Carnival Corp on a roll

2024-03-27T19:58:36+00:00 March 27th, 2024|Finance|

Carnival Corp has reported record first quarter revenues of $5.4 bill with record net yields (in constant currency) and record net per diems (in constant currency).

The Group improved its first quarter bottom line by nearly $500 mill, compared to 2023 and the adjusted net loss was better than the December guidance, with continued strength in demand driving ticket prices higher.

During 1Q24, booking volumes hit an all-time high with prices considerably higher year-on-year.

Following a successful wave season, Carnival raised its full year 2024 net yield guidance (in constant currency) by over a point to about 9.5%, compared to 2023, based on continued strength in demand and also improved its adjusted cruise costs, excluding fuel guidance (in constant currency) by $35 mill, compared to its December guidance.

Total customer deposits reached a first quarter record of $7 bill, surpassing the previous first quarter record by $1.3 bill.

The company redeemed its remaining second lien debt (9.875% second-priority secured notes), upped its forward starting revolving facility by $400 mill and extended its availability by two years.

During the quarter, Carnival ordered its first newbuildings in five years, the 10th and 11th ‘Excel’ class cruise ships, scheduled to be delivered to Carnival Cruise Line in 2027 and 2028.

“This has been a fantastic start to the year. We delivered another strong quarter that outperformed guidance on every measure, while concluding a monumental wave season that achieved all-time high booking volumes at considerably higher prices,” claimed Carnival Corp’s CEO, Josh Weinstein (pictured).

“These results are a continuation of the strong demand we have been generating across our brands and all core deployments, leading to an upward revision of full year expectations by more than a point of incremental yield improvement and setting us up nicely to deliver a nearly double-digit improvement in net yields.

“With much of this year on the books, we have even greater conviction in delivering record revenues and EBITDA, along with a step change improvement in operating performance, and have begun turning more of our attention to delivering an even stronger 2025,” he added.

During 1Q24, cash from operations was $1.8 bill and operating income was $276 mill.

Adjusted US GAAP net loss of $214 mill, or $(0.17) diluted EPS, and adjusted net loss of $180 mill, or $(0.14) adjusted EPS, were better than the December guidance.

An adjusted EBITDA of $871 mill exceeded December guidance by over $70 mill.

First quarter revenues were a record $5.4 bill, with record net yields (in constant currency) and record net per diems (in constant currency) both significantly exceeding 2023 levels.

Gross margin yields nearly doubled, compared to last year and net yields (in constant currency) significantly exceeded 2023 levels by over 17%.

Gross margin per diems increased by 73%, compared to 2023 levels and net per diems (in constant currency) were up nearly 5%, significantly exceeding strong previous year levels.

On board revenue per diems were higher than 2023 for the company’s North America and Australia (NAA) segment, as well as for its Europe segment.

On a consolidated basis, on board revenue per diems reflected a mix impact, due to the increased weighting of its Europe segment driven by its higher occupancy growth.

Cruise costs per available lower berth day (ALBD) increased 7.9%, compared to 2023. Adjusted cruise costs, excluding fuel per ALBD (in constant currency), were better than the December guidance, due to the timing of expenses between the quarters and up 7.3%, compared to 2023.

Carnival said that it experienced an early start to a robust wave season with record booking volumes for all future sailings that exceeded expectations.

The company also achieved considerably higher prices (in constant currency) than last year on 1Q24 booking volumes, having entered 2024 with less inventory remaining for sale, in line with the company’s strategy to pull the booking curve forward.

Pricing (in constant currency) on bookings for the remainder of the year for the NAA segment was considerably higher, compared to the previous year, with its Europe segment up by double digits.

“We are enjoying a phenomenal wave season with strength across all major deployments and brands. Even with less inventory available for the remainder of the year, booking volumes hit an all-time high, driven by demand for 2025 sailings and beyond.

“Our brands have demonstrated continued success creating demand that outstrips available capacity translating into higher prices (in constant currency) and a further elongation in the booking curve,” Weinstein noted.

Carnival’s booked position for the remainder of this year continued to be the best on record, with both pricing (in constant currency) and occupancy considerably higher than 2023.

The company added that given the timing of the Baltimore bridge incident and the temporary change in homeport, its guidance does not include the current estimated impact of up to $10 mill on both adjusted EBITDA and adjusted net income for the full year 2024.

