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Royal Caribbean loses $1.1bn in Q4 on 'staggering' pandemic impact but bookings are coming in

CRUISE Royal Caribbean Group logo_20.jpg
Royal Caribbean Group lost more than $1bn for a fourth straight quarter on the COVID-19 pandemic's 'staggering impact.'

Adjusted net loss was $1.1bn, or $5.02 per share, narrower than Wall Street's expectation of a loss of $5.20 per share. US GAAP net loss was $1.4bn, or $6.09 per share. This compares to the year-ago adjusted net income of $297.4m, or $1.42 per share, and US GAAP net income of $273.1m, or $1.30 per share.

Revenues were $34.14m, lower than Wall Street's $35.61m forecast, and down from $2.52bn in Q4 2019.

'These results reflect the staggering impact that the pandemic brought to our company and the whole industry during 2020,' EVP and CFO Jason Liberty said.

Though the pandemic is having a 'painful and profound impact on our world and our business,' Chairman and CEO Richard Fain credited the 'resourcefulness and agility' of his team's response.

'More importantly, we remain confident about the ability of our company to recover and return to the positive trajectory we were on previously,' Fain said. 'We are encouraged to see the sharp decline in cases and the growing availability of vaccines.'

Full-year results

Full-year adjusted net loss was $3.9bn, or $18.31 per share, compared to a profit of $2bn, or $9.54 per share in the prior year. US GAAP net loss was $5.8bn, or $27.05) per share, compared to net income of $1.9bn, or $8.95 per share.

Revenues were $2.2bn, down from $10.95bn.

Bookings update

Booking activity for the second half of 2021 is aligned with the company's anticipated resumption of cruising. Pricing for these bookings is higher than in 2019, both including and excluding the dilutive impact of future cruise credits.

While the brands are still in the process of opening sales for the remainder of their 2022/2023 seasons, Q1 and Q2 2022 sailings have been open for some time. Cumulative advance bookings for the first half of 2022 are within historical ranges and at higher prices. This was achieved with minimal sales and marketing spending.

Since Royal Caribbean's last business update in late October, approximately 75% of bookings made for 2021 are new and 25% are due to FCC redemptions and the 'Lift & Shift' program that allows travelers to change their sailing date.

At Dec. 31, the company had $1.8bn in customer deposits, 50% related to FCCs. Since the suspension of operations, approximately 53% of travelers booked on canceled sailings have requested cash refunds.

Monthly cash burn averages $250m to $290m

Royal Caribbean reaffirmed the expectation that its cash burn will average in a range of approximately $250m to $290m per month during a prolonged suspension of operations. The average monthly cash burn rate in Q4 was consistent with this range.

As ships start returning to service, the company will incur incremental spending as it staffs up with crew, takes the necessary steps to ensure compliance with the recommended protocols and gears up sales and marketing activities.

Liquidity

Royal Caribbean had $4.4bn of liquidity, including $3.7bn in cash and cash equivalents and a $0.7bn commitment from a 364-day loan facility as of Dec. 31.

During 2020, the company raised approximately $9.3bn of new capital through a combination of bond issuances, public stock offerings and other loan facilities.

In recent efforts, Royal Caribbean completed a $1bn 'at-the-market' equity offering during December and amended its export credit facilities to defer $0.8bn of principal amortization due before April 2022 and to waive financial covenants through at least the end Q3 2022.

It also received approvals from export credit agencies to defer an additional $0.4bn of principal amortization due before April 2022, expected to be completed in Q1 2021.

And the company amended over $4.9bn of commercial bank facilities to provide covenant waivers through the end of Q3 2022 and to reset covenant levels for the balance of 2022 and 2023.

Capital expenditures and newbuild delivery plans

2021's expected capital expenditures are $2.1bn, driven mainly by newbuild projects which have committed financing. The company expects the delivery of Odyssey of the Seas in the first quarter and Silver Dawn in Q4.

Two newbuild deliveries are scheduled in 2022, both with committed financing: Wonder of the Seas and Celebrity Beyond.

Ships divested

Since the suspension of operations and during 2020, the company divested three ships: the small Gal√°pagos vessel Celebrity Xperience, Majesty of the Seas and Empress of the Seas. Three ships used by Pullmantur were also divested.

A definitive agreement was reached to sell the Azamara brand and its three ships.

Four ships are sailing

In December, Quantum of the Seas started sailing short cruises from Singapore, while TUI Cruises has had three vessels operating in the Canary Islands since November.

'Guests are sharing very positive reviews and we are also seeing a higher proportion of first-time cruisers than expected,' Fain said. 'We believe that these cruises, even before the availability of vaccines, are helping us learn and demonstrate to others how we can operate successfully under the current COVID-19 environment.'

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