RCL reports robust first quarter results

2024-04-29T17:35:20+00:00 April 29th, 2024|Finance|

Royal Caribbean Group (RCL) has reported first quarter 2024 earnings per share (EPS) of $1.35 and adjusted EPS of $1.77.

These results were better than RCL’s guidance, due to stronger pricing on close-in demand, strength in on board revenue and favourable timing of expenses, the cruise giant said.

As a result of an exceptional WAVE season and continued strength in demand, the company is increasing the 2024 adjusted EPS guidance to $10.70 – $10.90 per share.

“Wow, what a great start to the year! Demand for our leading brands and the incredible experiences they deliver continues to be very robust, resulting in outperformance in the first quarter, a further increase of full year earnings guidance, and 60% expected earnings growth year over year,” said Jason Liberty, RCL President and CEO.

“Building on this momentum, we expect to achieve all our Trifecta financial goals in 2024, which allows us to focus on a new era of growth to drive long-term shareholder returns and take a greater share of the rapidly growing $1.9 trill global vacation market.”

Stronger than anticipated demand led to a record WAVE season and continued strength in bookings in April from both a volume and pricing standpoint.

This robust booking environment across all key itineraries coupled with continued strength in on board spend, led to higher revenue versus guidance in 1Q24 and a further improvement in full year yield expectations.

The 1Q24 highlights included:

  • Load factors at 107%.
  • Gross margin yields were up 60.3% as-reported. net yields were up 19.3% in constant-currency (19.5% as-reported).
  • Gross cruise costs per available passenger cruise days (APCD) increased 5.1% as-reported. Net cruise costs (NCC), excluding fuel per APCD, increased 4.1% in constant-currency (4.2% as-reported), which benefited from 325 bps of favourable timing of expenses.
  • Total revenues were $3.7 bill, Net income was $360 mill or $1.35 per share, adjusted net income was $478 mill or $1.77 per share, adjusted EBITDA was $1.2 bill, and operating cash flow was $1.3 bill.

As for the full year outlook, RCL said that net yields are expected to increase 9% to 10% in constant-currency and as-reported.

NCC, excluding fuel per APCD, is expected to increase by about 5.5% in constant-currency (around 5.4% as-reported), including 310 bps of costs related to increased drydocking days and the new operations of Hideaway Beach at Perfect Day at CocoCay.

About one third of the increase in unit costs, compared to prior guidance, is related to lower APCDs, due to cancelled Red Sea sailings with the remainder driven by higher stock-based compensation.

Adjusted EPS is expected to grow 60% year-on-year and be in the range of $10.70 to $10.90. The increase in earnings includes a $0.10 headwind related to a stronger dollar and higher fuel prices.

Around one third of the increase is attributable to the first quarter business outperformance with the remainder mainly driven by better business outlook, lower interest expense but also higher stock-based compensation.

The company expects to achieve all of its Trifecta financial goals in 2024: triple digit EBITDA per APCD, ROIC in the teens, and double digit EPS, one year earlier than previously expected, it said.

Net Income for 1Q24 was $360 mill or $1.35 per share, compared to a net loss of $48 mill or $(0.19) per share for the same period in 2023. Adjusted net income was $478 mill or $1.77 per share, compared to an adjusted net loss of $59 mill or $(0.23) per share for 1Q23. RCL also reported total revenues of $3.7 bill and an adjusted EBITDA of $1.2 bill.

Gross margin yields increased 60.3% as-reported, and net yields increased 19.3% in constant currency (19.5% as-reported) when compared to 1Q23. Load factor for the quarter was 107%, up 5% compared to the same period the year before.

Half of the first quarter yield growth was driven by higher ticket pricing on existing hardware, with the remainder driven by a combination of on board revenue rates, higher load factors, and new hardware.

While on board revenue continues to grow, the company was particularly pleased with the significant increase in ticket r,ates, compared to 2023.

Gross cruise costs per APCD increased 5.1% as-reported, compared to 2023. NCC, excluding fuel, per APCD increased 4.1% in constant currency (4.2% as-reported), compared to 1Q23. Costs were also favourable to prior guidance due to the timing of expenses.

The demand and pricing environment continued to be very strong. Overall, this has been the strongest WAVE season in the company’s history from both a demand and pricing standpoint.

As a result, the company continued to be in a record booked position, with rates for 2024 sailings even further ahead of 2023 than they were at the beginning of this year.

In addition to record ticket pricing, consumer spending on board and pre-cruise purchases continue to exceed prior years driven by greater participation at higher prices.

“Our existing fleet along with our new ships continue to perform exceptionally well, highlighted by the market response to the launch of ’Icon of the Seas’, which has exceeded all expectations,” added Liberty.

“The momentum continues with ’Utopia of the Seas’ and ’Silver Ray’, set to launch this summer. And, just this quarter alone, we announced an order for a seventh ‘Oasis’ class ship and the expansion of our Royal Beach Club portfolio in Cozumel; and we officially broke ground on Royal Beach Club Paradise Island.  These strategies will further propel our leadership in the cruise industry and push us to new heights in the vacation industry.”

As of 31st March, 2024, the Group’s customer deposit balance was at $6 bill.

For 2Q24, net yields are expected to increase 10.20% to 10.70% in constant currency (10% to 10.5% as-reported).

NCC, excluding fuel per APCD, is expected to increase 7.4% to 7.9% in constant currency (7.2% to 7.7% as-reported), compared to 2023 and includes costs related to increased drydocking days and the operations of Hideaway Beach, as well as timing of costs shifted from the first quarter.

Based on current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company expects second quarter adjusted EPS to be in the range of $2.65 to $2.75.

As of 31st March, 2024, the Group’s liquidity position was $3.7 bill, which includes cash and cash equivalents and undrawn revolving credit facility capacity.

During 1Q24, the company increased its revolving credit facility by $80 mill and refinanced its $1.25 bill of 11.625% unsecured notes, due in 2027, by issuing new $1.25 bill of 6.25% unsecured note,s due in 2032.

Also during the first quarter, S&P upgraded the company’s rating to BB+ with a stable outlook and Moody’s upgraded the company’s credit rating to Ba2 with a positive outlook.

The company also revealed that as at the end of March, the scheduled debt maturities for the remainder of 2024, 2025, 2026, and 2027 were $1.4 bill, $2.6 bill, $3 bill and $2.5 bill, respectively.

About 85% of the company’s debt is tied to fixed interest rates.

Capital expenditures for the full year are expected to be around $3.4 bill, based on current foreign exchange rates and are predominantly related to the company’s new ship orderbook. The company expects to take delivery of ’Utopia of the Seas’ and ’Silver Ray’ this year. All of the ship orders have committed financing in place. Non-new ship related capital expenditures are expected to be $0.7 bill.

This year’s capacity changes fare expected to be 8.1%, compared to 2023. Capacity changes for 2025, 2026, and 2027 are predicted to be 5%, 6%, and 4%, respectively. These figures do not include potential ship sales or additions that the company may elect in the future.