Norwegian Cruise Line Holdings: 2021 Q1 Results and Business Update

Norwegian Cruise Line Holdings today reported financial results for the first quarter ended March 31, 2021 and provided a business update.

“Over a year after the initial global suspension of cruise voyages, we are pleased to have announced our Great Cruise Comeback program beginning with voyages originating from international ports. Our teams have worked tirelessly and enlisted the guidance of top public health officials and scientific experts to develop our robust, science-backed SailSAFE health and safety program, which combines mandatory vaccination of all guests and crew with rigorous preventative measures including universal COVID-19 testing. With our SailSAFE program we believe we can provide a uniquely safe and healthy experience which exceeds all other vacation options available on land or at sea,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. 

“As for the resumption of cruises from the U.S., we continue to engage in dialogue with the U.S. Centers for Disease Control and Prevention. Our team is working through the recently issued and modified technical guidance for which additional clarification is needed on how the incorporation of vaccine requirements impacts the Conditional Sail Order and our path forward.”

Resumption of Cruise Operations

On April 6, 2021, the company unveiled its two-pronged plan for its long-awaited return to cruising within and outside the U.S. this summer. The company has announced its phased cruise resumption for voyages embarking outside of the U.S. across its three brands, which include:

Norwegian Cruise Line- Norwegian Cruise Line will initially offer seven-day cruises to the Greek Isles on Norwegian Jade from Athens (Piraeus), Greece beginning July 25, 2021, and seven-day Caribbean itineraries originating in Montego Bay, Jamaica beginning on August 7, 2021 on Norwegian Joy and from La Romana, Dominican Republic on Norwegian Gem beginning August 15, 2021. Beginning in September, Norwegian Cruise Line will offer voyages in the Mediterranean departing from Barcelona and Rome (Civitavecchia) on Norwegian Epic and Norwegian Getaway.

Oceania Cruises– Oceania Cruises will restart cruise operations with Marina in August, resuming her originally published voyage schedule commencing on August 29, 2021 in Copenhagen.

Regent Seven Seas Cruises- Regent Seven Seas Cruises will return to sailing with Seven Seas Splendor cruising from the U.K. beginning September 11, 2021. The voyage will also mark the resumption of Seven Seas Splendor’s inaugural season, with the ship having only completed two cruises with guests after being christened in February 2020.

Booking Environment and Outlook

According to Norwegian, bookings have been strong for future periods resulting in an elongated booking window as guests book further into the future, despite reduced sales and marketing investments and a travel agency industry that has not been at full strength for months. During the first quarter 2021, overall bookings, net of cancellations, were more than double the volumes during the prior quarter.

2022 booking and pricing trends are very positive driven by strong pent up demand. The company is experiencing robust future demand across all brands with the overall cumulative booked position for the first half of 2022 meaningfully ahead of 2019’s record levels with pricing higher when excluding the dilutive impact of future cruise credits (“FCCs”).

As of March 31, 2021, the company had $1.3 billion of advance ticket sales, including the long-term portion of advance ticket sales, which includes approximately $0.85 billion of FCCs.

Liquidity and Financial Action Plan

The company said it continues to take proactive measures on its financial action plan to conserve cash, control operating and capital expenditures, improve its debt maturity profile and secure additional capital. As of March 31, 2021, the company’s total debt position was $12.2 billion and the company’s cash and cash equivalents was $3.5 billion.

The company has taken the following additional actions to enhance its liquidity since December 31, 2020:

Raised approximately $1.6 billion, net of underwriting fees, with an equity offering of approximately 53 million ordinary shares in March 2021. Approximately $1 billion of proceeds were used to repurchase the L Catterton exchangeable notes due 2026. This repurchase allowed the company to reduce debt and future interest expense while generating incremental liquidity of approximately $530 million with limited additional dilution, as the vast majority of shares issued were already reserved for the L Catterton notes.

