NCLH outperforms in Q3 but trims forecast, cancels 2024 Israel cruises

It also became the first cruise giant to cancel all 2024 Israel calls.

Full-year guidance 73 cents EPS

Full year 2023 adjusted EBITDA is expected to be approximately $1.86b, within the previously provided range despite the impact of global events including the wildfires in Maui and the escalating conflict in Israel. However, full year adjusted earnings per share are expected to be 73 cents, below prior guidance of 80 cents and a penny off the Wall Street forecast.

Third quarter

NCLH outperformed in the recent quarter driven by 'solid revenue' and lower adjusted net cruise costs.

Adjusted net income of $388m, or 76 cents per share, was higher than the 70-cent guidance and Wall Street's 70-cent consensus expectation. US GAAP net income was $345.9m, or 71 cents per share. Revenues reached a record $2.5b, in line with Wall Street's expectation and up 33% from 2019.

This compares to the year-ago adjusted net loss of $268.3m, or a 64-cent EPS loss, on revenues of $1.6b.

106% occupancy

Occupancy was 106%, in line with guidance, and total revenue per passenger cruise day increased approximately 16% both as reported and in constant currency, compared to the same 2019 period.

Adjusted net cruise costs excluding fuel per capacity day in constant currency were approximately $152, in line with guidance and lower than the prior quarter of $156, the third consecutive quarter of cost improvement since a cost-control initiative was implemented.

NCLH President/CEO Harry Sommer said the outperformane was driven by healthy demand and the company's 'relentless efforts to rightsize our cost base.'

Hawaii and Israel impact

Following the Maui wildfires, year-round Hawaii ship Pride of America experienced a slowdown in close-in bookings, primarily concentrated in Q4. NCLH said demand has improved in recent weeks and is now approaching normalized levels. In addition, Norwegian Spirit is operating in the region, bringing total capacity with calls to Hawaii to approximately 6% in Q4.

As a result of the escalation of the conflict in Israel, NCLH canceled and redirected all calls to Israel and certain calls to the surrounding region for the remainder of 2023. The company is also in the process of dropping all Israel calls in 2024. Before the conflict, approximately 7% of Q4 capacity and 4% of full-year 2024 capacity visited the Middle East.

Outlook

Cumulative booked position for Q4 continues to be at record levels and at higher pricing. NCLH said it remains within its optimal booked position on a 12-month forward basis and at higher pricing.

The company expects Q4 net per diem and net yield growth of approximately 15% to 16% and 7.75% to 8.75% in constant currency basis and compared to 2019, respectively. This is below previous guidance due to the impact of Hawaii and Israel.

Lower close-in demand for some longer NCL E. Med, Asia itineraries

NCLH also reported lower than expected close-in demand for certain longer, exotic itineraries on Norwegian Cruise Line in late season Eastern Mediterranean and certain parts of Asia.

The company elaborated that as NCL has strategically shifted to a longer, more immersive deployment mix, the booking curves, sourcing and marketing plans for certain itineraries continue to be optimized.

'While this caused a temporary disconnect versus initial expectations in the fourth quarter of 2023, plans have now been recalibrated resulting in a significantly better booked position for the same fourth quarter period in 2024, compared to same time last year for 2023,' NCLH said. As a result, full year 2023 net per diem and net yield growth are expected to be 9.25% to 9.75% and 4.25% to 4.75% on a constant currency basis compared to 2019, versus previous guidance of 9% to 10.5% and 5% to 6.5%.

Full year occupancy is forecast to average 102.6%, slightly lower than prior guidance due to disruptions impacting Q4.

NCLH said on-board revenue generation remains robust with broad-based strength across all revenue streams. At Sept. 30, advance ticket sales were $3.1b, approximately 59% higher Q3 2019.

$2.5b liquidity

As of Sept. 30, total debt was $13.9b. Counting the October refinancing, which extended debt maturity and provided incremental liquidity, liquidity is at $2.5b.

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