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NCLH shares slide on wider than expected Q4 loss, Q1 projection (updated)

Norwegian Cruise Line Holdings shares were trading down more than 6% pre-market open after the company turned in a wider than expected fourth quarter loss and signaled a higher than consenus Q1 loss.

Update: NCLH closed down 10%, at $14.82, on Tuesday.

The company projects a return to profit in 2023, albeit lower than Wall Street's forecast.

Q4 adjusted net loss was $439.7m, or a loss of $1.04/share, compared to Wall Street's expectation of a loss of 85 cents/share and the year-ago loss of $765m, or $1.95/share. US GAAP net loss was $482.5m, or $1.14/share. Revenues were $1.5b, slightly above the consensus forecast and up from $487.4m a year ago.

Occupancy reached 87% in the quarter, consistent with guidance.

Total revenue per passenger cruise day exceeded expectations, increasing approximately 23% as reported and 24% in constant currency, compared to the same 2019 period.

Net cash provided by operating activities was approximately $237m. The company achieved positive adjusted free cash flow of approximately $71m.

Full year 2022

Adjusted net loss for the full year was $1.9b, or $4.64/share, while GAAP net loss was $2.3b or $5.41/share. This compares to adjusted net loss and adjusted EPS of $2.9b and $8.07/share in 2021.

2023 outlook

NCLH entered the year with a record booked position and at higher pricing. Cumulative bookings for 2023 were at approximately 62%, in line with expectations and within the company's optimal 60% to 65% range, at higher prices than 2019 at a similar point in time.

This is on an approximately 19% capacity increase in 2023 compared to 2019 with this year's addition of Oceania Cruises’ Vista, Norwegian Viva and Regent Seven Seas Cruises' Seven Seas Grandeur.

The company described wave season demand as 'very strong,' with its brands experiencing record launches for wave offers and highest-ever booking months in November and January.

As of Dec. 31, advance ticket sales were $2.7b, approximately 9% higher than the prior quarter and approximately 30% greater than at year-end 2019. This includes approximately $144m of future cruise credits or approximately 5% of the total deposit balance. Approximately 40% of the FCC balance outstanding has been applied to future sailings.

Occupancy/net per diem projections

Occupancy is expected to average approximately 100% in Q1 and is on track to reach historical levels for Q2. Full year 2023 occupancy is expected to reach approximately 103.5%, partially impacted by a lower Q1.

Net per diem is expected to increase in the range of 8.75% to 10.25% as reported and 9% to 10.50% in constant currency versus 2019. Net yield is expected to increase in the range of 4.75% to 6.25% as reported and 5% to 6.5% in constant currency versus 2019.

'Right-sizing' cost base

NCLH said it is 'undertaking a broad and ongoing margin enhancement initiative and took several steps in recent months to improve operating efficiencies, reduce costs and maximize revenue generation opportunities while continuing to provide value to its guests.'

With the phased occupancy ramp-up now nearly complete, the company is 'focused on both maximizing revenue opportunities and right-sizing its cost base.'

Operating efficiency and cost reduction efforts are expected to result in a decrease of nearly 15% in adjusted net cruise costs excluding fuel per capacity day for full year 2023 as compared to the second half of 2022.

Adjusted EBITDA is expected to be in the range of $1.8b to $1.95b.

Q1 and 2023 EPS guidance

NCLH projects adjusted net loss of approximately 45 cents per share in the first quarter, higher than Wall Street's 33-cent loss projection. Full-year adjusted EPS is estimated at 70 cents, lower than Wall Street's $1.06 forecast.

Liquidity and amended Apollo agreement

As of Dec. 31, NCLH's total debt position was $13.6b and liquidity was approximately $1.9b, consisting of cash and cash equivalents of $947m and a $1b undrawn commitment.

In February the company amended its $1b undrawn commitment with Apollo Global Management. As part of the amendment and to provide the option to extend the commitment for a second year, NCLH issued $250m 9.75% senior secured notes due 2028. At the same time, the company revised the commitment to reduce the amount to $650m, which will be available through February 2024 with an option, at its election, to extend through February 2025.

NCLH said it does not currently intend to draw the remaining $650m. In total, the combination of these two actions provides NCLH with approximately $900m of liquidity.

Also in February, NCLH entered into a $300m unsecured and undrawn backstop commitment. The facility will be available to draw beginning Oct. 4, 2023 through Jan. 2, 2024 and provides backstop committed financing to refinance up to $300m of amounts outstanding under the operating credit facility.

See also 'At NCLH, cost-cutting but $1.2b higher newbuild contract pricing'  and 'NCL's last two Prima Plus ships will accommodate green methanol'