For the full 12 months, the company expects:

⦁ Net yields (in constant currency) up around 9.5%, compared to 2023, over a point better than the December guidance, based on continued strength in demand and with occupancy at historical levels.
⦁ Adjusted cruise costs, excluding fuel (in constant currency) are $35 mill better than the previous guidance, with adjusted cruise costs, excluding fuel per ALBD (in constant currency), 0.5% higher than the December guidance, as a result of lower ALBD’s from the Red Sea re-routing, as certain ships were reposition without guests.
⦁ Adjusted EBITDA of about $5.63 bill, over 30% growth compared to 2023, and better than the December guidance, despite the impact of the Red Sea re-routing of around $130 mill or $0.09 adjusted EPS, through November, 2024.
For 2Q24, the company expects:
⦁ Net yields (in constant currency) up around 10.5%, compared to 2023 levels, including the unfavourable impact from the Red Sea re-routing of 0.5%, with occupancy at historical levels.
⦁ Adjusted cruise costs, excluding fuel per ALBD (in constant currency), up about 3%, compared to 2Q23, including the unfavourable impact of 1.3% as a result of lower ALBD’s from the Red Sea re-routing as certain ships reposition without guests.
⦁ Adjusted EBITDA of about $1.05 bill, over 50% growth, compared to 2Q23.

“Continued execution coupled with strengthening demand for our brands is driving increased confidence in our ongoing performance. We are pleased this has been recognised by S&P and Moody’s with their recent upgrades, as well as the recent upsizing and two-year extension of our revolving credit facility,” commented Carnival Corp’s CFO, David Bernstein.

“Looking forward over the next several years, we expect our robust revenue growth, responsible approach to capital investment, and ongoing efforts to refinance debt at favourable rates to deliver substantial free cash flow, which will significantly reduce our leverage and build shareholder value,” he added.

During the 1Q24, Carnival redeemed and retired nearly $1 bill of debt with original maturities in 2027, including all of the remaining second lien debt outstanding.

The Group also successfully extended the maturity of its forward starting revolving credit facility to August, 2027 and upsized its borrowing capacity by $400 mill, bringing its total commitment to $2.5 bill.

It ended the quarter with $5.2 bill of liquidity. On 26th March, 2024, Carnival prepaid its $837 mill euro term loan, saving interest expense and continuing to simplify its capital structure by removing secured debt.

The 1Q24 generated cash from operations of $1.8 bill and adjusted free cash flow of $1.4 bill. It took delivery of two new ships and drew down on two export credit facilities, continuing its strategy to finance its newbuilding programme at preferential interest rates.

Carnival also said that it continued to focus on reducing its greenhouse gas (GHG) emissions footprint and pursuing net zero emissions from ship operations.

In 1Q24, it took delivery of two LNG powered ships with ’Carnival Jubilee’, marking the ninth vessel in its series of ‘Excel’ class ships and ’Sun Princess’, the first ship in the Sphere class.

Carnival now has 10 LNG powered ships in its fleet and three more on order for delivery through 2028.

It continued to implement several fuel and energy saving innovations, while also pioneering lower emission alternatives and exploring other new technologies to power its ships.

Collectively, these initiatives are expected to drive an 18% reduction in GHG emission intensity on a lower berth capacity basis in 2024, compared to 2019, approaching its initial 2030 goal of a 20% reduction and reaffirming its progress to achieve its goal four years early.

For the full 12 months, Carnival expects to achieve a 42% reduction, compared to 2008, ahead of the IMO’s 2030 carbon intensity reduction timeline.

‘Carnival Firenze’ officially joined the CCL fleet, becoming the second ship to feature its ‘Fun Italian Style’ concept and will begin homeporting from the US west coast in April.

CCL also announced a new pier extension for Celebration Key, which will ultimately double the arrivals at its new exclusive destination on Grand Bahama Island opening summer 2025.

Princess Cruises took delivery of its most luxurious ship to date, ’Sun Princess’, while AIDA Cruises announced the largest modernisation programme in its fleet’s history, AIDA Evolution, focused on enhancing guest experience, while further reducing its environmental footprint.

Also during the quarter, Carnival Corp’s brands continued to achieve new peak booking levels with Holland America Line reaching its highest booking day in its history, P&O Cruises (UK) and Princess Cruises’ Alaska bookings surpassing their previous January record, and Cunard reporting more guests booked in January than any equivalent period in the last decade.