Royal Caribbean Reports Q1 Results

Royal Caribbean Cruises Ltd. today reported first quarter results and updated its outlook for the full year.

Commercially the year is turning out as expected, with strong booking trends and yield growth for all major products. The strengthening of the US Dollar and the rise in fuel prices are negatively affecting earnings, but cost efficiencies are mitigating a large portion of the impact.

Net Yields were down 1.0% on a Constant-Currency basis (down 5.4% As-Reported). Strong close-in pricing on Caribbean sailings drove the better than anticipated performance.

Net Cruise Costs (“NCC”) excluding fuel increased 0.9% on a Constant-Currency basis (down 1.7% As-Reported), significantly better than guidance driven by further efficiencies.

Adjusted Net Income was $45.2 million, or $0.20 per share, versus a forecast of $0.10 to $0.15 per share. Currency and fuel negatively impacted the first quarter by $0.05.

US GAAP Net Income was $45.2 million or $0.20 per share, versus $26.5 million or $0.12 per share in 2014.  

Adjusted EPS is expected to be in the range of $4.45 to $4.65 per share – $0.20 lower than our previous guidance. The strengthening of the US Dollar and the increase in fuel prices have negatively impacted the full year by $0.36.

Net Yields are expected to increase 2.5% to 4.0% on a Constant-Currency basis (down 0.5% to 2.0% As-Reported). The slight narrowing of the range is driven by somewhat weaker onboard revenue trends from non-US guests due to the strengthening of the US Dollar.

NCC excluding fuel are expected to be flat to down 1% on a Constant-Currency basis (down 2.5% to 3.5% As-Reported).

“It is gratifying to post another strong quarter with both revenues and expenses exceeding expectations,” said Richard D. Fain, chairman and chief executive officer. “Despite ongoing volatility in the currency and fuel markets, our Double-Double program remains solidly on track.”


Adjusted Net Income for the first quarter of 2015 was $45.2 million, or $0.20 per share, compared to Adjusted Net Income of $46.1 million, or $0.21 per share, in the first quarter of 2014. Results were approximately $0.08 better than the mid-point of guidance, despite a $0.05 currency and fuel headwind. US GAAP Net Income for the first quarter 2015 was $45.2 million or $0.20 per share compared to $26.5 million or $0.12 per share in 2014.  

Net Yields on a Constant-Currency basis decreased 1.0% during the quarter. Strong close-in demand for Caribbean sailings catapulted yields over the top end of guidance and more than offset weaker onboard sales from our internationally sourced guests. Given that the majority of onboard revenue sales are priced in US Dollars, the strengthening of the Dollar reduced the purchasing power of many of our internationally sourced guests, which modestly affected their onboard spend.

Constant-Currency NCC excluding fuel increased 0.9% which is 160 basis points better than guidance, mainly driven by efficiencies. Bunker pricing net of hedging for the first quarter was $597 per metric ton and consumption was 344,000 metric tons.


The company has updated full year Adjusted EPS guidance to a range of $4.45 to $4.65 from $4.65 to $4.85. The strengthening of the US Dollar and the increase in fuel prices since our January guidance is expected to negatively impact earnings by $0.36. Constant-Currency Net Yields are expected to be in the range of up 2.5% to 4.0%, a slight reduction from previous guidance mainly due to the impact of the stronger US Dollar on the purchasing power of our non-US guests.

Net Cruise Costs excluding fuel are expected to be flat to down 1% on a Constant-Currency basis, better than previous guidance of 1% or better.

The fundamentals of the business as well as the company’s focus on the targets associated with the Double-Double program remain on track and are unchanged.

“The business continues to perform well, despite the currency volatility,” said Jason T. Liberty, chief financial officer. “Our unwavering commitment to cost consciousness has helped us identify further efficiencies that are driving a significant shift in our cost guidance for the full year. This type of operational focus throughout all facets of our business is a core enabler of our continued financial success.”

Overall booking volumes during the first quarter were higher than prior year levels even after adjusting for our increase in capacity. Caribbean itineraries enjoyed particularly strong demand, and bookings were also up year-over-year for Europe and China itineraries. As previously discussed, the company has taken actions to extend its booking curve, as a result of which booked load factors and APDs are higher than historical levels. More recently, the company has taken further steps to improve the integrity of its pricing model including steps to eliminate last minute discounting.

Overall, European itineraries are booked at a higher load factor and APD than last year. Western Mediterranean itineraries have been booking well, while trends have been a little weaker for Eastern Mediterranean itineraries, particularly those that turn in Turkey. Demand for China remains strong and bookings have been outpacing expectations despite the significant capacity growth in the region.

Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company expects 2015 guidance for Adjusted EPS to be in the range of $4.45 to $4.65 per share.


Constant-Currency Net Yields are expected to increase approximately 3.5% in the second quarter of 2015. NCC excluding fuel are expected to be up approximately 4.5% on a Constant-Currency basis. Based on current fuel pricing, interest rates and currency exchange rates, the company expects second quarter Adjusted EPS will be approximately $0.70 per share.


Fuel ExpenseThe company does not forecast fuel prices, and its fuel cost calculations are based on current at-the-pump prices, net of hedging impacts. Based on today’s fuel prices the company has included $213 million and $834 million of fuel expense in its second quarter and full year 2015 guidance, respectively.

Forecasted consumption is 52% hedged via swaps for the remainder of 2015 and 55%,
40% and 20% hedged for 2016, 2017 and 2018, respectively. For the same four years, the average cost per metric ton of the hedge portfolio is approximately $638, $562, $540 and $503, respectively.

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