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Royal Caribbean cuts Q4 loss on close-in demand, record wave is under way

Royal Caribbean Group narrowed its fourth quarter loss with better pricing on close-in demand and strong onboard spending and reported record wave season bookings.

Adjusted loss per share was $289.4m, or $1.12, less than Wall Street's $1.34 expectation and down from the year-ago loss of $4.78/share. GAAP net loss was $500.2m, or $1.96/share.

Total revenues were $2.6b, in line with the Wall Street consensus, and adjusted EBITDA was $409.3m.

The performance was also helped by favorable timing of operating costs and lower interest expense.

'2022 was a pivotal year as we successfully returned our business to full operations and delivered memorable vacation experiences to 6 million guests,' President/CEO Jason Liberty said. 'We also returned to positive adjusted EBITDA and operating cash flow by consistently growing revenue and controlling costs.'

Record yields and EBITDA forecast

Liberty said the wave season is resulting in a booked position approaching previous record highs and at higher prices. He predicted record yields and adjusted EBITDA in 2023.

Q4 load factors were in line with guidance at 95%, with Caribbean sailings reaching 100%, and holiday sailings close to 110%.

Total revenues per passenger cruise day were up 3.5% as reported and 4.5% in constant currency, compared to Q4 2019.

Cuba lawsuit contingency loss

Royal Caribbean recorded a Q4 loss contingency of $130m related to a Helms-Burton Act claim for use of the Havana cruise terminal, which the company said it continues to vigorously defend.

Full year 2022

2022 load factors were 85% overall, with the full fleet back in operation since June.

Adjusted net loss was $1.9b, or $7.50/share, while GAAP net loss was $2.2bn, or $8.45/share, on revenues of $8.8b. Adjusted EBITDA was $711.6m.

2023 outlook

In this record wave season, the seven biggest booking weeks in the company's history have occurred since the last earnings call in November, including the first five weeks of the wave period.

The booking window has continued to move back to normal, providing further confidence in forward-looking business. Spending onboard and pre-cruise purchases continue to exceed prior years, driven by greater participation at higher prices, which Royal Caribbean sees as indicating 'quality and healthy future demand.'

N. American itineraries leading, Europe bookings now top 2019

The 2023 cumulative booked position remains well within historical ranges for all quarters and at record rates. North America-based itineraries are leading the way and booked in line with 2019 for the full year, and ahead for Q2 through Q4.

Bookings for European cruises have been accelerating during the wave period and are now higher than in 2019.

Net yields are expected to increase 2.5% to 4.5% in both as reported and constant currency from 2019. Net yields are expected to ramp up as load factors reach historical levels by late spring.

Net cruise costs, excluding fuel, per available passenger cruise day are expected to increase 4.5% to 5.5% as reported and 4.75% to 5.75% in constant currency compared to 2019 — a three-year-old benchmark. Expenses include approximately 210 basis points from lingering transitional costs such as crew movement and additional infrastructure costs, including a full year of operations for Perfect Day at CocoCay and the new Galveston terminal.

Adjusted EPS forecast at $3 to $3.60

The company expects to exceed prior record adjusted EBITDA, achieved in 2019, and estimated adjusted earnings per share in the range of $3 to  $3.60. This compares to the $3.31 consensus.

Q1 loads to reach 100%

Q1 net yields are expected to increase 0.5% to 1.5% as reported and 1% to 2% in constant currency versus 2019, with load factors reaching 100% and total revenues per passenger cruise day up in the mid- to high-single-digit range in both as reported and constant currency compared to 2019.

Net cruise costs, excluding fuel, per available passenger cruise day are expected to go up approximately 8.3% as reported and approximately 8.5% in constant currency, compared to 2019, including 320 basis points of lagging transitional costs, additional structural costs and timing of expenses.

Loss expected

Q1 adjusted loss per share is expected to be in the range of 65 cents to 85 cents.

Check back later today for more reporting following the company's fourth quarter earnings call