MIAMI, Florida – Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) (together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company”) today reported financial results for the fourth quarter and full year ended December 31, 2017, as well as provided guidance for the first quarter and full year 2018.
Full Year 2017 Highlights
- The Company generated GAAP net income of $759.9 million or EPS of $3.31. Adjusted Net Income was $907.7 million or Adjusted EPS of $3.96.
- Company beat full year earnings expectations, surpassing the midpoint of its initial February 2017 Adjusted EPS guidance of $3.80 by $0.16.
- Adjusted ROIC reached double-digit levels for the year.
- Total revenue increased 10.7% to $5.4 billion. Gross Yield increased 4.4%. Adjusted Net Yield increased 5.0% on a Constant Currency basis, exceeding the Company’s initial February 2017 guidance of 1.75% by 325 basis points.
- Company selected to join prestigious S&P 500 Index.
· Company’s three award-winning brands sailed inaugural voyages to Cuba, making the Company the first operator to have all brands approved to sail to Cuba.
- Successful launch of Norwegian Joy, marking the Company’s entry into the Chinese cruise market.
- Company bolstered its growth trajectory through 2025 with order for next generation of ships for the Norwegian Cruise Line brand.
Full Year 2018 Highlights
- Strong financial track record continues as Company anticipates fifth consecutive year of double-digit EPS growth.
- Company’s 2018 booked position at all-time high entering the year with load factor and pricing higher than prior year across all three brands driven by strong demand across all core markets.
- Adjusted Net Yield growth guidance on a Constant Currency basis for full year and first quarter 2018 of approximately 2.0% and 0.5%, respectively.
- Norwegian Bliss, the first custom-designed ship for the lucrative Alaska cruise market, will join the fleet in the second quarter.
“The strong, record performance we delivered in 2017 was the perfect end to a historic year as we celebrate the five year anniversary of our initial public offering. Over the last five years we have continued our track record of consistent financial performance with a more than sixfold increase in EPS, a doubling of revenue and the expansion of Adjusted ROIC to double-digit levels," said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “It has been a remarkable journey for our Company with more major milestones to come and an amazing trajectory of profit growth for 2018 and beyond. Our solid revenue and earnings performance will continue in 2018, having entered the year in the best booked position in our Company’s history with pricing above prior year across all three of our brands."
Fourth Quarter 2017 Results
GAAP net income was $98.8 million or EPS of $0.43 compared to $72.2 million or $0.32 in the prior year. The Company generated Adjusted Net Income of $156.8 million or Adjusted EPS of $0.68 compared to $127.7 million or $0.56 in the prior year.
Revenue increased 11.1% to $1.2 billion compared to $1.1 billion in 2016. Adjusted Net Revenue increased 12.6% to $969.7 million compared to $861.6 million in 2016. These increases were primarily attributed to the addition of Norwegian Joy to the fleet, along with strong organic pricing growth across all core markets. Gross Yield increased 2.5% and Adjusted Net Yield increased 3.4% on a Constant Currency basis and 3.9% on an as reported basis.
An increase in Capacity Days along with an increase in marketing, general and administrative expenses increased total cruise operating expense 8.4% in 2017 compared to 2016. Gross Cruise Costs per Capacity Day increased 1.2%. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 2.8% on a Constant Currency basis and 3.2% on an as reported basis.
Fuel price per metric ton, net of hedges increased to $460 from $459 in 2016. The Company reported fuel expense of $94.3 million in the period.
Interest expense, net decreased to $84.3 million in 2017 from $88.0 million in 2016. In connection with refinancings of our senior notes and certain of our credit facilities, interest expense, net included losses on extinguishment of debt and debt modification costs of $23.9 million in 2017 and $28.1 million in 2016.
Full Year 2017 Results
GAAP net income was $759.9 million or EPS of $3.31 compared to $633.1 million or $2.78 in the prior year. The Company generated Adjusted Net Income of $907.7 million or Adjusted EPS of $3.96 compared to $776.3 million or $3.41 in the prior year, despite unprecedented weather-related headwinds experienced in 2017. This strong growth follows a 49.5% increase in GAAP EPS and an 18.4% increase in Adjusted EPS from 2015 to 2016, further demonstrating the Company’s continued underlying earnings power.
