NCLH rides out the storm as cash burn mounts

2020-11-14T13:55:43+00:00 November 14th, 2020|Finance|

Norwegian Cruise Line Holdings (NCLH) suffered a GAAP net loss of $677.4 mill or EPS of minus $2.5, compared to a profit of $450.6 mill or $2.09 EPS in 3Q19.

NCLH also reported an adjusted net loss of $638.7 mill or adjusted EPS of minus $2.35, in 2020, which included $38.6 mill of adjustments primarily consisting of expenses related to non-cash compensation and losses on debt extinguishment and modifications.

This compares to adjusted net income and adjusted EPS of $481.5 mill and $2.23, respectively, in 2019, which included $30.9 mill of adjustments, primarily consisting of expenses related to non-cash compensation.

Revenue decreased to $6.5 mill, compared to $1.9 bill in 3Q19, due to the complete suspension of voyages in the quarter.

Total cruise operating expense decreased 80.8% in 3Q20, compared to 2019. These cruise operating expenses were primarily related to crew costs, including salaries, food and other repatriation costs, fuel, and other ongoing costs, such as insurance and ship maintenance.

NCLH’s monthly average cash burn rate for 3Q20 was around $150 mill. For comparative purposes, assuming vessels remain at minimum manning status, fourth quarter 2020 average cash burn rate would be higher at about $175 mill per month, primarily driven by the timing of interest expense.

For the second half of 2020, this would result in an average monthly cash burn rate of around $160 mill, in line with the company’s previously disclosed target rate during voyage suspensions.

As a consequence of COVID-19, while the company said that it could not estimate the impact on its business, financial condition or near- or longer-term financial or operational results with certainty, it will report a net loss on both a US GAAP and adjusted basis for the fourth quarter of this year.

“The new Framework for Conditional Sailing Order issued by the US Centres for Disease Control and Prevention (CDC) is a step in the right direction on the path to the safer and healthier resumption of cruising in the US, reinforcing our existing rigorous commitment to health and safety. We will continue to collaborate with the CDC on next steps to relaunch operations with a shared goal of protecting the health and safety of our guests, crew and the communities we visit,” said Frank Del Rio, NCLH President and CEO (pictured). “While we have a long road of recovery ahead of us, we are encouraged by the continued demand for future cruise vacations, especially from our loyal past guests, across all three of our brands.”

While bookings since the pandemics’ emergence remain below historical levels, there continues to be demand for future cruise vacations, particularly beginning for sailings operating in the second half of 2021 and beyond, despite limited marketing efforts.

NCLH’s overall cumulative booked position for the first half of 2021 remains below historical ranges as expected, due to the current uncertain environment, however, for the second half of 2021 it is in line with historical ranges.

Pricing for full year 2021 is in line with pre-pandemic levels, even after including the dilutive impact of future cruise credits. Pent up future demand for cruising is further demonstrated by record bookings in September and October, including Oceania Cruises’ Labour Day upgrade sale, which was the most successful holiday promotion in the line’s history, a new World Cruise opening day booking record for Regent Seven Seas Cruises’ 2023 World Cruise and a new all-time largest single booking day in Regent’s history with the launch of its 2022-2023 Voyage Collection.

To provide additional flexibility to its guests, NCLH has also extended its modified final payment schedule for all voyages through 30th April, 2021 which requires final payment 60 days prior to embarkation versus the standard 120 days.

As of 30th September, 2020, the company had $1.2 bill of advance ticket sales, including the long-term portion of advance ticket sales, which includes around $0.85 bill of future cruise credits.

As of the same date, NCLH’s total debt was $10.9 bill and the company’s cash and cash equivalents were $2.4 bill. The company said that it was in compliance with all its debt covenants.

In July, 2020, the company closed on a series of capital market transactions resulting in $1.5 bill of gross proceeds, which in part were used in part to repay the existing $675 mill short-term revolving credit facility.

In addition, NCLH extended its workforce furloughs, extended 20% salary reduction for all shoreside team members and continued the significant reductions or deferrals of near-term marketing expenses.

Marketing investments are now focused on second half of 2021 and beyond, together with with the planned gradual resumption of voyages.

“We are focused on positioning the company to not only withstand an extended COVID-19 disruption but to emerge from this period with a clear path for long-term financial recovery,” said Mark Kempa, NCLH’s Executive Vice President and CFO. “Our swift actions to adapt to this unprecedented environment by reducing costs, conserving cash and enhancing our liquidity profile will bolster our efforts to navigate through COVID-19, relaunch our vessels and, over the longer-term, optimise our balance sheet and resume our consistent track record of strong financial performance.”