Norwegian Cruise Line Holding today reported financial results for the fourth quarter and full year ended December 31, 2022 and provided guidance for the first quarter and full year 2023.
Fourth Quarter 2022
- Total revenue of $1.5 billion, GAAP net loss of $(482.5) million or EPS of $(1.14), Adjusted Net Loss of $(439.7) million or Adjusted EPS of $(1.04), and Adjusted EBITDA of $(41.4) million.1
- Sequential Occupancy improvement to approximately 87% in the quarter, consistent with guidance.
- Total revenue per Passenger Cruise Day exceeded expectations, increasing approximately 23% as-reported and 24% in Constant Currency, compared to the same period in 2019.
- Net cash provided by operating activities was approximately $237 million. Achieved positive Adjusted Free Cash Flow of approximately $71 million, reaching another key post-pandemic financial milestone.
- Entered the year with a record booked position and at higher pricing.
- WAVE season demand has been very strong with the Company’s brands experiencing record launches for WAVE offers and highest-ever booking months in November 2022 and January 2023.
- Occupancy is expected to average approximately 100% for the first quarter and is on track to reach historical levels for the second quarter.
- Capacity is expected to increase approximately 19% compared to 2019 including the delivery of three newbuilds in 2023: Oceania Cruises’ Vista, Norwegian Viva and Regent’s Seven Seas Grandeur.
- Net Per Diem is expected to increase in the range of 8.75 to 10.25% as-reported and 9.00 to 10.50% in Constant Currency versus 2019. Net Yield is expected to increase in the range of 4.75 to 6.25% as-reported and 5.00 to 6.50% in Constant Currency versus 2019.
- The Company is undertaking a broad and ongoing margin enhancement initiative and took several steps in recent months to improve operating efficiencies, reduce costs, and maximize revenue generation opportunities while continuing to provide value to its guests. As part of this initiative, operating efficiency and cost reduction efforts are expected to result in a decrease of nearly 15% in Adjusted Net Cruise Costs excluding Fuel per Capacity Day for full year 2023 as compared to the second half of 2022.
- Adjusted EBITDA is expected to be in the range of $1.8 to $1.95 billion.
“2022 was an eventful year, as we successfully completed our nearly yearlong Great Cruise Comeback, welcomed our newest ship Norwegian Prima to our world class fleet and achieved several key milestones on our post-pandemic financial recovery,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “We are now squarely focused on the future and are taking deliberate and strategic actions to best position the Company for its next chapter, which includes an industry-leading growth profile representing approximately 50% Capacity growth over 2019.”
“Our three award-winning brands continue to resonate with loyal past guests and new guests alike, as evidenced by our strong guest satisfaction scores and the numerous booking records we have achieved in recent months, and we are excited to deliver memorable vacation experiences to the nearly three million guests we expect to welcome aboard in 2023. We continue to pursue all opportunities to capitalize on the healthy demand we are experiencing, especially during this important WAVE season,” continued Del Rio.
Business and Operations Update
The Company continued its phased ramp-up in the fourth quarter achieving Occupancy of approximately 87%, consistent with previously outlined expectations and with the gap versus 2019 levels continuing to narrow sequentially. Occupancy is expected to average approximately 100% for the first quarter of 2023 and reach historical Occupancy levels for the second quarter of 2023. Full year 2023 Occupancy is expected to reach approximately 103.5%, partially impacted by a lower first quarter due to the phased voyage ramp up.
Strong ticket pricing and onboard revenue generation resulted in better-than-expected total revenue per Passenger Cruise Day which was up approximately 23% as-reported and approximately 24% in Constant Currency in the fourth quarter of 2022 versus 2019.
Net cash provided by operating activities was approximately $237 million and the Company reached another significant financial inflection point by generating positive Adjusted Free Cash Flow of approximately $71 million for the fourth quarter of 2022.
With the phased Occupancy ramp up now nearly complete, the Company is undertaking a broad and ongoing margin enhancement initiative, focused on both maximizing revenue opportunities and right sizing its cost base, in order to strengthen the foundation for sustained, profitable growth.
Booking Environment and Outlook
The Company entered the year with a record cumulative booked position of approximately 62% for full year 2023, in line with previously outlined expectations and within the Company’s optimal 60 to 65% range, and at higher prices than 2019 at a similar point in time.
Booking volumes have accelerated in recent months buoyed by strong WAVE season demand. The Company’s brands achieved several booking records in recent months including at Norwegian Cruise Line which reached an all-time record booking month in November, boosted by Black Friday and Cyber Monday, which was subsequently exceeded in January 2023. As a result, full year 2023 cumulative booked position is ahead of 2019 levels inclusive of the Company’s approximately 19% increase in capacity, at continued higher pricing. Net booking volumes continue to be at the pace needed to reach historical Occupancy levels for the second quarter of 2023 and beyond.
