RCL hits record bookings – reduces losses

2023-05-12T16:59:18+00:00 May 12th, 2023|Finance|

Royal Caribbean Group (RCL) reported a net loss for the first quarter of this year of $47.9 mill or $0.19 per share, compared to a net loss of $1.2 bill or $4.58 per share for the same period in 2022.

RCL also reported an adjusted net loss of $58.9 mill, or $0.23 per share, compared to an adjusted net loss of $1.2 bill, or $4.57 per share for 1Q22.

First quarter revenue significantly exceeded the company’s guidance, primarily due to very strong close-in demand, higher load factors at higher prices, and continued strength in on board revenue.

RCL said it experienced particularly strong close-in demand for Caribbean itineraries, which accounted for almost 80% of its first quarter capacity.

Gross cruise costs per available passenger cruise days (APCD) increased 8.2% as reported and 8.8% in constant currency, compared to 2019. Net cruise costs (NCC) excluding fuel per APCD, increased 5.2% as reported and 5.8% in constant currency, compared to 2019.

Part of the improvement, compared to expectations, was due to favourable timing of operating costs.

Gross cruise costs per APCD and NCC, excluding fuel per APCD, for the first quarter included $2.87 per APCD of lingering transitional costs and structural costs (eg full year operations of Perfect Day at CocoCay and the new Galveston terminal).

In 1Q23, RCL said that it continued to benefit from multiple actions taken during the past several years to reshape its cost structure, which is helping to offset persistent inflation.

“First quarter results reflect continued strong demand for cruising and our teams’ focus on delivering the best vacation experiences that exceed guest expectations,” said Naftali Holtz, Royal Caribbean Group CFO.

“We also benefited from favourable timing of operating expenses, as well as our continued focus on improving margins consistent with our Trifecta goals.”

As a result of a record-breaking WAVE season and accelerating demand for its cruise experiences, the company is increasing its 2023 adjusted earnings per share (EPS) guidance to $4.40 – $4.80.

“We knew that demand for our business was strong and strengthening, but we have been pleasantly surprised with how swiftly demand further accelerated well above historical trends and at higher rates,” said Jason Liberty, RCL’s President and CEO (pictured).

“Leisure travel continues to strengthen, as consumer spend further shifts towards experiences. Demand for our brands is outpacing broader travel due to a strong rebound and an attractive value proposition.

“We are increasing full year guidance, given the significant momentum in our business, and we are well on our way to achieve our Trifecta goals,”  he said.

Stronger than anticipated demand has led to a record-breaking and extended WAVE season, which has and continues to translate into a robust booking environment – driving higher load factors and higher prices.

These factors, combined with the continued strength in on board spending, have led to the significant improvement (versus guidance) in 1Q23 and the significant increase in the company’s full-year expectations for ticket and on board revenue, as well as earnings.

Full Year 2023 Outlook:

  • Net yields are expected to increase 6.25% to 7.25% as reported and 6.75% to 7.75% in constant currency, compared to 2019.
  • NCC, excluding Fuel, per APCD is expected to increase 5.2% to 6.2% as reported and 5.5% to 6.5% in constant currency, compared to 2019.
  • The company expects to significantly exceed prior record adjusted EBITDA, achieved in 2019.
  • Adjusted earnings per share for the full year are expected to be in the range of $4.40 to $4.80 per share.

Second Quarter 2023 Outlook:

  • Net yields are expected to increase 9.6% to 10.1% as reported and 10.1% to 10.6% in constant currency, compared to the second quarter of 2019.
  • NCC, excluding Fuel, per APCD is expected to increase about6% as reported and around 8.9% in constant currency, compared to second quarter 2019.
  • Adjusted earnings per share for the second quarter are expected to be in the range of $1.50 to $1.60 per share.

As of 31st March, 2023, the Group’s customer deposit balance was at a record $5.3 bill.

In addition, the Group’s liquidity position was $3.9 bill, which includes cash and cash equivalents and undrawn revolving credit facility capacity.

During 1Q23, the company repaid $0.3 bill of debt maturities and generated $1.3 bill in operating cash flow. RCL also issued $0.7 bill of 7.25% senior guaranteed notes, due 2030, to refinance 2023 and 2024 debt maturities and extended $2.3 bill of its existing revolving credit facility commitment to April, 2025.

As of 31st March, 2023, the scheduled debt maturities for the remainder of 2023, 2024, 2025 and 2026 were $1.8 bill, $2.3 bill, $3.7 bill and $2.8 bill, respectively.

Capital expenditures for full year 2023 are expected to be $4.2 bill. The company expects to take delivery of three new ships this year, including ’Icon of the Seas’, ‘Celebrity Ascent’ and ’Silver Nova’.

All of the ship orders have committed financing in place. Non-new ship related capital expenditures are expected to be $0.5 bill.

Capacity changes for 2023, 2024, 2025, and 2026 are expected to be 14%, 8%, 6%, and 7%, respectively, not including potential ship sales or additions that the company may opt for in the future.