Norwegian Cruise Line Holdings reports financial results
Norwegian Cruise Line Holdings Ltd. (Nasdaq: NCLH) (together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company”) today reported financial results for the third quarter ended September 30, 2017, and provided guidance for the fourth quarter and full year 2017.
- The Company generated GAAP net income of $400.7 million or EPS of $1.74 compared to $342.4 million or $1.50 in the prior year. Adjusted Net Income was $427.0 million or Adjusted EPS of $1.86 compared to $369.3 million or $1.62 in the prior year.
- Total revenue increased 11.2 percent to $1.7 billion. Gross Yield increased 2.0 percent. Adjusted Net Yield increased 3.0 percent on a Constant Currency basis.
- 2017 full year Adjusted EPS is now expected to be approximately $3.90. Excluding the impact from weather disruptions along with a current technical issue on Norwegian Gem, Adjusted EPS guidance would have increased to approximately $4.05, exceeding the high-end of our prior guidance range.
- 2017 full year Adjusted Net Yield growth guidance on a Constant Currency basis increased 50 basis points from prior guidance to approximately 4.75 percent.
“Strong operational performance across our core markets, bolstered by strength in European itineraries, where pricing has now exceeded the previous high watermark of 2015, drove third quarter revenue and yield growth well ahead of expectations, despite the disruptions caused by weather-related events during the quarter,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “Over the last several weeks we have seen consumer demand continue to accelerate for Caribbean sailings and booking volumes have now reached pre-hurricane levels. Our ships, crew and shoreside personnel have been actively engaged in assisting impacted destinations by evacuating stranded families and delivering much-needed supplies. In addition, our company has committed to providing long-term financial aid to rebuild critical infrastructure through our Hope Starts Here hurricane relief program.”
Third Quarter 2017 Results
GAAP net income was $400.7 million or EPS of $1.74 compared to $342.4 million or $1.50 in the prior year. The Company generated Adjusted Net Income of $427.0 million or Adjusted EPS of $1.86 compared to $369.3 million or $1.62 in the prior year.
Revenue increased 11.2 percent to $1.7 billion compared to $1.5 billion in 2016. This increase was primarily attributed to a 9.1 percent increase in Capacity Days primarily due to the delivery of Norwegian Joy, which entered service in late June, along with an increase in Net Yield due to strength in ticket pricing and higher onboard and other revenue. Gross Yield increased 2.0 percent, while Adjusted Net Yield improved 3.0 percent on a Constant Currency basis and 3.1 percent on an as reported basis.
Gross Cruise Cost increased 8.4 percent compared to 2016 due to an increase in total cruise operating expense and marketing, general and administrative expenses, which was primarily attributable to the aforementioned increase in Capacity Days. Gross Cruise Costs per Capacity Day decreased 0.6 percent. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 0.5 percent on a Constant Currency basis and 0.6 percent on an as reported basis primarily due to an increase in marketing, general and administrative expenses primarily offset by a decrease in cruise operating expenses.
Fuel price per metric ton, net of hedges decreased 4.8 percent to $476 from $500 in the prior year. The Company reported fuel expense of $91.2 million in the period.
Interest expense, net increased to $66.3 million in 2017 from $60.7 million in 2016. Interest expense for 2017 reflects an increase in average debt balances outstanding primarily associated with the delivery of new ships and newbuild installments, as well as higher interest rates due to an increase in LIBOR.
Other income (expense), net was an expense of $3.3 million in 2017 compared to an expense of $5.3 million in 2016. In 2017, the expense was primarily related to losses on foreign currency exchange. In 2016, the expense was primarily related to unrealized and realized losses on fuel swap derivative hedge contracts and foreign exchange derivative contracts and losses on foreign currency exchange.
“Our booked position for full year 2018 remains well ahead in both load and price compared to prior year across all three of our brands, despite booking headwinds caused by weather-related disruptions in the Caribbean,” said Wendy Beck, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “We continue to focus on further strengthening our balance sheet as evidenced by the success of our recent refinancing transaction. We are now within our targeted leverage range of three to four times with further meaningful deleveraging expected in 2018 and beyond.”
2017 Guidance and Sensitivities
In addition to announcing the results for the third quarter, the Company also provided guidance for the fourth quarter and full year 2017, along with accompanying sensitivities. The Company does not provide guidance on a GAAP basis because the Company is unable to predict, with reasonable certainty, the future movement of foreign exchange rates or the future impact of certain gains and charges. These items are uncertain and will depend on several factors, including industry conditions, and could be material to the Company’s results computed in accordance with GAAP. The Company has not provided reconciliations between the Company’s 2017 guidance and the most directly comparable GAAP measures because it would be too difficult to prepare a reliable GAAP quantitative reconciliation without unreasonable effort.
(1) Excludes $7.6 million and $30.3 million of amortization of intangible assets related to the Acquisition of Prestige in the fourth quarter and full year 2017, respectively.
(2) Based on midpoint of guidance.
(3) For the remaining quarter of 2017.
