase in guest counts, frequency as well as average spend. Just what do you attribute that to? And then is there a way to think about the magnitude of the step-up that you may be seeing?

We -- say that again, Max. We saw an increase in traffic, which is the amount of passengers we saw, which is a function of some of the newer ships coming into service in the fourth quarter, obviously. And then the penetration rate actually moved up positively as well from the second quarter. So that just meant we were getting more of that traffic on the ships into the spas and the penetration rate increased moderately, which is a good sign. But we're also focusing the staff on facility utilization, as we mentioned on our last call, last quarter, which is how do we better utilize not only our staff, but the facilities themselves on sea days, port days, what we can do to take and try-train staff to fill in the gaps and get better utilization.

So where we see the demand remaining high, we see the utilization maxed out, we will go to the cruise lines and have a discussion not just on real estate, but more importantly, on getting an extra birth, which is never an easy discussion, but something that sometimes yields an increase. And if it does, obviously, and we show them where the demand comes from, it will be a great thing to have. So now we have the data to support the facility utilization. And as I mentioned before, it's a metric that we will produce at some point in the future, probably at the end of second quarter next year. But it's something that we're focusing on internally to improve that metric itself.

Got it. That's really helpful. And then, Stephen, how are you thinking about the right level of cash to hold on the balance sheet in the context of likely continued declines in interest rates? Should we assume that you're going to put more cash to work as what we saw both in 3Q and quarter-to-date? Or what's the plan ahead?

We'll continue to have a balanced capital allocation strategy. We like to keep $25-or-so million of cash on the balance sheet. But as you know, we do have a $50 million availability on the line of credit. And so I think the way we think about it is continued optimization of the capital allocation strategy for the near term, share repurchases would remain at the top of that -- on the top of the list. Opportunistically, though it's not programmatic, then the dividends, which, as you know, we increased by 25% now to $0.05 a quarter. And then if it makes sense, we'll pay down a little bit more of the debt or more over time, but that's the order of prioritization.

Our next question comes from Gregory Miller with Truist.

I thought I'd start off on a question on staffing. You mentioned in the prepared remarks that you redesigned the talent management process. Could you elaborate on the kind of changes you're implementing?

Yes. So we're focusing clearly, obviously, around solution selling. We're putting people into different modalities and not just sort of pinning them to one modality. So there's much more of a shared philosophy around where staff can be used, where before they'd be only used for one type of modality, which is allowing us, as I mentioned before, Greg, to get the better utilization out of our facilities. So the focus is not limiting staff just to one type of service where before we thought that might have maxed out the benefits of each of them just specializing. We see that it's better to use them across different modalities, so enhancing our facility utilization overall.

And then I'd like to shift over to the AI front. If I heard correctly, the revenue enhancement projects are on 40 vessels, which is an impressive ramp-up already compared to the piloting you were doing previously. But if I heard correctly, the operating efficiencies have been launched on 180 vessels so far. So I'm curious what's driving the disconnect of more focus at this stage on the AI implementation on the operating efficiency side versus the revenue enhancement side.

It's not a matter of more focus, Greg. It's a matter of the simplicity of rolling out one versus the other. The revenue enhancement is -- has more complexity and requires specific training for the managers on board, whereas the operational efficiency is rolling out apps, which are much simpler and can be shown how to use much more easily. So it's simply a matter of what is easier to be done.

Our next question comes from Drew May with Northcoast Research.

So a little bit of a calmer-than-expected hurricane season this year, but one saw a little more itinerary changes and extra sea days. Was there any tangible headwind or benefit you guys call out from storm activity during the quarter?

No, nothing tangible or material, Drew.

Okay. Got it. And then next question was a little bit of a step-up in the CapEx this quarter. Was that kind of related to the AI initiatives? Or is there anything else you guys could call out there?

No, those are related to the AI initiatives. We have talked about CapEx being at a slightly elevated rate this year and potentially next year as well as we make investments in those projects. So that was a big piece of it. There was a smaller piece related to rolling out some of this additional Medi-Spa equipment on board, but the majority is related to these projects.

Our next question comes from Assia Georgieva with Infinity Research.

Leonard, I wanted to follow up on your comment about adding an extra birth. I imagine with adding more staff, we might see the productivity metric come down in Q2, but that would be because of the structural change as opposed to actual productivity coming down. Is that fair? Just wanted to clarify.

Yes, it should not depress that metric. The only reason we would go to a cruise line and ask for an increased birth would be because we're not getting to the right level of penetration or productivity that we could if we had that staff member. So it would be purely accretive if we added it, not for the sake of just having it.

Correct. And again, I was trying to understand, so I don't overly focus on the metric, and I understand having more bodies, obviously, would be helpful to the overall revenue generation and penetration rates. My second question is, some of your banners seem to be making sort of a deployment shift not only in 2026, I imagine it will be in '27 and beyond to shorter voyages, including in Europe and the shift to more ships in the Caribbean and the Bahamas and also shorter voyages there. It seems that shorter voyages typically are a good thing for you. Is that the correct interpretation still?

They always -- they've always been very decent. And we try and look at 3, 4 as a 7. So we stagger it that way. We market it that way. We know on the 4-day, we've got a little bit extra time. So even though it's separate cruises, we try and structure that for the high demand periods or the at-sea period. So yes, I wouldn't say there's a material difference today than it was before. It's still -- they still prove out to be quite decent for us, yes.

So you don't see any net-net impact at this point?

Not really, no. I haven't seen anything so far, nor do we expect to see anything material.

And sort of related to that, with the further development of private island destinations, is that an opportunity to further build out your infrastructure on these private islands, basically the marquee ones? Can you discuss that a little bit?

Yes. No, we definitely are looking at it very seriously. We're talking to 1 or 2 of the banners who have additional islands that they're building out. I think there's an opportunity for us to do something alongside them. I think with the existing operations, we're looking at where we can add or improve the facilities on some of the older sort of islands. So we think there's tremendous opportunity for us to participate more so when these ships are calling at these fantastic slots in the islands, Mexico for Royal Caribbean. I mean all of them have a very nice island experience today and some are enhancing it, as you've seen with NCL and others, Royal announcing Santorini yesterday. I mean it's just very exciting because you see they're combining both the land and sea vacation and are meeting that expectation very well.

Santorini sounded really good when I heard that yesterday. So yes, it did catch my attention. And lastly, and I'll let you go. In terms of prebooked services, has that rate moved? I know it has been difficult sometimes to be fully integrated within the banner's internal prebooking engine, but they themselves seem to be doing a great job of increasing penetration, and I'm hoping that you are benefiting from that as well. Is that the case?

Well, I think it's encouraging certainly that prebooking is getting mentioned on particularly yesterday's call, I think they mentioned that it's close to 50% and continues to grow. For us, it's a high focus item. We talk about it in all of our business reviews. We have some initiatives that we're looking at in terms of AI for next year to help enhance the prebook. So I think for us, there's equally a stronger focus on the prebook because we know they spend up to 30% more than somebody who doesn't prebook. And I think prebooking is just going to continue to get stronger, not only for the cruise lines, but for us as well over time.

What is your current rate roughly, if you don't mind sharing?

It's about 22% of service revenue, which excludes Medi-Spa.

This concludes our question-and-answer session. I would like to turn the conference back over to Leonard Fluxman, Executive Chairman and CEO.

Right. Thank you all for joining us today. We look forward to speaking with many of you at our upcoming investor conferences, meetings and when we report our fourth quarter results in February. Thanks, everybody. Have a good one.

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