Norwegian Cruise Line Holdings has reported financial results for the second quarter ended June 30, 2024 and provided guidance for the third quarter and full year 2024.

Second Quarter 2024 Highlights

• Generated record second quarter total revenue of $2.4 billion, an 8% increase compared to the same period in 2023 on 4% capacity growth, with GAAP net income of $163.4 million, or EPS of $0.35. Performance was driven by strong revenue growth and continued focus on cost reductions and efficiencies.
• Adjusted EBITDA grew 14% to $587.7 million compared to $514.8 million for the same period of 2023 and above guidance of $555 million. Adjusted EPS grew 33% to $0.40, which compares to $0.30 in the second quarter of 2023, exceeding guidance of $0.32.¹
• The Company’s sustained focus on margin enhancement drove another quarter of improvement in operating costs. Gross Cruise Costs per Capacity Day was approximately $315 for the quarter. Adjusted Net Cruise Costs excluding Fuel per Capacity Day was approximately $163 on an as reported and Constant Currency basis, better than guidance, and flat year-over-year when excluding the expected ~$9 impact of the incremental Dry-docks and the related reduction in Capacity Days.
• Occupancy was 105.9% for the quarter, slightly above guidance, and total revenue per Passenger Cruise Day increased approximately 2%, compared to second quarter 2023.
• Gross margin per Capacity Day was up 7% versus 2023 on an as reported and Constant Currency basis. Net Yield growth beat guidance by 200 basis points, increasing over prior year by approximately 6.3% on an as reported and Constant Currency basis due to strong close-in demand and onboard revenue performance.
• Total debt was $13.4 billion. Net Leverage was 5.9x for the 12-months ended June 30, 2024, achieving year-end goal of reducing Net Leverage by ~1.5x from December 31, 2023 6-months early.
• Announced Charting the Course 2026 targets at May 2024 Investor Day, detailing a bold new vision to “Vacation Better. Experience More.” with robust financial targets.

2024 Outlook

• 2024 full year Net Yield guidance on a Constant Currency basis increased 100 basis points from the prior guidance to approximately 8.2% from 7.2%.
• 2024 full year Adjusted EBITDA guidance increased $50 million from the prior guidance to approximately $2.35 billion from $2.30 billion.
• 2024 Adjusted Net Cruise Costs excluding Fuel per Capacity Day guidance remained unchanged at flat to prior year excluding the impact of Dry-docks.
• Full year Adjusted Net Income guidance increased $60 million from prior guidance to approximately $790 million from $730 million, and Adjusted EPS guidance increased over 8%, or $0.11 to $1.53 from $1.42.
• On track to achieve double-digit Adjusted ROIC by year-end.

“2024 continues to be an exceptional year in terms of our financial performance, as evidenced by our strong second quarter results which exceeded guidance across the board. As we raise our full-year guidance a third time, we expect our Adjusted EPS to grow approximately 120% compared to 2023, driven mainly by our ability to capitalize on the robust market demand and ensuring our guests are vacationing better and experiencing more across our brands,” remarked Harry Sommer, president and chief executive officer of Norwegian Cruise Line Holdings Ltd.

“The momentum we are garnering from strong yield growth, disciplined cost management and the initiatives that comprise our Charting the Course strategy further bolsters our confidence in achieving our previously announced 2026 financial and sustainability targets,” continued Sommer.

Business, Operations and Booking Environment Update

The Company continues to experience strong consumer demand as the majority of new bookings are pivoting to 2025 sailings. As a result, the Company remains at the upper range of its optimal booked position on a 12-month forward basis. Occupancy was 105.9% for the second quarter of 2024, slightly above guidance. Full year 2024 Occupancy is expected to average 105.2%, slightly above prior guidance.

In addition, top line growth in the second quarter was also strong. Gross margin per Capacity Day was approximately $124 in the quarter, up 7% versus 2023 on an as reported and Constant Currency basis. Net Yield growth was up approximately 6.3% versus 2023 on an as reported and Constant Currency basis, above guidance by 200 basis points due to strong close-in demand and onboard revenue performance. The Company’s advance ticket sales balance, including the long-term portion, ended the second quarter of 2024 at an all-time record high of $3.9 billion, approximately 11% higher than the same period of 2023.

The Company demonstrated continued progress on its ongoing margin enhancement initiatives to maximize revenue opportunities and right size its cost base. Gross Cruise Costs per Capacity Day was approximately $315 in the second quarter, which was flat versus last year. Adjusted Net Cruise Costs excluding Fuel per Capacity Day in the second quarter of 2024 was approximately $163 on an as reported and Constant Currency basis and was essentially flat year-over-year excluding the expected ~$9 impact from increased Dry-dock days and related costs and better than guidance of $165, as cost savings measures fully offset an increase in variable compensation due to strong performance of the business.

