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Royal Caribbean's Q3 beats on 'robust' demand, company launches Trifecta Program

Royal Caribbean Group beat third quarter expectations on 'robust' demand, projected record results in 2023 and unleashed the Trifecta Program to drive performance.

The company cited higher load factors from strong close-in demand, onboard revenue and cost control in pushing up earnings. Adjusted net income was $65.8m, or 26 cents per share, above Wall Street's 19-cent consensus expectation, and US GAAP net income came in at $33m, or 13 cents EPS. Adjusted EBITDA was $742.3m.

Revenue was $3b, higher than Wall Street's $2.97b forecast.

Continued robust demand

'Last quarter's better than expected performance was a result of the continued robust demand environment and strong execution by our teams,' Royal Caribbean Group President/CEO Jason Liberty said. He added the company is well-positioned to deliver record yields and adjusted EBITDA in 2023.

All 2023 quarters are currently booked well within historical ranges at record pricing, and Royal Caribbean expects a return to historical load factors in early summer. The company sees lower transitory expenses and accelerating benefit from actions taken to improve margin while partially mitigating continued inflationary pressures expected to persist through first half 2023.

Overall 96% occupancy, Caribbean higher

Q3 load factors were 96% overall, with Caribbean sailings reaching almost 105%.

Booking volumes accelerated from Q2 and remained significantly higher than in Q3 2019 for all future sailings.

Fourth quarter loss

Based on continued strength in consumer demand and typical load factor seasonality, the company expects Q4 load factors to be similar to Q3 overall — just a tad lower at 95% — and to reach triple digits by year-end.

Royal Caribbean projects adjusted EBITDA of $350m to $400m and an adjusted loss of $1.30 to $1.50 per share on revenue of approximately $2.6b. Wall Street had been expecting a lower Q4 loss, of 67 cents per share.

Bookings update

Q3 booking volumes were significantly higher than the same 2019 period, helped by the easing of COVID-19 testing and vaccination protocols.

Travelers continue to make cruise reservations closer to sailing than in the past, resulting in about 50% more bookings in Q3 for current year sailings when compared to Q3 2019.

While 2022 bookings remain strong and on pace to achieve occupancy targets, Royal Caribbean said the most notable change has been a substantial acceleration in demand for 2023 sailings. Booking volumes for 2023 doubled during Q3 when compared to Q2 and were considerably higher than bookings for 2020 sailings during the comparable period in 2019, the highest in company history.

As of Sept. 30, customer deposit balance was $3.8b, reflecting typical seasonality as peak summer sailing deposits are recognized in revenue. In Q3, approximately 95% of total bookings were new versus future cruise credit redemptions.

Trifecta Program goals

The Trifecta Program is designed to achieve three financial goals by the end of 2025: increasing adjusted EBITDA per available passenger cruise day (APCD) to triple digits, to exceed the prior record of $87 in 2019; increasing adjusted EPS to double digits, to exceed the 2019 record of $9.54; and achieving return on invested capital in the teens, topping 2019's 10.5% through optimizing capital allocation and enhancing operating income.

All this in parallel with returning to an investment grade profile and reducing carbon intensity by double digits compared to 2019.

The Trifecta Program 'provides us the financial coordinates we are looking to achieve over the next three years,' Liberty said. 'As we have demonstrated in the past, we expect the formula of moderate yield growth, strong cost discipline and moderate growth of our fleet will deliver a strong financial profile.'

Third quarter details

As expected, total revenues per passenger cruise day were flat as reported and up 1% in constant currency versus Q3 2019 despite the negative impact from the redemption of FCCs and lower than average load factors on high-priced Europe itineraries. 

Gross cruise costs per APCD increased 1% as reported and in constant currency, compared Q2 2022 and included $3.37 per APCD related to health protocols and one-time lagging costs related to fleet ramp-up. Net cruise costs, excluding fuel, per APCD improved 11% as reported and 10% in constant currency, compared to Q2.


As of Sept. 30, the group's liquidity was $3.1b including cash and cash equivalents, undrawn revolving credit facility capacity and a $700m commitment for a 364-day term loan facility.

During Q3, Royal Caribbean addressed $5.6b of its 2022 and 2023 debt maturities, resulting in $0.1b and $2.1b of maturities remaining in 2022 and 2023, respectively.