Pandemic leads to first quarter loss at Norwegian Cruise Line Holdings

Adjusted EPS loss 99 cents/share, GAAP net loss $8.80/share

Adjusted net income was a loss of $211.3m, or a loss of 99 cents per share — greater than Wall Street's expectation of a 31-cent/share loss — compared to a gain of $181.8m, or 83 cents per share, in the prior year. These results include adjustments of $1.7bn, primarily consisting of expenses related to impairment losses, non-cash stock-based compensation and amortization of intangible assets. GAAP net income was a loss of $1.9bn, or $8.80 per share, including a non-cash impairment loss of $1.6bn primarily related to goodwill and tradenames, compared to a positive $118.2m, or 54 cents EPS in the prior year.

Revenue fell 11.2%, to $1.2bn, compared to $1.4bn in 2019.

Net yield decreased 12.3%, both as reported and in constant currency on a 12.6% decrease in capacity days. Net yield fell primarily due to an increase in protected commissions and credit card fees recognized in the quarter as a result of canceled sailings. Capacity days fell due to the cancellation of sailings, partially offset by the addition of Norwegian Encore and Seven Seas Splendor to the fleet.

Cruise operating expense up 20.3%

Total cruise operating expense increased 20.3% year over year, primarily due to costs associated with the suspension of cruise voyages, including the cost of the related protected commissions, a 27.2% increase in fuel expense associated with the IMO 2020 regulations and the addition of Norwegian Encore and Seven Seas Splendor. Adjusted net cruise cost excluding fuel per capacity day increased 26.1% in constant currency and 25.7% as reported.

Total other operating expense increased 396% compared to 2019 primarily due to a $1.6bn impairment loss in the quarter comprised of $1.3bn related to goodwill and $0.3bn related to impairments for tradenames.

Capex estimated at $195m for balance of 2020

As of March 31, anticipated capital expenditures for the remainder of 2020 were $0.4bn with export credit financing in place for the anticipated expenditures related to ship construction contracts of $0.1bn. The company is finalizing documentation for deferrals of approximately $170m of newbuild-related payments, net of financing, due through March 31, 2021.

Once deferrals are finalized, anticipated total capital expenditures for the remainder of 2020 will be approximately $195m. NCLH did not provide capex guidance for 2021 and 2022 given the uncertainty of the current environment. The company expects the effects of COVID-19 on shipyards will result in delivery delays, which may be prolonged.

No significant debt maturities through 2021

Having secured debt holidays with export credit agencies and commercial lenders, extended a Pride of America term loan by a year and a $675m revolving credit facility maturity by a year (to March 2022), the company has no significant debt maturities through 2021.

$3.1bn net liquidity

NCLH acted in other ways to significantly strengthen its financial position, including a successful oversubscribed $2.4bn gross simultaneous quad-tranche capital raise. Total liquidity is approximately $3.7bn. Available net liquidity is $3.1bn, ssuming factors including cash refunds.

This capital raise, coupled with other ongoing liquidity-enhancing initiatives, makes the company 'well-positioned to weather an unlikely scenario of over 18 months of suspended voyages,' reiterated Frank Del Rio, president and CEO. 'Our guests continue to demonstrate their desire for cruise vacations, and we continue to experience demand for voyages further in the future across our three brands.'

He added the company is working around the clock alongside US and global public health agencies and governments to develop and implement the next level of enhanced health and safety standards in order to resume cruises.

2021 booked position within historical ranges

2020 started off strong and was expected to be another record year. Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises entered the year in a record booked position, at higher prices on a comparable basis. For the first two months, ships sailed full at higher prices on approximately 7% capacity growth.

The pandemic resulted in significant softness in near-term demand and an elevated rate of cancellations. NCLH cited continued demand for cruises, though, particularly beginning in the fourth quarter 2020 accelerating through 2021 with the company’s overall booked position and pricing for 2021 within historical ranges.

Slightly over half of passengers seek refunds

Future cruise credits of typically 125% are offered in lieu of refunds and valid for sailings through 2022. As of May 11, slightly over half of passengers on canceled sailings have requested cash refunds. As of March 31, the company had $1.8bn of advance ticket sales, including the long-term portion.

This includes approximately $800m for previously announced voyage cancellations through June 30, where travelers have the option of a future cruise credit or a refund, and approximately $370m for voyages scheduled for the remainder of 2020. The company also continues to take future bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings.

Monthly operating expenses $70m-$180m

Ongoing ship operating expenses and administrative operating costs combined are estimated to range from approximately $70m to $110m per month during the suspension of operations.

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