Norwegian Cruise Line Holdings today reported financial results for the first quarter ended March 31, 2023 and provided guidance for the second quarter and full year 2023.

First Quarter 2023 Highlights:

• Total revenue of $1.8 billion, GAAP net loss of $(159.3) million or EPS of $(0.38).
• Achieved Adjusted EBITDA of $234 million and Adjusted EPS of $(0.30), above guidance of $195 million and $(0.45) respectively.
• company met or exceeded guidance for all key metrics in the first quarter.
• Sequential Occupancy improvement to approximately 101.5% in the quarter, exceeding guidance of 100%.
• Total revenue per Passenger Cruise Day increased approximately 17.5% as-reported and 18.3% in constant currency, compared to the same period in 2019.
• Gross Cruise Costs per Capacity Day was approximately $298 in the quarter. Adjusted Net Cruise Costs excluding Fuel per Capacity Day in constant currency of approximately $161 was better than guidance of $165 as certain efficiencies and cost savings from the company’s ongoing margin enhancement initiative were realized earlier than anticipated.
• Cumulative booked position for the remainder of 2023 continues to be at record levels and at higher pricing.
• Full year 2023 Adjusted EPS guidance improved to approximately $0.75 reflecting first quarter outperformance partially offset by higher anticipated fuel costs and foreign exchange for the remainder of 2023. Adjusted EBITDA is still expected to be in the range of $1.8 to $1.95 billion.

“It has been an honor and privilege to lead the world-class team at Norwegian Cruise Line Holdings for the past eight years,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “With the post-pandemic operational recovery complete and the company solidly positioned for 2023 and beyond, now is the right time to make way for the next generation of leaders who are ready to take this company on to its newest chapter. Harry is a deeply experienced and strategic leader and I have full confidence that this iconic company will not skip a beat with him at the helm.”

“On behalf of the entire team at Norwegian Cruise Line Holdings, I want to thank Frank for his invaluable contributions as he brought together three of the industry’s leading brands – Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises – to form the best cruise operator in the industry,” said Harry Sommer, president and chief executive officer-elect of Norwegian Cruise Line Holdings Ltd. “Frank has been a friend and mentor for decades, and I look forward to building upon his unequaled legacy.”

Sommer added: “We are embarking on an exciting new chapter with an industry-leading growth profile including one new ship for each of our brands in 2023, beginning with Oceania Cruises’ outstanding Vista which we took delivery of just last week. We are also focused on improving profitability and accelerating our financial recovery, while maintaining the superior service levels and the exceptional guest experience our loyal guests expect from our amazing brands as well as advancing our efforts to drive a positive impact on society and the environment through our Sail & Sustain program. We continue to experience healthy demand across the board as evidenced by our record booked position as well as robust onboard revenue generation.”

Business, Operations and Booking Environment Update

The company continued its phased occupancy ramp-up in the first quarter of 2023 achieving a 15-point sequential improvement to approximately 101.5%, exceeding guidance of approximately 100%, according to a press release.

The phased occupancy ramp-up is expected to be complete in the second quarter at approximately 105%. As planned, this is slightly lower than the second quarter of 2019, reflecting the company’s strategic shift to longer, more immersive itineraries. Full year 2023 occupancy, which reflects the phased voyage ramp-up, is expected to average 103.5%, consistent with prior guidance.

The company said its cumulative booked position for the remainder of 2023 is ahead of 2019 levels inclusive of the company’s approximately 18% increase in capacity, at continued higher pricing. As of March 31, 2023, the company’s advance ticket sales balance, including the long-term portion, was a record $3.4 billion, approximately 26% higher than the prior quarter and approximately 60% higher than the first quarter of 2019.

Onboard revenue generation remains robust, and the company continues to focus on increasing its pre-sold revenue from guests prior to voyage sailing, as this typically results in higher overall spend throughout the cruise journey.

Total revenue per Passenger Cruise Day was up approximately 17.5% as-reported and approximately 18.3% in constant currency in the first quarter of 2023 versus 2019. Looking ahead, full year guidance remains unchanged at Net Per Diem growth in the range of 9.0 to 10.5% and Net Yield growth in the range of 5.0 to 6.5%, both on a constant currency basis and compared to 2019.

