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Royal Caribbean sees cash-flow positive spring, full-year 2022 profit

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Royal Caribbean Group posted a wider than expected third quarter loss but said booking volumes have improved significantly since summer's 'Delta dip' and 2022 cruises are booked within historical ranges and at higher prices than 2019.

The company expects to be cash flow positive by spring and profitable for full year 2022.

The Group attracted more bookings in Q3 than Q2, with September 'particularly strong' and October bookings 'significantly better than September.' New bookings for 2022 sailings were more than 60% higher than the Q2 monthly average.

Royal Caribbean's Q3 adjusted net loss of $1.2bn, or $4.91 per share, was higher than Wall Street's forecast of a $4.16 per share loss and compares to the year-ago $1.2bn or $5.62 per share loss. Net GAAP loss was $1.4bn, or $5.59 per share, compared to the Q3 2020 US GAAP $1.3bn loss, or $6.29 per share.

Revenues were $457m, under the $612m consensus forecast and up from the $33m a year ago.

Two-thirds of fleet operating

Forty ships, or two-thirds of the Royal Caribbean Group fleet, are now carrying passengers. More than 500,000 passengers have sailed across the company's five brands, with more than 1m expected by year-end when 50 of 61 ships wil have returned to service.

This represents almost 100% of the company's core itineraries and approximately 80% of worldwide capacity.

All ships sailing by spring, regular load factors by Q3

The remaining ships are expected to return to service by the spring, with a return to historical load factors in Q3 2022.

Mainland China cruising is expected to resume in the spring.

Record satisfaction scores/on-board spending

Both guest satisfaction scores and on-board spending per passenger are at the highest levels in company history.

The ships that operated the core Caribbean, Alaska and Europe itineraries in Q3 achieved a 44% load factor. (Core itineraries exclude sailings during the early ramp-up period of up to four weeks and specialized itineraries, such as Singapore and Cyprus sailings, implemented during the COVID period.)

Total revenues per passenger cruise day were up 12% versus record 2019 levels, driven mainly by strong on-board revenue. Ships in core itineraries were cash flow accretive excluding start-up costs.

'Our strategy continues to focus on getting the flywheel spinning smooth and fast, so that as we turn the year we will enjoy a stable and predictable platform with which to start the wave period,' Chairman and CEO Richard Fain said.

Occupancies ramping up

Royal Caribbean anticipates load factors on core itineraries to ramp to 65% to 70% during Q4 when the company projects 6.9m available passenger cruise days, with overall load factors of 60% to 65%. All ships on core itineraries in Q4 are expected to be cash flow accretive even when including start-up costs.  

Sailings further out are experiencing more normalized booking trends than those closer in. Load factors for Q1 are lower than historical levels and improving but still below average in Q2 and are solidly within historical levels in the second half. Pricing remains strong throughout 2022, with or without future cruise credits.

Cost and supply chain pressures

'As [COVID] cases have come down, demand has come surging back,' EVP and CFO Jason Liberty said. '... Although there are many uncertainties going forward regarding COVID-19, as well as cost and supply chain pressures, we continue our pathway forward and anticipate positive cash flow for the Group by spring of 2022 and generating positive earnings for the full year 2022.'

Approximately 35% of the customer deposit balance is related to FCCs compared to 40% in the prior quarter, a positive trend indicating new demand. Customer deposits for Q2 2022 forward sailings are higher than at the same time in 2019.

Liquidity

At Sept. 30, liquidity was approximately $4.1bn, including $3.3bn in cash and cash equivalents, $0.1bn of undrawn revolving credit facility capacity and a $0.7bn commitment for a 364-day facility.

The delivery of Silver Dawn is expected during Q4. In 2022, two ship deliveries scheduled: Wonder of the Seas and Celebrity Beyond. 

Check back later for more details following the company's earnings call. 

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