NCLH narrows loss – sees revenue increase

2022-08-12T17:17:37+00:00 August 12th, 2022|Finance|

Norwegian Cruise Line Holdings (NCLH) has reported a GAAP net loss of $509.3 mill or EPS of minus $1.22 for the second quarter of this year, compared to net loss of $717.8 mill or EPS of minus $1.94 for the same period of 2021.

Adjusted net loss was $478.3 mill or adjusted EPS of minus $1.14 in 2Q22. This compares to a loss of $714.7 mill and minus $1.93 EPS, respectively, in 2Q21.

Revenue increased to $1.2 bill in 2Q22, compared to $4.4 mill in 2021, due to the resumption of cruise voyages.

Total cruise operating expense increased in 2022, compared to 2021, due to the resumption of voyages, which resulted in higher payroll, fuel, and direct variable costs of fully operating ships, compared to the previous year’s quarter when no voyages operated.

Costs were also impacted by inflationary pressures and continued COVID-19 related costs, including testing.

“We are encouraged by the continued strong consumer demand we are experiencing, which is reflected in our record pricing, accelerating booking volumes, especially for 2023 and beyond, and highest ever on board revenue generation.

“Having emerged from the pandemic and returning to more normal operations, we remain steadfast in our strategy and commitment to protect our brands’ positioning and industry-leading pricing, which we firmly believe is the best way to maximise long-term value for all our stakeholders,” said Frank Del Rio, NCLH’s President and CEO (pictured).

“As the leading operator in upscale cruising, our three award-winning brands are particularly well-positioned to capitalise on our target consumers’ continued desire for travel and experiences led by our unique and compelling value propositions versus land-based vacation alternatives.

“Our world-class fleet has been further enhanced by the recent addition of ‘Norwegian Prima’, the first of six ships in the ground-breaking ‘Prima’ class for Norwegian Cruise Line,” he said.

In early May, the company claimed to be the first major cruise operator to complete the phased relaunch of its entire fleet with all ships in operation. Occupancy in the second quarter was 65%, in line with previously outlined expectations, and a 17-point improvement over the prior quarter. Numerous voyages, across several key markets, achieved occupancy levels north of 100% during the quarter.

Consistent with its core strategy to focus on maximising long-term pricing, the company continued to expect quarterly occupancy levels to sequentially increase and reach historical levels for 2Q23. Occupancy is expected to average in the low 80% range in 3Q22 with July voyages averaging about 85%.

NCLH said that it continued to experience strong ticket pricing and on board revenue generation with total revenue per passenger cruise day up nearly 20% in 2Q22, versus 2019.

For 3Q22, the company expects total revenue per passenger cruise day to increase high-single digits, versus 2019, despite the significant impact of the Russia/Ukraine conflict on certain premium-priced European itineraries in the current year.

Momentum continued in terms of financial performance, with the company generating positive operating cash flow of around $260 mill for 2Q22 after turning positive in March.

The company expects to reach another milestone in 2H22 with a slightly positive adjusted EBITDA.

NCLH also continued to benefit from significant improvements in the public health environment, allowing it to align its SailSAFE health and safety protocols closer to those of the rest of the travel, leisure and hospitality industry worldwide. It said that it was pleased with the recent decision of the US Centres for Disease Control and Prevention (CDC) to recognise the success of the cruise industry’s mitigation protocols and discontinue its voluntary COVID-19 Programme for Cruise Ships.

In addition, the company announced SailSAFE protocol changes, which will become effective on 3rd September, subject to local regulations. Vaccinated guests aged 12 and over will no longer have any pre-cruise COVID-19 related protocols and unvaccinated travellers may embark with a negative COVID-19 test taken within 72 hours prior to departure. Guests aged 11 and under will be exempt from all vaccination and testing requirements.

The company said that it will continue to evaluate its protocols and modify them as needed, as the public health environment evolves.

These protocol revisions, in conjunction with continued easing of travel restrictions and reopening to cruise in more ports around the globe, are meaningfully positive as it reduces friction, expands the addressable cruise market, brings variety to itineraries, and provides additional catalysts on the road to recovery, NCLH stressed.

Booking trends for full year 2023 remain positive with cumulative booked position in line with a record 2019, inclusive of the company’s 20% increase in capacity. Pricing continues to be significantly higher than that of 2019 at a similar point in time and thus at record levels for the next full year.

NCLH’s advance ticket sales balance, including the long-term portion, increased by about $0.3 bill in the quarter to $2.5 bill, as of 30th June, 2022, an all-time record high for the company.

This included around $0.4 bill of FCCs or 16% of the total deposit balance. About 75% of the FCC balance outstanding has already been applied to future sailings.

Gross advance ticket sales build was around $1.5 bill during the quarter, about a $0.5 bill increase, versus the previous quarter and the highest level since the start of the pandemic.

As of 30th June, 2022, NCLH’s total debt position was $13.2 bill and the company’s liquidity was around $2.9 bill, consisting of cash and cash equivalents of $1.9 bill and a $1 bill undrawn commitment.

Last month, the company amended its existing undrawn $1 bill commitment and extended it through 31st March, 2023. The company said that it had not drawn, and currently does not intend to draw, under this commitment, however, it believed extending the facility was prudent given the current volatile macroeconomic and strained capital markets environment.

“Our entire team is united around our key priorities which include accelerating our ongoing operational and financial recovery, delivering outsized top and bottom-line growth from our disciplined and cash-accretive newbuild pipeline, and preserving liquidity and financial flexibility against a rapidly evolving macroeconomic backdrop,” said Mark Kempa, NCLH’s Executive Vice President and CFO.