Royal Caribbean Reports Third Quarter 2022 Results; Net profit of $33 million

Royal Caribbean Group today reported third quarter 2022 earnings per share of $0.13 and adjusted earnings per share of $0.26.

Third quarter results were better than expected and above forecast for the quarter, primarily due to higher load factors from strong near-by demand, further improvement in onboard revenue and better cost performance. The Group has also launched the Trifecta program, a new three-year initiative designed to drive superior performance, according to a press release.

“Last quarter’s better-than-expected performance is the result of a continued robust demand environment and strong execution by our teams,” said Jason Liberty, President and CEO of Royal Caribbean Group.

“The combination of our leading global brands, the best and most innovative fleet in the industry, our agile global sourcing platform and the best people has enabled a successful return of our business to full operations and positions us well to deliver record and EBITDA-adjusted returns in 2023,” Liberty added. “The Trifecta program provides us with the financial coordinates we seek to achieve over the next three years. As we have demonstrated in the past, we expect the formula of moderate yield growth, strong performance discipline of costs and moderate growth in our fleet will produce a solid financial profile.”

Company Highlights

  • Third quarter load factors were 96% overall, with Caribbean crossings reaching nearly 105%.
  • Total revenue in the third quarter was $3.0 billion, net income was $33.0 million and adjusted EBITDA was $742.3 million.
  • Third quarter booking volumes accelerated from the second quarter of 2022 and remained significantly above booking volumes received in the third quarter of 2019 for all future sailings.
  • For 2023, all quarters are currently booked well within historic ranges at record prices.
  • During the third quarter, the company processed $5.6 billion of its debt maturities in 2022 and 2023, resulting in $0.1 billion and $2.1 billion of remaining maturities in 2022 and 2023, respectively.
  • Based on the continued strength of consumer demand and typical load factor seasonality, the Company expects fourth quarter load factors to be similar to the third quarter overall and reach triple digits by the end of the year.
  • For the fourth quarter of 2022, based on current exchange rates, fuel rates and interest rates, the company expects to generate total revenue of approximately $2.6 billion, EBITDA adjusted from $350 to $400 million and an adjusted loss per share of ($1.30)-($1.50).
  • The Trifecta program is designed to achieve three important financial goals by the end of 2025: increase Adjusted EBITDA by APCD by triple digits, increase Adjusted EPS by double digits and achieve ROI in teens, while returning alongside an investment grade profile and reduce carbon intensity to double digits compared to 2019.

Third quarter 2022

The company reported net income for the third quarter of $33.0 million or $0.13 per share, compared to a net loss of ($1.4 billion or $(5.59) per share for the same period of the previous year. The company also reported adjusted net income of $65.8 million or $0.26 per share for the third quarter, compared to an adjusted net loss of ($1.2) billion or $(4.91) per share. share for the same period of the previous year.

Third quarter load factors were 96% overall and nearly 105% for Caribbean Sailings. As expected, total cruise-passenger revenue per day remained stable and up 1% in constant currency compared to the third quarter of 2019 despite the negative impact of the reimbursement of future cruise certificates (FCC) and the factors of charge below average on high-priced Europe. routes.

Gross cruise costs per APCD increased by 1% on a reported basis and in constant currency, compared to the second quarter of 2022. Net cruise costs (NCC), excluding fuel, per APCD increased by 11% on a reported basis and 10% in constant currency, compared to the second quarter. quarter of 2022. Gross cruise costs per APCD and NCC, excluding fuel, per APCD for the third quarter included $3.37 per APCD related to health protocols and one-time delay costs related to ramp-up fleet power.

NCC, excluding fuel, per APCD for the fourth quarter is expected to be lower to mid-single digit higher than the fourth quarter of 2019, all at constant currency. The company still expects to have transitional costs in the fourth quarter, but should normalize as the company approaches full occupancy, full crewing levels and protocols adaptation. The improvement is partially offset by inflationary and supply chain challenges, primarily related to fuel and food costs, which are expected to continue to weigh on costs through the remainder of this year and into the first half of 2023 .

Update on reservations

Reservation volumes in the third quarter were significantly higher than the corresponding period in 2019, the company said.

This improvement in bookings has been helped by the relaxation of testing and vaccination protocols which now align more closely with the wider travel industry, allowing everyone to enjoy a cruise vacation.

Customers continue to book cruises closer to sailing than in the past, resulting in approximately 50% more bookings in the third quarter for current year sailings compared to the third quarter of 2019.

While 2022 bookings remain strong and on track to meet occupancy targets, the most notable change has been a substantial acceleration in demand for 2023 departures.

Booking volumes for 2023 doubled in the third quarter compared to the second quarter and were significantly higher than bookings for 2020 sailings during the comparable period in 2019, the highest in the history of the company.

As of September 30, 2022, the Group’s customer deposit balance was $3.8 billion, reflecting typical seasonality as peak deposits for summer cruises were recognized in revenue. In the third quarter, approximately 95% of total bookings were new to FCC buyouts.

Trifecta program

The Trifecta program is a three-year financial performance initiative designed to chart a course for superior performance with three primary goals to be achieved by the end of 2025, the company said, including:

  • Triple-digit Adjusted EBITDA by APCD, surpassing the previous record Adjusted EBITDA by APCD of $87 in 2019.
  • Double-digit adjusted earnings per share surpassing previous record adjusted earnings per share of $9.54 in 2019.
  • Return on invested capital (“ROIC”) in teens to exceed previous record ROIC of 10.5% in 2019 thanks to the optimization of capital allocation and improved operating income; while returning to an investment grade profile and reducing carbon intensity to double digits compared to 2019.

To achieve these objectives, the company plans to execute its proven formula of moderate capacity growth, moderate yield growth and tight cost control, while ensuring disciplined capital allocation, investing in the future and improving the balance sheet.

“Our brands, our vacation offerings and our fleet have never been stronger and we are well positioned to continue to fundamentally change our financial performance,” Liberty said. “Our proven formula for success remains unchanged as we increase capacity and improve profitability while seeking to deliver superior shareholder returns.”

Cash and financing arrangements

As of September 30, 2022, the Group’s liquidity position was $3.1 billion, which includes cash and cash equivalents, undrawn revolving credit facility capacity and a $700 million commitment. dollars for a 364 day term loan facility.

During the third quarter, the company took proactive steps to process $5.6 billion of 2022 and 2023 maturities, in addition to securing financing for the acquisition of Silversea Endeavour:

  • In August, the company issued $1.15 billion of 6.00% convertible bonds due 2025 and used the proceeds to buy back $800 million of its 4.25% convertible bonds due June 2023 and $350 million of its 2.875% convertible bonds due November 2023;
  • In August, the company issued $1.25 billion of 11.625% unsecured notes due 2027 to refinance 2022 and 2023 debt maturities;
  • In August, the company extended its existing commitment to Morgan Stanley for a $700 million term loan facility through August 2023;
  • In September, the company amended its $554 million term loan (October 2023 maturity) such that the total outstanding principal balance is $502 million, of which $30.0 million matures in October 2023 and $472 million maturing in October 2024.
  • In September, the company priced $1.0 billion of 8.25% secured notes and $1.0 billion of 9.25% secured notes, both due in 2029 and repayable in 2025 to refinance $1.0 billion of secured notes and $1.0 billion of secured notes, both due June 2023. The transaction closed in October.

“During the third quarter, we took a series of proactive actions to methodically address a significant portion of our 2022 and 2023 debt maturities,” said Naftali Holtz, chief financial officer of Royal Caribbean Group. “Our strong near-term liquidity allows us to focus on continued balance sheet improvement as we seek to return to an investment-grade profile.”

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