For the full year 2024, the Company increased its Net Yield guidance by 100 basis points from prior guidance to growth of approximately 8.2% from approximately 7.2% on a Constant Currency basis compared to 2023. The increase in guidance is driven by strong demand across all three brands and itineraries.

Full year Adjusted Net Cruise Cost Excluding Fuel per Capacity Day guidance remained unchanged and is expected to be approximately $159, increasing approximately 3.5% in Constant Currency, which includes an approximate 300 basis point impact from 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 Operational EBITDA Margin for the full year 2024 is expected to increase to 34.5% and full year 2024 Adjusted EBITDA guidance increased by $50 million to $2.35 billion. Adjusted EPS guidance was increased by $0.11, or 8%, to approximately $1.53 from approximately $1.42.

Liquidity and Financial Position

The Company is committed to prioritizing efforts to optimize its balance sheet and reduce leverage. As of June 30, 2024, the Company had total debt of $13.4 billion and Net Debt of $12.8 billion. Net Leverage improved by approximately 1.5 turns compared to December 31, 2023, ending the second quarter of 2024 at 5.9x and achieving our year-end goal 6 months early. The Company announced at its Investor Day that it plans to reduce its Net Leverage to the mid 4’s by 2026.

During the quarter, as expected, substantially all the holders of the 6% 2024 Exchangeable Notes exchanged their 2024 Exchangeable Notes for shares with any remaining unexchanged notes being repaid in cash at maturity.

At quarter-end, liquidity was $2.7 billion. This consists of approximately $594.1 million of cash and cash equivalents, $1.2 billion of availability under our undrawn Revolving Loan Facility, a $650 million undrawn backstop commitment, and other commitments.

“We enter the second half of 2024 with strong momentum, exceeding our guidance metrics in each quarter of 2024 on the back of strong execution. We continue to see robust demand heading into the back half of the year and are committed to improving efficiencies, reducing costs, and restoring our margins in a strategic and disciplined manner. Given our strong progress to date and current demand expectations, we are raising our 2024 full-year guidance for a third time this year for key metrics resulting in expected Adjusted EPS growth of 120% versus 2023, while keeping our cost guidance for the year unchanged at flat to prior year,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd.

Kempa continued, “Additionally, we made significant advances in reducing Net Leverage and de-risking our balance sheet during the first half of 2024. We have already accomplished our year-end goal of reducing Net Leverage by a full turn and a half versus year-end 2023, ending the quarter at 5.9x. We remain confident that our strong liquidity position, ongoing cash generation, and favorable growth prospects will enable us to continue to de-risk our balance sheet further bolstering our path to achieving the 2026 Charting the Course financial targets laid out at our recent Investor Day.”

Second Quarter 2024 Results

GAAP net income was $163.4 million or EPS of $0.35 compared to $86.1 million or EPS of $0.20 in the prior year. The Company reported Adjusted Net Income of $203.7 million or Adjusted EPS of $0.40 in the second quarter of 2024. This compares to Adjusted Net Income and Adjusted EPS of $137.0 million and $0.30, respectively, in the second quarter of 2023. Adjusted EBITDA in the second quarter was approximately $587.7 million, better than guidance of $555 million, and increased 14% compared to 2023, driven primarily by solid revenue performance and Adjusted Net Cruise Cost Excluding Fuel that was essentially flat year-over-year excluding the impact of Dry-docks.

Gross Cruise Costs per Capacity Day was approximately $315 in the quarter. Adjusted Net Cruise Costs excluding Fuel per Capacity Day was approximately $163 on an as reported and Constant Currency basis, which includes approximately $9 related to Dry-docks, and would have been essentially flat year-over-year without these Dry-dock impacts, reflecting the benefits from the Company’s ongoing margin enhancement initiative.

The Company reported fuel expense of $175 million in the quarter. Fuel price per metric ton, net of hedges, increased slightly to $719 from $715 in 2023. Fuel consumption of 243,000 metric tons was slightly better than projections.

Interest expense, net was $178.5 million in 2024 compared to $177.7 million in 2023.

Other income (expense), net was an income of $1.9 million in 2024 compared to an expense of ($8.0) million in 2023. The income and expense primarily relate to net gains and losses on foreign currency.

Outlook and Guidance

In addition to announcing the results for the second quarter 2024, the Company also provided guidance for the third 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.