The cmpany continues to focus on efforts to maximize revenue opportunities and right size its cost base in order to strengthen the foundation for sustained, profitable growth. Gross Cruise Costs per Capacity Day was approximately $301 in constant currency in the quarter, compared to $323 in the second half of 2022. Adjusted Net Cruise Costs excluding Fuel per Capacity Day in constant currency in the first quarter of 2023 was approximately $161, lower than the second half of 2022 at $187, and improved versus guidance of $165 as cost savings from the ongoing margin enhancement initiative were realized earlier than anticipated. Based on initiatives already identified and implemented, the company expects this metric to show continued modest sequential improvement throughout 2023.

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 March 31, 2023, the company’s total debt position was $13.1 billion and the company’s liquidity was approximately $1.9 billion, consisting of $701 million of cash and cash equivalents, nearly $600 million of availability under its Revolving Loan Facility and a $650 million undrawn commitment. The company also has an incremental $300 million unsecured and undrawn commitment through January 2, 2024, which enhances future liquidity as it becomes available to draw on October 4, 2023.

The company has taken the following additional action to enhance its liquidity profile and financial flexibility since its fourth quarter and full year 2022 earnings report:

• In April 2023, the company increased its export-credit agency backed commitments by approximately €1.7 billion to finance improvements, changes and modifications to certain newbuilds, owners’ supplies associated with preparing these ships to enter service and related financing premiums. These changes include the previously communicated modification and enlargement of the last four Prima Class vessels which will increase their gross tonnage by up to 20% compared to Norwegian Prima and Norwegian Viva. This also includes modifications to create a Methanol-Ready configuration for the final two Prima Class vessels.

“As we continue to focus on rebuilding our financial track record, we are pleased to report that we met or exceeded guidance on all key metrics in the first quarter, buoyed by the strong consumer demand we are experiencing across our brands,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “The results of our ongoing margin enhancement initiative are already starting to reflect in our financial results during the quarter, as evidenced by the significant sequential improvement in our operating costs. We will continue to capitalize and build on this momentum as we remain keenly focused on strategically improving our margins while maintaining our brands’ strong and unique positioning.”

First Quarter 2023 Results

GAAP net loss was $(159.3) million or EPS of $(0.38) compared to net loss of $(982.7) million or EPS of $(2.35) in the prior year. The company reported Adjusted Net Loss of $(127.7) million or Adjusted EPS of $(0.30) in first quarter 2023. This compares to Adjusted Net Loss and Adjusted EPS of $(760.5) million and $(1.82), respectively, in first quarter 2022. Adjusted EBITDA in the first quarter was approximately $234.2 million.

Revenue increased to $1.8 billion compared to $521.9 million in first quarter 2022 due to the phased ramp up of cruise voyages. Total cruise operating expense increased in 2023 compared to 2022, due to the full resumption of voyages, which resulted in higher payroll, fuel, and direct variable costs of fully operating ships. Costs for certain items were also impacted by lagging inflationary pressures. Gross Cruise Costs per Capacity Day was approximately $298 in the quarter as-reported and $301 in constant currency. Adjusted Net Cruise Costs excluding Fuel per Capacity Day in constant currency was approximately $161, reflecting an approximately 14% decrease compared to the second half of 2022 as benefits from the company’s ongoing margin enhancement initiative are taking effect.

Fuel price per metric ton, net of hedges, increased to $779 from $724 in 2022. The company reported fuel expense of $194.9 million in the period.

Interest expense, net was $171.3 million in 2023 compared to $327.7 million in 2022. 2023 included lower extinguishment of debt and debt modification costs, which were $2.4 million in 2023 compared to $188.4 million in 2022. Excluding this, interest expense increased primarily as a result of higher rates.

Other income (expense), net was expense of $(9.0) million in 2023 compared to income of $38.1 million in 2022. In 2023, the expense primarily related to losses on foreign currency remeasurements. In 2022, the income primarily related to gains on fuel swaps not designated as hedges and foreign currency remeasurements.

Outlook and Guidance

In addition to announcing the results for the first quarter 2023, the company also provided guidance for the second quarter and full year 2023, along with accompanying sensitivities. The company does not provide certain estimated future results 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 2023 guidance and the most directly comparable GAAP measures because it would be too difficult to prepare a reliable U.S. GAAP quantitative reconciliation without unreasonable effort.