Carnival breaks quarterly revenue record

2023-10-15T19:46:17+00:00 October 15th, 2023|Finance|

Carnival Corp has reported record third quarter 2024 revenue with a strong earnings momentum.

In its results’ presentation, the highlights included –

*US GAAP net income of $1.07 bill, or $0.79 diluted EPS, and adjusted net income of $1.18 bill, or $0.86 adjusted EPS, exceeded the June guidance range, as did the adjusted EBITDA of $2.22 bill.

*Third quarter revenues hit an all-time high of $6.9 bill.

*Continued strength in close-in demand enabled the company to increase its net per diems guidance for the full year by a percentage point to about 7%, compared to 2019 (in constant currency).

*Booking volumes during 3Q23 and for September continued at significantly high levels.

*Carnival’s cumulative advanced booked position for 2024 is well above the high end of the historical range and at higher prices (in constant currency) than 2023 levels.

*Total customer deposits reached a 3Q23 record of $6.3 bill.

*The company now expects fuel consumption per available lower berth day (ALBD) for 2023 to be nearly 16% lower than 2019, better than previously expected.

*Carnival reduced its debt by nearly $4 bill from its peak in 1Q23 and ended the 3Q with $5.7 bill of liquidity.

“We delivered over $1 bill to the bottom line with revenue reaching an all-time high,” confirmed Carnival Corp’s CEO, Josh Weinstein (pictured). “Both revenue and earnings significantly exceeded expectations this quarter enabling us to take up expectations for the year.”

He continued, “The outperformance was driven by strength in demand, with both our North America and Australia segment and Europe segment equally outperforming expectations.

“It is gratifying to see the power of our portfolio deliver, as our continental European brands have stepped up nicely. Our demand generation efforts are working across all regions, as we have consistently been achieving quarterly net per diems well in excess of 2019 levels, while closing the occupancy gap by 11 points over the course of the year.

“I continue to be encouraged with our revenue trajectory heading into next year as we see no signs of slowing from our consumers,” he said.

For the first time since the resumption of guest cruise operations, GAAP net income turned positive, generating $1.07 bill, or $0.79 diluted EPS, marking a significant milestone.

While gross margin yields were down, compared to 2019, net yields (in constant currency) exceeded the strong 2019 levels.

Third quarter occupancy was 109%, better than the company’s expectations and a return to historical levels.

Gross margin per diems were down compared to 2019. Net per diems (in constant currency) exceeded 2019 levels, overcoming headwinds from the removal of St Petersburg, Russia as a marquee destination and were around one percentage point above the midpoint of the June guidance range.

Cruise costs per ALBD increased 8.9%, compared to 3Q19. Adjusted cruise costs excluding fuel per ALBD (in constant currency) increased 15%, compared to the same quarter of 2019, in line with June guidance.

Total customer deposits reached a 3Q record of $6.3 bill, surpassing the previous third quarter record of $4.9 bill (as of 31st August, 2019), by 28%.

Booking volumes during 3Q23 continued at significantly elevated levels, setting a new third quarter record for total bookings during the quarter.

Weinstein added, “We are maintaining strong momentum and continuing to build demand through our improved commercial execution. Booking volumes during the quarter were running nearly 20% above 2019 levels and multiples of our capacity growth, which has continued into September.

“This has helped us extend the booking curve even further, with our North American brands exceeding historical highs and our European brands essentially achieving pre-pause levels,” he said.

The cumulative advanced booked position for 2024 is well above the high end of the historical range at higher prices (in constant currency) than 2023 levels.

This aligns with the company’s yield management strategy to base load bookings, lengthen the booking curve and optimise net yields.

Weinstein explained, “Our booked position for 2024 is further out than we have ever seen and at strong prices. With less remaining inventory to sell, despite a 5% increase in capacity, we are well positioned to drive pricing higher and deliver strong yield improvement in 2024.”

For the full year 2023, the company expects:

  • Adjusted EBITDA of $4.1 bill to $4.2 bill, within the June guidance range, despite the $125 mill net unfavourable impact from fuel price and currency from June guidance
  • Occupancy of 100% or higher.
  • Net per diems (in constant currency) up around 7%, compared to 2019, one percentage point higher than the midpoint of June guidance, based on the continued strength in close-in demand.
  • Adjusted cruise costs excluding fuel per ALBD (in constant currency) at the high end of June guidance range.
  • Fuel consumption per ALBD to be nearly 16% lower than 2019, better than previously expected.

For 4Q23, Carnival predicted:

  • Adjusted EBITDA of $800 mill to $900 mill.
  • Net yields (in constant currency) up mid-single digits, compared to 2019 with occupancy in line with historical levels and net per diems (in constant currency) up 7% to 8%, compared to 2019.

Carnival Corp CFO, David Bernstein, commented, “We are accelerating our debt repayment efforts and aggressively managing down our interest expense. In just the last six months, we have reduced our debt balance by over 10% or nearly $4 bill.

“With improving performance, growing operating cash flows and $5.7 bill of liquidity, we are on a path to end the year with less than $31 bill of debt,” he said.

The 3Q23 generated cash from operations of $1.8 bill and adjusted free cash flow of $1.1 bill. The company expects continued growth in adjusted free cash flow to be the driver for paying down debt over time.

In addition, Carnival took the following actions to pro-actively manage its debt portfolio since 31st May, 2023:

  • Completed a $1.3 bill senior secured first lien term loan B facility, due 2027 and completed a $500 mill private offering of first-priority senior secured notes, due 2029 to repay the existing US dollar first-priority secured term loan facility maturing in 2025.
  • Called $1.2 bill of its highest cost debt.
  • Prepaid an additional $1.1 bill of debt with maturities from 2024 through 2027.
  • On an annualised basis, saved $200 mill in gross interest expense and around $100 mill in net interest expense, as a result of lower interest income following the debt prepayments.

Other highlights included:

  • Seabourn took delivery of ’Seabourn Pursuit’, sister to ’Seabourn Venture’, the line’s second purpose-built ultra-luxury expedition ship.
  • Carnival Cruise Line named its new destination in Grand Bahama Island ‘Celebration Key’, which is expected to open in the second half of 2025.
  • Holland America Line had its highest booking day in the brand’s 150-year history on 11th July.
  • Cunard became the company’s fourth brand to enable shore power connection capability across its entire fleet.
  • Cunard announced a three-year partnership with the UK film organisation, British Film Institute, which will feature short films and blockbusters shown exclusively on the outdoor screen on board ’Queen Anne’, the lines newest ship expected April, 2024.
  • Carnival Corp continued to expand upgraded internet across its fleet with the installation of SpaceX’s Starlink on Costa Cruises, Cunard and P&O Cruises (UK) ships, with plans for all of the company’s capacity to have Starlink capability by the end of the first quarter of 2024.