As of September 30, 2017, the Company had hedged approximately 75 percent, 65 percent, 48 percent and 26 percent of its total projected metric tons of fuel consumption for the remainder of 2017, 2018, 2019 and 2020, respectively. The following table provides amounts hedged and price per barrel of heavy fuel oil (“HFO”) and marine gas oil (“MGO”) which are hedged utilizing U.S. Gulf Coast 3 percent (“USGC”) and Brent, respectively.
Future capital commitments consist of contracted commitments, including ship construction contracts, and future expected capital expenditures necessary for operations. As of September 30, 2017, our anticipated capital expenditures were $0.3 billion for the remainder of 2017, $1.4 billion for the year ending December 31, 2018 and $1.2 billion for the year ending December 31, 2019, of which we have export credit financing in place for the expenditures related to ship construction contracts of $48 million for the remainder of 2017, $0.8 billion for 2018 and $0.6 billion for 2019.
Company Updates and Other Business Highlights
As part of ongoing efforts to deleverage and reduce interest expense, the Company redeemed all of its outstanding 4.625 percent Senior Notes due 2020 in October and amended its existing senior secured credit facilities by increasing and repricing its $750 million revolving credit facility (“Revolver”) and repricing the approximately $1,412 million principal amount outstanding under its term loan A facility (“Term Loan”). The amendment increased the amount of commitments under the Revolver from $750 million to $875 million (“New Revolver”). The applicable margins for both the New Revolver and Term Loan are determined by reference to a total leverage ratio and currently bear interest at LIBOR plus an applicable margin of 1.75 percent. In addition, the Company added a new $375 million term B loan facility due 2021 (“New Term B Loan Facility”), which bears interest at LIBOR plus an applicable margin of 1.75 percent. The proceeds from the New Term B Loan Facility and cash on hand were used for the notes redemption.
Norwegian Cruise Line Holdings Selected to Join the S&P 500 Index
The Company debuted on the S&P 500 Index effective at the open of trading on October 13 under the S&P 500 GICS Hotels, Resorts & Cruise Lines Sub-Industry index.
Company Partners with All Hands Volunteers for Hope Starts Here Hurricane Relief
The Company recently announced a partnership with All Hands Volunteers, the world’s leading disaster relief organization powered by volunteers, and set a goal to raise $2.5 million for the Hope Starts Here hurricane relief program. Under Hope Starts Here, the Company has committed to match up to $1.25 million of donations from its valued guests, team members, suppliers and partners in order to substantially help All Hands Volunteers and Happy Hearts Fund deliver early relief response for the Florida Keys, and rebuild safe schools in the Caribbean islands impacted by Hurricanes Irma and Maria.
New Features Unveiled for Norwegian Bliss
In August, the Company revealed features and amenities for Norwegian Bliss, the line’s sixteenth ship, which has been designed for the ultimate Alaska cruising experience and begins sailing in June 2018. Norwegian Bliss will boast many firsts at sea features including the largest competitive race track at sea and an open-air laser tag course. The ship’s exciting new features will join the brand’s signature elements of freedom and flexibility that Norwegian Cruise Line is known for across the globe including a myriad of mouthwatering dining options and a vibrant onboard atmosphere fueled by dynamic spaces and a multitude of bars and lounges, award-winning youth programs and more.
Oceania Cruises Introduces La Cuisine Bourgeoise
Oceania Cruises unveiled its latest epicurean masterpiece, La Cuisine Bourgeoise, by Jacques Pépin. An elegant seven-course affair, La Cuisine Bourgeoise, is rooted in fresh, seasonal ingredients, time-honored flavors and celebrates the rituals of the table and sharing a meal with friends and family. The dining experience features many classic dishes that the Oceania Cruises’ Executive Culinary Director, Master Chef Jacques Pépin, has enjoyed over the years.
Updated Itineraries and Deployment
The Norwegian Cruise Line brand announced several updates and enhancements to its itineraries for winter 2018/2019. Norwegian Breakaway will reposition to the Port of New Orleans and will offer seven, 10- and 11-day cruises to the Caribbean, all including a port of call at the Caribbean’s premier resort-style destination in Southern Belize, Harvest Caye. The recently refurbished Norwegian Gem will remain in New York City and sail a series of cruises to the Caribbean, Canada and New England and the Bahamas and Florida.
Regent Seven Seas Cruises unveiled its new 2019/2020 voyages season, comprising 118 new sailings, departing from March 2019 through June 2020 aboard four of the world’s most luxurious cruise ships. New for the season, travelers can choose among two new exciting Grand Voyages, the 77-night Grand Arctic Quest aboard Seven Seas Navigator and the 66-night Circle South America itinerary aboard Seven Seas Mariner, which provide guests with a regionally immersive and extended experience with no repeating ports.
The Company has scheduled a conference call for Thursday, November 9, 2017 at 10:00 a.m. Eastern Time to discuss third quarter results. A link to the live webcast can be found on the Company’s Investor Relations website at www.nclhltdinvestor.com. A replay of the conference call will also be available on the website for 30 days after the call.