As of December 31, 2022, the Company’s advance ticket sales balance, including the long-term portion, was $2.7 billion, approximately 9% higher than the prior quarter and approximately 30% greater than at year-end 2019. This includes approximately $144 million of FCCs or approximately 5% of the total deposit balance. Approximately 40% of the FCC balance outstanding has been applied to future sailings.
Liquidity and Financial Recovery Plan
The Company continues to prioritize enhancing liquidity and financial flexibility in the current environment while seeking opportunities to optimize its balance sheet and reduce leverage. As of December 31, 2022, the Company’s total debt position was $13.6 billion and the Company’s liquidity was approximately $1.9 billion, consisting of cash and cash equivalents of $947 million and a $1 billion undrawn commitment.
The Company has taken the following additional actions to enhance its liquidity profile and financial flexibility since the end of the third quarter:
- In December 2022, the Company amended its Operating Credit Facility, consisting of its senior secured revolving credit facility and senior secured term loan facility, and extended $1.4 billion of it by one year to January 20252.
- In December 2022, the Company amended its export-credit backed loan facilities to amend, among other things, certain financial covenants related to net debt to capitalization, free liquidity and consolidated EBITDA to consolidated debt service.
- In February 2023, the Company issued $600 million of aggregate principal amount of 8.375% senior secured notes due 2028 in a refinancing transaction. The proceeds from this offering were used to fully repay the term loans outstanding under its Operating Credit Facility that would have otherwise become due in January 2024.
- In February 2023, the Company amended its $1 billion undrawn commitment. As part of the amendment and to provide the Company with the option to extend the commitment for a second year, the Company issued $250 million of 9.75% senior secured notes due 2028. At the same time, the Company revised the commitment to reduce the amount to $650 million, which will be available through February 2024 with an option, at the Company’s election, to extend through February 2025. The Company does not currently intend to draw the remaining $650 million under the commitment. In total, the combination of these two actions provides the Company with approximately $900 million of liquidity.
- In February 2023, the Company entered into a $300 million unsecured and undrawn backstop commitment with to further enhance its future liquidity profile. The facility will be available to draw beginning October 4, 2023 through January 2, 2024 and provides backstop committed financing to refinance up to $300 million of amounts outstanding under the Operating Credit Facility.
“We continue to make progress towards resuming our historic track record of achieving consistently improving financial results year after year,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “We remain steadfast in our commitment to deliver value for all of our stakeholders. We are focused on identifying new and incremental opportunities to reinforce our solid foundation and become an even stronger and more nimble organization, while continuing to provide unparalleled vacation experiences for our valued guests.”
2 Subject to a springing maturity if certain liquidity conditions are not met.
Fourth Quarter 2022 Results
GAAP net loss was $(482.5) million or EPS of $(1.14) compared to net loss of $(1.6) billion or EPS of $(4.01) in the prior year. The Company reported Adjusted Net Loss of $(439.7) million or Adjusted EPS of $(1.04) in 2022. This compares to Adjusted Net Loss and Adjusted EPS of $(765.0) million and $(1.95), respectively, in 2021. Revenue increased to $1.5 billion compared to $487.4 million in fourth quarter 2021 due to the phased ramp up of cruise voyages.
Total cruise operating expense increased in 2022 compared to 2021, due to the continued resumption of voyages, which resulted in higher payroll, fuel, and direct variable costs of fully operating ships, compared to the prior year when only 16 ships were returned to service. Costs were also impacted by inflationary pressures.
Fuel price per metric ton, net of hedges, increased to $755 from $737 in 2021. The Company reported fuel expense of $183 million in the period.
Interest expense, net was $177 million in 2022 compared to $950 million in 2021. Interest expense in the prior year included losses on extinguishment of debt and debt modification costs of $771.6 million related to the repurchase of certain exchangeable notes.
Other income (expense), net was expense of $(24) million in 2022 compared to income of $66.5 million in 2021. In 2022, the expense primarily related to losses from foreign currency remeasurements.
Full Year 2022 Results
GAAP net loss was $(2.3) billion or EPS of $(5.41) compared to a net loss of $(4.5) billion or EPS of $(12.33) in the prior year. The Company reported Adjusted Net Loss of $(1.9) billion or Adjusted EPS of $(4.64) in 2022. This compares to Adjusted Net Loss and Adjusted EPS of $(2.9) billion and $(8.07), respectively, in 2021.