Norwegian Cruise Line Reports Q4 and Full Year 2023 Results

Norwegian Viva Funnel

Norwegian Cruise Line Holdings reported financial results for the fourth quarter and year ended December 31, 2023 and provided guidance for the first quarter and full year 2024.

Full Year 2023 Highlights:

  • Generated total revenue of $8.5 billion, a 32% increase compared to the same period in 2019, with GAAP net income of $166.2 million, or EPS of $0.39 returning to full year profitability for the first time since 2019.
  • Achieved Adjusted EBITDA of $1.861 billion in line with guidance of $1.860 billion and Adjusted EPS of $0.70, which is inclusive of a $0.07 foreign currency negative impact. Full year performance was driven by solid revenue growth and continued focus on cost reduction and efficiencies.1
  • The Company’s ongoing margin enhancement initiative drove improvement in operating costs. Gross Cruise Costs per Capacity Day was approximately $301 for the year. Adjusted Net Cruise
  • Costs excluding Fuel per Capacity Day was approximately $154, and 21% less than the same period in 2022. This represents four quarters of continuous year-over-year improvement on this metric.
  • Occupancy was 102.9% for the year, in line with guidance of 102.6%, and total revenue per Passenger Cruise Day increased approximately 17%, or 18% in Constant Currency, compared to the same period in 2019.
  • Announced a revamped climate action strategy including interim greenhouse gas intensity reduction targets of 10% by 2026 and 25% by 2030 compared to a 2019 baseline with intensity measured on a per Capacity Day basis.
  • Successfully took delivery of three ships, Oceania Cruises’ Vista, Norwegian’s Viva and Regent’s Seven Seas Grandeur, the most deliveries in a single year in the Company’s history.

Recent Highlights

Expected refinancing of the company’s $650 million backstop commitment from a secured to unsecured commitment. Additionally, as part of this refinancing, expected repayment of the company’s $250 million 9.75% senior secured notes due 2028.

We have continued to see exceptional demand for the Norwegian Cruise Line brand, with bookings and pricing at higher levels than 2023 for all four quarters of 2024. Oceania Cruises and Regent Seven Seas Cruises also continue to see strong demand across all geographies with the exception of redeployed itineraries due to cancellations in the Middle East and Red Sea.

2024 Outlook

  • Entered the year at all-time high booked position and pricing for 2024 voyages.
  • Net Yield is expected to increase approximately 5.5% as-reported and approximately 5.4% in Constant Currency versus 2023.
  • In 2024 Adjusted Net Cruise Costs Excluding Fuel per Capacity Day is expected to be $159, increasing 3.4% in Constant Currency, which includes an approximately 325 basis points impact of increased Dry-dock days and related costs in the year. Excluding this, Adjusted Net Cruise Cost Excluding Fuel per Capacity Day would be essentially flat year-over-year.
  • Adjusted EBITDA is expected to be approximately $2.2 billion, Adjusted Net Income is expected to be approximately $635 million, and Adjusted EPS is expected to be approximately $1.23, an increase of 76% over 2023 results. This Adjusted EPS takes into consideration ~516 million dilutive shares, reflecting the expected accounting treatment of the company’sexchangeable notes.

 

“Norwegian Cruise Line Holding experienced a momentous year of growth and achievement in 2023. We successfully took delivery of three new ships, one for each of our brands, representing the most deliveries in a single year in our Company’s 57-year history. This important milestone showcases our dedication to innovation and commitment to providing exceptional vacation experiences for our guests,” remarked Harry Sommer, president and chief executive officer of Norwegian Cruise Line Holdings Ltd.

“Looking ahead, we are determined to capitalize on our recent achievements and take advantage of the positive momentum and strong demand for cruise which resulted in turning the year at all-time highs in both our booked position and pricing. Our team is looking forward to showcasing our world-class fleet, delivering exceptional experiences, and surpassing the expectations of the guests we will welcome on board in 2024 and beyond,” continued Sommer.

Business, Operations and Booking Environment Update

The Company continues to experience healthy consumer demand and is at an all-time high booked position and pricing reflective of some of the best booking weeks in the Company’s history beginning with Black Friday and Cyber Monday. Additionally, onboard revenue per Passenger Cruise Day remains robust, up 20% in the quarter compared to 2019, with broad-based strength across all revenue streams. The Company’s advance ticket sales balance, including the long-term portion, ended 2023 at a year-end record of $3.2 billion, approximately 56% higher than at the end of 2019.

As a result of the ongoing conflict in Israel and the Red Sea, the Company cancelled and redirected all calls to Israel during the fourth quarter of 2023. As a result, Occupancy was 99.2% for the fourth quarter of 2023, and full year Occupancy was 102.9%, in line with guidance. Additionally, all calls to Israel and the Red Sea have been cancelled and redirected for the entirety of 2024. Prior to the conflict, approximately 7% of the capacity in the fourth quarter of 2023 and 4% of capacity for the full year 2024 expected to visit the Middle East, predominantly on the Oceania Cruises and Regent Seven Seas Cruises brands. Prior to the recent cancellations, approximately 1% of 2024 capacity was expected to sail through the Red Sea.

Pricing growth in the fourth quarter was also strong with total revenue per Passenger Cruise Day up approximately 21%, with capacity growth of 17% compared to 2019. Total revenue was up approximately 34% in the fourth quarter versus 2019. Gross margin per Capacity Day was approximately $79 in the quarter. Net Yield growth was approximately 8.2%, or 8.6% versus 2019 on a Constant Currency basis, in line with guidance.

