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Demand buoys Carnival to smaller Q1 loss, wave season 'phenomenal'

Article-Demand buoys Carnival to smaller Q1 loss, wave season 'phenomenal'

Carnival Corp. & plc's first quarter adjusted net loss of 55 cents per share was better than expectations on strong demand, and the company is experiencing a 'phenomenal' wave season.

US GAAP net loss was $693m, or 55 cents per share, and adjusted net loss was $690m, or 55 cents per share. This was better than the company's guidance of a loss in the range of $750m to $850m and beat the Wall Street consensus forecast for a loss of 60 cents/share.

In providing guidance for Q2 and full-year 2023, however, Carnival's loss expectations are higher than consensus.

First quarter

Adjusted EBITDA was $382m, better than the December guidance range of $250m to $350m, despite a $31m unfavorable impact from fuel price and currency rates since December.

Revenue was $4.4b, or 95% of the 2019 level, and compared to Wall Street's $4.22b consensus.

Occupancy was 91%, higher than December guidance and up 7 poinits from the prior quarter, on higher capacity.

Cruise costs per available lower berth day increased 3.3% from Q1 2019.

Highest booking volumes ever

The company experienced the highest booking volumes for any quarter in its history, breaking records for both the North America and Australia and Europe segments.

Total customer deposits reached a first quarter record of $5.7b at Feb. 28, topping the previous Q1 record of $4.9b (as of Feb, 28, 2019 ) by 16%.

'We are well booked for the remainder of the year at higher prices (normalized for future cruise credits) which, coupled with continued strength in onboard revenue, supports our improving outlook for the remainder of the year,' CEO Josh Weinstein said. 'We expect the extension of booking lead times, combined with our investment in advertising, to position us even better in 2024 and beyond.'

The company is 'very encouraged' with the improving demand environment, kicked off by an early start to wave season on 'very strong' Black Friday and Cyber Monday bookings.

Booking window returning to historical patterns

The booking window continues returning to historical patterns, providing further confidence in the demand environment and helping revenue yields improve over time. The North America segment's booking curve mirrored peak 2019 levels, while the Europe segment continued to extend its booking curve, which is over 80% recovered compared to 2019.

The  cumulative advanced booked position for the rest of 2023 is at higher ticket prices in constant currency, normalized for future cruise credits compared to strong 2019 pricing and a booked occupancy position that is solidly in the higher end of the historical range.

Cash from operations turns positive

Cash from operations turned positive in Q1.

'We outperformed our guidance on all measures. We achieved record first quarter net per diems, exceeding the high end of our guidance, driven by improving ticket prices and sustained growth in onboard revenue, while delivering an additional seven points of occupancy on higher capacity compared to the prior quarter,' Weinstein said.

'We are enjoying a phenomenal wave season, achieving our highest ever quarterly booking volumes and breaking records in both North America and Europe,' he continued. 'Our strong performance has extended into March and we expect this favorable trend to continue based on the success of our efforts to drive demand.'

2023 and Q2 EPS losses forecast higher than consensus

For the full year 2023, the company expects adjusted EBITDA of $3.9b to $4.1b, occupancy of 100% or higher, returning to historical levels this summer, and adjusted cruise costs excluding fuel per ALBD (in constant currency) one point higher than December guidance.

The company estimates a full-year loss of 44 cents/share to 32 cents/share. This is higher than Wall Street's forecast for a loss of 8 cents/share.

For the second quarter, Carnival expects a loss in the range of 42 cents/share to 34 cents/share. This is also greater than Wall Street's expectation for a 28-cent/share loss.

$8.1b liquidity, no intent to sell equity

The company ended the quarter with $8.1b of liquidity. With this, adjusted free cash flow for the year expected to be positive, the revolver renewal behind it, more committed export credit financings in hand and a reduced capex profile going forward, 'We believe we are well positioned to pay down near term debt maturities from excess liquidity and therefore have no intention to sell equity,' Weinstein said, except in connection with Carnival's non-dilutive stock swap program.

'We believe our debt balance has peaked this quarter and will reduce over time based on our ample liquidity position of $8.1 billion and the expected cash flow strength of our business,' CFO David Bernstein said.

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