NCLH significantly reduces losses

2023-05-12T17:32:52+00:00 May 12th, 2023|Finance|

Norwegian Cruise Line Holdings (NCLH) has reported a GAAP net loss of $159.3 mill for the first quarter of this year, or EPS of minus $0.38.

This is a significant reduction in the net loss of $982.7 mill, or EPS of minus $2.35, reported in 1Q22.

Adjusted net loss was $127.7 mill or adjusted EPS of minus $0.30 for 1Q23, compared to a $760.5 mill loss and minus $1.82, respectively, in the same quarter of 2022. Adjusted EBITDA in 1Q23 was around $234.2 mill.

Revenue increased to $1.8 bill, compared to $521.9 mill in 1Q22, due to the phased ramp up of cruise voyages.

However, total cruise operating expenses increased this year, compared to 2022, due to the full resumption of voyages, which resulted in higher payroll, fuel, and direct variable costs of fully operating ships. Costs for certain items were also impacted by lagging inflationary pressures.

Gross cruise costs per capacity day were about $298 in the quarter as-reported and $301 in constant currency.

Sequential occupancy on board the ships improved to around 101.5% in 1Q23, exceeding guidance of 100%.

Total revenue per passenger cruise day increased about 17.5% as reported and 18.3% in constant currency, compared to the same period in 2019.

The cumulative booked position for the remainder of 2023 continued to be at record levels and at higher pricing, NCLH claimed.

Full year 2023 adjusted EPS guidance improved to around $0.75, reflecting first quarter out performance, partially offset by higher anticipated fuel costs and foreign exchange for the remainder of this year.

Adjusted EBITDA is still expected to be in the range of $1.8 to $1.95 bill for 2023.

As previously announced, Frank Del Rio (pictured) is stepping down from his position as the company’s President and CEO and from the Board, effective 30th June, 2023. Del Rio will serve in a consultant capacity as a Senior Advisor to the Board through 2025.

Harry Sommer, a 15-year NCLH veteran and former President of the company’s largest cruise line, Norwegian Cruise Line (NCL), will succeed Del Rio and will also join the Board, effective 1st July, 2023.

“It has been an honour and privilege to lead the world-class team at Norwegian Cruise Line Holdings for the past eight years,” said Del Rio.

“With the post-pandemic operational recovery complete and the company solidly positioned for 2023 and beyond, now is the right time to make way for the next generation of leaders who are ready to take this company on to its newest chapter. Harry is a deeply experienced and strategic leader and I have full confidence that this iconic company will not skip a beat with him at the helm.”

“On behalf of the entire team at Norwegian Cruise Line Holdings, I want to thank Frank for his invaluable contributions as he brought together three of the industry’s leading brands – Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises – to form the best cruise operator in the industry,” Sommer said. “Frank has been a friend and mentor for decades, and I look forward to building upon his unequalled legacy.”

“We are embarking on an exciting new chapter with an industry-leading growth profile, including one new ship for each of our brands in 2023, beginning with Oceania Cruises’ outstanding ’Vista’, which we took delivery of (recently).

“We are also focused on improving profitability and accelerating our financial recovery, while maintaining the superior service levels and the exceptional guest experience our loyal guests expect from our amazing brands, as well as advancing our efforts to drive a positive impact on society and the environment through our Sail & Sustain programme.

“We continue to experience healthy demand across the board as evidenced by our record booked position, as well as robust on board revenue generation,” he concluded.

NCLH added that phased occupancy ramp-up is expected to be complete in 2Q23 at around 105%. As planned, this is slightly lower than the second quarter of 2019, reflecting the company’s strategic shift to longer, more immersive itineraries.

Full year 2023 occupancy, which reflects the phased voyage ramp-up, is expected to average 103.5%, consistent with previous guidance.

As of 31st March, 2023, NCLH’s advance ticket sales balance, including the long-term portion, was a record $3.4 bill, around 26% higher than the previous quarter and about 60% higher than the first quarter of 2019.

On board revenue generation remained robust, and the company continued to focus on increasing its pre-sold revenue from guests prior to voyage sailing, as this typically results in higher overall spend throughout the cruise journey.

NCLH also said that it continued to prioritise enhancing liquidity and financial flexibility in the current environment, while seeking opportunities to optimise its balance sheet and reduce leverage.

As at the end of March, 2023, the company’s total debt position was $13.1 bill and liquidity was about $1.9 bill, consisting of $701 mill of cash and cash equivalents, nearly $600 mill of availability under its revolving loan facility and a $650 mill undrawn commitment.

NCLH also has an incremental $300 mill unsecured and undrawn commitment through 2nd January, 2024, which enhances future liquidity, as it becomes available to draw on 4th October this year, the company said.

In April 2023, it increased its export-credit agency backed commitments by around $1.7 bill to finance improvements, changes and modifications to certain newbuildings, owners’ supplies associated with preparing these ships to enter service and related financing premiums.

These changes include the modification and enlargement of the last four ‘Prima’ class vessels, which will increase their gross tonnage by up to 20%, compared to ‘Norwegian Prima’ and ‘Norwegian Viva’. This also included modifications to create a methanol-ready configuration for the final two ‘Prima’ class vessels.

“As we continue to focus on rebuilding our financial track record, we are pleased to report that we met or exceeded guidance on all key metrics in the first quarter, buoyed by the strong consumer demand we are experiencing across our brands,”  Mark Kempa, Executive Vice President and CFO explained.

“The results of our ongoing margin enhancement initiative are already starting to reflect in our financial results during the quarter, as evidenced by the significant sequential improvement in our operating costs.

“We will continue to capitalise and build on this momentum, as we remain keenly focused on strategically improving our margins while maintaining our brands’ strong and unique positioning,” he said.

NCLH also revamped its climate action strategy to focus on three key pillars – Efficiency, Innovation and Collaboration.

Also established were new short- and near-term GHG reduction targets to support the company’s pursuit of net zero by 2050. It is targeting a reduction in GHG intensity by 10% by 2026 and 25% by 2030, compared to a 2019 baseline with intensity measured on a per capacity day basis.

Oceania Cruises took delivery of its new ship ‘Vista’ on 28th April, 2023 in Genoa, Italy marking the first newbuilding addition to the brand’s fleet in over a decade. The 67,000 gt, 791 ft long cruise ship is the first of two 1,200-guest ‘Allura’ class ships and was christened on 8th May, 2023 in Valletta, Malta.