Revenue increased 10.7% to $5.4 billion compared to $4.9 billion in 2016. Net Revenue increased 11.2% to $4.2 billion compared to $3.8 billion in 2016. These increases were primarily attributed to a 6.0% increase in Capacity Days due to the delivery of Norwegian Joy in April 2017, Regent’s Seven Seas Explorer in June 2016 and Oceania Cruises’ Sirena in April 2016 and strong organic pricing growth across all core markets. Gross Yield increased 4.4% and Adjusted Net Yield increased 5.0% on a Constant Currency basis and 4.8% on an as reported basis.
An increase in Capacity Days along with an increase in marketing, general and administrative expenses increased total cruise operating expense 7.5% in 2017 compared to 2016. Gross Cruise Costs per Capacity Day increased 2.9%. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 2.8% on a Constant Currency basis and 2.9% on an as reported basis.
Fuel price per metric ton, net of hedges decreased to $465 from $466 in 2016. The Company reported fuel expense of $361.0 million in the period.
Interest expense, net decreased to $267.8 million in 2017 from $276.9 million in 2016. Interest expense for 2017 reflects higher interest rates due to an increase in LIBOR, as well as an increase in average debt balances outstanding primarily associated with the delivery of new ships and newbuild installments. In connection with refinancings of our senior notes and certain of our credit facilities, interest expense, net included losses on extinguishment of debt and debt modification costs of $23.9 million in 2017 and $39.2 million in 2016.
Other income (expense), net was an expense of $10.4 million in 2017 compared to an expense of $8.3 million in 2016. In 2017, the expense was primarily related to losses on foreign currency exchange. In 2016, the expense was primarily related to $16.1 million of unrealized and realized losses on fuel swap derivative hedge contracts partially offset by $4.5 million of gains on foreign currency exchange and $3.9 million of gains on foreign currency exchange derivative hedge contracts.
2018 Outlook
“The continued strong global demand for our portfolio of brands will enable us to further grow revenue, resulting in our sixth consecutive year of Net Yield growth. This, coupled with the benefit of the launch of Norwegian Bliss and a continued focus on costs, will drive 2018 earnings to record highs,” said Wendy Beck, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd.
2018 Guidance and Sensitivities
In addition to announcing the results for the fourth quarter and full year 2017, the Company also provided guidance for the first quarter and full year 2018, along with accompanying sensitivities. The Company does not provide guidance on a GAAP basis because the Company is unable to predict, with reasonable certainty, the future movement of foreign exchange rates or the future impact of certain gains and charges. These items are uncertain and will depend on several factors, including industry conditions, and could be material to the Company’s results computed in accordance with GAAP. The Company has not provided reconciliations between the Company’s 2018 guidance and the most directly comparable GAAP measures because it would be too difficult to prepare a reliable U.S. GAAP quantitative reconciliation without unreasonable effort.
First Quarter 2018
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Full Year 2018
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As Reported
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Constant Currency
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As Reported
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Constant
Currency | ||||||||
Adjusted Net Yield
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Approx. 1.25%
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Approx. 0.50%
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Approx. 2.75%
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Approx. 2.0%
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Adjusted Net Cruise Cost
Excluding Fuel per Capacity Day |
Approx. (1.75%)
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Approx. (2.75%)
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0.5% to 1.5%
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Flat to 1.0%
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Adjusted EPS
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Approx. $0.52
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$4.45 to $4.65
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Adjusted Depreciation and Amortization (1)
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Approx. $126 million
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Approx. $553 million
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Adjusted Interest Expense, net
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Approx. $61 million
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Approx. $275 million
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Effect on Adjusted EPS of a
1% change in Adjusted Net Yield(2) |
$0.04
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$0.20
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Effect on Adjusted EPS of a 1% change in Adjusted Net Cruise Cost Excluding Fuel per Capacity Day (2)
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$0.03
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$0.10
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(1) Excludes $6.2 million and $24.9 million of amortization of intangible assets related to the Acquisition of Prestige in the first quarter and full year 2018, respectively.
(2) Based on midpoint of guidance.
The following reflects the Company’s expectations regarding fuel consumption and pricing, along with accompanying sensitivities.
First Quarter 2018
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