The Company once again demonstrated continued progress on its ongoing margin enhancement initiative and efforts to maximize revenue opportunities and rightsize its cost base. Gross Cruise Costs per Capacity Day was approximately $280 in the fourth quarter, compared to $311 last quarter. Adjusted Net Cruise Costs excluding Fuel per Capacity Day in the fourth quarter of 2023 was approximately $151, in line with guidance.

For the full year 2024, the Company expects Net Yield growth to be strong at approximately 5.4% on a Constant Currency basis compared to 2023. This growth is driven by exceptional demand for Norwegian Cruise Line with Oceania Cruises and Regent Seven Seas Cruises also experiencing strong demand across all geographies with the exception of voyages redeployed due to the conflicts in the Middle East and Red Sea. Full year Adjusted Net Cruise Cost Excluding Fuel per Capacity Day is expected to be approximately $159, increasing approximately 3.4% in Constant Currency, which includes an approximately 325 basis points impact of increased Dry-dock days and related costs in the year. Excluding this impact, Adjusted Net Cruise Cost Excluding Fuel per Capacity Day would be essentially flat year-over-year. Adjusted EBITDA is expected to grow 18% to approximately $2.2 billion during 2023 and Adjusted EPS is expected to grow 76% to approximately $1.23.

Liquidity and Financial Position

The Company is committed to prioritizing efforts to optimize its balance sheet and reduce leverage. As of December 31, 2023, the Company had total debt of $14.1 billion and total Net Debt of $13.7 billion and continues to expect improvement in its Net Leverage. The Company repaid $1.9 billion of debt in 2023, which included the pay down in full of the company’s $875 million Revolving Loan Facility.

At year-end, liquidity was $2.3 billion. This consists of approximately $402.4 million of cash and cash equivalents, $1.2 billion of availability under the company’s Revolving Loan Facility and a $650 million undrawn backstop commitment. In March 2024 the company said it expects to refinance our $650 million backstop commitment, replacing the secured commitment with an unsecured commitment. Additionally, as part of this refinancing, the company said it expects to repay $250 million 9.75% senior secured notes due 2028, the company’s highest interest rate debt.

“Throughout the year, we successfully implemented measures to rightsize our cost base. Notably, the fourth quarter of 2023 marked our fourth consecutive quarter of improved Adjusted Net Cruise Costs Excluding Fuel per Capacity Day, this resulted in a substantial 21% reduction in 2023 compared to 2022,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd.

Kempa continued, “additionally, we made important advancements towards reducing leverage and de-risking our balance sheet during 2023. We repaid $1.9 billion of debt during the year, which included the pay down in full of our $875 million Revolving Loan Facility, and we remain confident that our strong liquidity position, ongoing cash generation and favorable growth prospects enable us to meaningfully reduce leverage over the course of 2024. We recently negotiated a refinancing of our $650 million backstop commitment and in connection with that, expect to repay our highest rate debt, the $250 million 9.75% senior secured notes due 2028. This transaction, which is expected to close in early March, will reduce interest expense and improve leverage while releasing the related secured collateral, another important step forward in improving our balance sheet.”

Full Year 2023 Results

GAAP net income was $166.2 million or EPS of $0.39 compared to net loss of $(2.3) billion or EPS of $(5.41) in the prior year. The Company reported Adjusted Net Income of $298.0 million or Adjusted EPS of $0.70 in the year. This compares to Adjusted Net Loss and Adjusted EPS of $(1.9) billion and $(4.64), respectively, in the prior year. Adjusted EBITDA was approximately $1.9 billion, in line with guidance driven primarily by solid revenue performance and lower Adjusted Net Cruise Cost Excluding Fuel.

Total revenue per Passenger Cruise Day increased approximately 17%, or approximately 18% on a Constant Currency basis compared to 2019. Gross margin per Capacity Day decreased approximately 11% on a reported, or approximately 10% on a Constant Currency basis, compared to 2019. Net Yield increased 4.6% on a Constant Currency basis compared to 2019.

Gross Cruise Cost per Capacity Day was $301, an approximately 6% decline from the prior year. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day was approximately $155 on a Constant Currency basis, an approximately 21% decline from the prior year.

Fourth Quarter 2023 Results

GAAP net loss was $(106.5) million or EPS of $(0.25) compared to net loss of $(482.5) million or EPS of $(1.14) in the prior year. The Company reported Adjusted Net Loss of $(77.1) million or Adjusted EPS of $(0.18) in the fourth quarter of 2023. This compares to Adjusted Net Loss and Adjusted EPS of $(439.7) million and $(1.04), respectively, in the fourth quarter of 2022. Adjusted EBITDA in the fourth quarter was approximately $359.6 million, in line with guidance driven primarily by solid revenue performance and lower Adjusted Net Cruise Cost Excluding Fuel.

Gross Cruise Costs per Capacity Day was approximately $280 in the quarter. Adjusted Net Cruise Costs excluding Fuel per Capacity Day was approximately $151, reflecting an approximately 19% decline from the fourth quarter of 2022, reflecting the benefits from the Company’s ongoing margin enhancement initiative.

The Company reported fuel expense of $187 million in the quarter. Fuel price per metric ton, net of hedges, decreased to $726 from $755 in 2022. Fuel consumption of 257,000 metric tons was in line with projections.

Interest expense, net was $197.4 million in 2023 compared to $177.1 million in 2022. The increase in interest expense is primarily the result of higher debt outstanding and higher interest rates.

Other income (expense), net was an expense of $(35.3) million in 2023 compared to an expense of $(24.0) million in 2022.

Outlook and Guidance

In addition to announcing the results for the fourth quarter and full year 2023, the Company also provided guidance for the first quarter and full year 2024, 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 2024 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.

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