Royal Caribbean Group (RCL) has reported better third quarter 2023 results than the earlier guidance, due to stronger close-in demand and further strength in on board revenue.
Earnings per share (EPS) in 3Q23 were $3.65 and adjusted EPS were $3.85.
RCL also increased its full year 2023 adjusted EPS guidance to $6.58 – $6.63, driven by increasing demand and continued strength in on board revenue.
“The strength of our brands and the acceleration of consumer spending on experiences have propelled us towards another outstanding quarter and a robust 2023,” said Jason Liberty, RCL’s President and CEO.
“Looking ahead, we see accelerating demand, as we build the business for 2024. Our booked load factors are higher than all prior years and at higher rates, further supporting our trajectory towards the Trifecta goals.
“The combination of our leading brands, the best people, and the most innovative fleet and destinations, positions us exceptionally well to deliver on a lifetime of vacation experiences, while creating long-term shareholder value,” he said.
For 3Q23, gross margin yields increased 19.1% as-reported, and net yields increased 16.7% in constant-currency (16.9% as-reported), compared to 3Q19.
Gross cruise costs per available passenger cruise day (APCD) increased 14.4% as-reported, and net cruise costs (NCC), excluding fuel, per APCD increased 10.3% in constant-currency (10.1% as-reported), compared to 3Q19.
Total revenue for the quarter was $4.2 bill, net income was $1 bill or $3.65 per share, adjusted net Income was $1.1 bill or $3.85 per share, adjusted EBITDA was $1.7 bill.
Third quarter revenue across North American and European itineraries exceeded expectations, due to better close-in demand that translated into higher load factors and pricing, as well as continued strength in on board revenue. 2Q23 load factor was 110%.
Bookings remained strong throughout the third quarter, significantly exceeding 2019 levels. Consumer spending on board, as well as pre-cruise purchases, continued to significantly exceed 2019 levels, driven by greater participation at higher prices.
As of 30th September, 2023, RCL’s customer deposit balance was at $5 bill.
For the full year, net yields are expected to increase 12.9% to 13.4% in constant-currency (12.4% to 12.9% as-reported), compared to 2019.
NCC, excluding Fuel, per APCD is expected to be up to 7% -7.5% in constant-currency (6.5% – 7% as-reported), compared to 2019, and includes around 30 basis points impact, due primarily to reduced APCDs on cancelled Israel and related sailings.
Fuel pricing and foreign exchange rates are negatively impacting EPS by $0.18, compared to the previous guidance. In addition, impacted sailings related to Israel deployment is expected to impact the year by about $0.03.
Adjusted EPS is expected to be in the range of $6.58 to $6.63 per share, RCL said.
Demand for 2024 has continued to accelerate, with bookings significantly and consistently outpacing 2019 levels.
Booked load factors and rates are higher than all prior years while the booking window has continued to extend. The market response to the company’s new ships, existing hardware, and the expansion of Perfect Day at CocoCay, and Hideaway Beach, has been excellent and further positions the company for strong yield and earnings growth next year, it claimed.
For 4Q23, net yields are expected to be up 16.2% – 16.7% in constant-currency and 15% to 15.5% as-reported, compared to the same period of 2019.
Continued strong demand for the company’s vacation experiences and strength in on board revenue contributed to increased yield expectations for the next quarter.
NCC, excluding Fuel, per APCD for 4Q23 are forecast to increase 3.9% – 4.4% in constant-currency and 3.3% to 3.8% as-reported, compared to 4Q19.
Fuel pricing and foreign exchange rates will negatively impact EPS by $0.15, versus previous expectations. Impacted sailings related to Israel deployment will be negatively impacted in 4Q23 by around $0.03.
Based on current fuel pricing, interest and currency exchange rates and the factors detailed above, RCL said that it expects 4Q23 adjusted EPS to be $1.05 – $1.10 per share.
“The performance of our business continues to accelerate, driven by strong demand and excellent operational execution,” said Naftali Holtz, RCL’s CFO. “Our formula of moderate yield growth, strong cost discipline, and moderate growth of our fleet delivers a strong financial profile and enhanced margins.”
As of 30th September, 2023, RCL’s liquidity position was $3.3 bill, which includes cash and cash equivalents and undrawn revolving credit facility availability.
During 3Q23, the company repaid $775 mill of debt, including $500 mill of its 11.5% senior secured notes, due June 2025.
Also, during the period, S&P upgraded the company’s credit rating to BB- with a stable outlook and Moody’s upgraded the company’s credit rating to B1 with a positive outlook.
This month, RCL refinanced its $3 bill revolving credit facilities and $500 mill term loan into new $3.5 bill multi-year revolving credit facilities. Also in late October, the company issued a redemption notice for the remaining $500 mill of its 11.5% senior secured notes, due June 2025, which will be funded with existing liquidity.
“Our strong performance and commitment to strengthening the balance sheet will allow us to pay off over $3.5 bill of debt by the end of this year and is being favourably recognised by our financial partners and the rating agencies” added Holtz. “We continue to strategically invest in our future while utilising excess cash flow to pay down debt, consistent with our Trifecta related goal of returning to investment grade metrics.”
As of the end of 3Q23, the scheduled debt maturities for the remainder of 2023, 2024, 2025, and 2026 were $0.7 bill, $2.3 bill, $2.8 bill, and $2.8 bill, respectively.
Capital expenditures for full year 2023 are expected to be $4.1 bill. The company took delivery of ‘Silver Nova’ and expects to take delivery of two new ships, ‘Icon of the Seas’ and ‘Celebrity Ascent’, in 4Q23. ‘Icon of the Seas’ is due to begin her revenue sailings at the end of January, 2024.
All of the ship orders have committed financing in place, while non-new ship related capital expenditures are expected to be $0.5 bill this year.
Capacity changes for 2023, 2024, 2025, and 2026 are expected to be plus 13%, 8%, 5%, and 6%, respectively.