Issued $1.1 billion of senior unsecured notes consisting of $575 million of 5.875% senior unsecured notes due 2026 (tack-on to $850 million offering in December 2020) and $525 million of 6.125% senior unsecured notes due 2028. Proceeds were used in part to fully repay the Norwegian Jewel and Pride of America credit facilities which were to mature in 2022 and generated approximately $650 million of incremental liquidity. 

Amended all export credit agency backed credit agreements to defer approximately $680 million of amortization payments through March 31, 2022 and secured covenant waivers and suspensions through December 31, 2022. 

Deferred certain newbuild-related payments of approximately €270 million through June 30, 2022.

Amended Senior Secured Credit Facility to defer approximately $70 million of certain amortization payments due prior to June 30, 2022 and suspend the testing of certain financial covenants through December 31, 2022.

 The company’s monthly average cash burn for the first quarter 2021 was in line with prior guidance at approximately $190 million, or approximately $170 million per month excluding previously disclosed non-recurring debt modification costs. The company paid approximately $50 million of one-time debt deferral and modification costs and fees in the first quarter of 2021 as a result of successful debt deferrals and covenant waivers and suspensions, which combined with newbuild payment extensions, have resulted in approximately $1 billion of additional liquidity through the first quarter 2022.

For the second quarter of 2021, the company expects the average cash burn rate to be approximately $190 million per month, as it prepares for a return to service this summer.

“We completed several strategic capital markets transactions in the quarter, raising over $1 billion of incremental liquidity and further extending our debt maturity profile. This included the opportunistic repurchase of the L Catterton senior exchangeable notes which allowed us to proactively manage our balance sheet, reduce debt and unlock additional value for our shareholders,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “As we prepare for our imminent resumption of cruising this summer, we will continue to balance our cash needs to maximize financial flexibility and position us well for an extended recovery period.” 

First Quarter 2021 Results

GAAP net loss was $(1.4) billion or EPS of $(4.16) compared to net loss of $(1.9) billion or EPS of $(8.80) in the prior year. The company reported Adjusted Net Loss of $(668.6) million or Adjusted EPS of $(2.03) in 2021 which included $701.6 million of adjustments primarily consisting of expenses related to losses on extinguishment and modifications of debt largely related to the repurchase of the L Catterton exchangeable notes. This compares to Adjusted Net Loss and Adjusted EPS of $(211.3) million and $(0.99), respectively, in 2020.

Revenue decreased to $3.1 million compared to $1.2 billion in 2020 due to the complete suspension of voyages in the quarter.

Total cruise operating expense decreased 79.8% in 2021 compared to 2020. In 2021, cruise operating expenses were primarily related to crew costs, including salaries, food and other travel costs, fuel, and other ongoing costs such as insurance and ship maintenance.

Fuel price per metric ton, net of hedges decreased to $590 from $614 in 2020. The company reported fuel expense of $42.6 million in the period.

Interest expense, net was $824.4 million in 2021 compared to $68.9 million in 2020. The increase in interest expense reflects losses on extinguishment of debt and debt modification costs of $674.0 million primarily related to the repurchase of the L Catterton senior exchangeable notes, as well as additional debt outstanding at higher interest rates, partially offset by lower LIBOR.

Other income (expense), net was income of $27.2 million in 2021 compared to income of $5.8 million in 2020. In 2021, the income primarily related to gains on fuel swaps not designated as hedges of $22.0 million and foreign currency exchange.

2021 Outlook

As a result of the COVID-19 pandemic, while the company cannot estimate the impact on its business, financial condition or near- or longer-term financial or operational results with certainty, it will report a net loss for the second quarter ending June 30, 2021 and expects to report a net loss until the company is able to resume regular voyages.

As of March 31, 2021, the company had hedged approximately 61%, 37% and 15% of its total projected metric tons of fuel consumption for the remainder of 2021, 2022 and 2023, respectively. The following table provides amounts hedged and price per barrel of heavy fuel oil (“HFO”) which is hedged utilizing U.S. Gulf Coast 3% (“USGC”) and marine gas oil (“MGO”) which is hedged utilizing Gasoil. 


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