Company Reports Record First Quarter Earnings with Strong EPS Growth of 67%
The Company’s Newest and Most Incredible Ship, Norwegian Bliss, Joins the Fleet
New $1 Billion, Three-year Share Repurchase Program Authorization Announced
MIAMI, Florida – May 2, 2018 – 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 first quarter ended March 31, 2018, as well as provided guidance for the second quarter and full year 2018.
Highlights
- The Company generated GAAP net income of $103.2 million or EPS of $0.45 compared to $61.9 million or $0.27 in the prior year. Adjusted Net Income was $137.8 million or Adjusted EPS of $0.60 compared to $91.2 million or $0.40 in the prior year.
- Total revenue increased 12.4% to $1.3 billion. Gross Yield increased 1.4%. Net Yield increased 1.0% on a Constant Currency basis.
- The Company expects to generate record earnings for full year 2018 and has increased its outlook, with Adjusted EPS now expected to be in the range of $4.55 to $4.70.
- 2018 full year Net Yield growth guidance on a Constant Currency basis increased 50 basis points from prior guidance to approximately 2.5%.
“The year is off to an impressive start with yet another record quarter of earnings, which exceeded expectations," said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “The 2018 Wave Season was stellar and has further strengthened our overall future booked position with load factor and pricing continuing to be well ahead of prior year for the remaining quarters of 2018 and throughout 2019.”
First Quarter 2018 Results
GAAP net income was $103.2 million or EPS of $0.45 compared to $61.9 million or $0.27 in the prior year. The Company generated Adjusted Net Income of $137.8 million or Adjusted EPS of $0.60 compared to $91.2 million or $0.40 in the prior year.
Revenue increased 12.4% to $1.3 billion compared to $1.2 billion in 2017. Net Revenue increased 13.1% to $1.0 billion compared to $0.9 billion in 2017. These increases were primarily attributed to strong organic pricing growth across all core markets along with an increase in Capacity Days due to the addition of Norwegian Joy to the fleet. Gross Yield increased 1.4% and Net Yield increased 1.0% on a Constant Currency basis and 2.0% on an as reported basis.
Total cruise operating expense increased 6.7% in 2018 compared to 2017 primarily due to an increase in Capacity Days. Gross Cruise Costs per Capacity Day decreased 1.5% due to a decrease in maintenance and repairs including Dry-dock expenses partially offset by an increase in marketing, general and administrative expenses. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day decreased 2.7% on a Constant Currency basis and 2.1% on an as reported basis.
Fuel price per metric ton, net of hedges decreased to $448 from $453 in 2017. The Company reported fuel expense of $93.4 million in the period.
Interest expense, net was $59.7 million in 2018 compared to $53.0 million in 2017. The increase in interest expense reflects additional debt in connection with the delivery of Norwegian Joy in April 2017, Project Leonardo financing, as well as higher interest rates due to an increase in LIBOR, partially offset by the benefit from the full redemption in October 2017 of our 4.625% Senior Notes due 2020.
Other income (expense), net was an expense of $1.7 million in 2018 compared to an expense of $2.8 million in 2017. In 2018, the expense was primarily related to losses on foreign currency exchange. In 2017, the expense was primarily related to losses on foreign currency exchange and unrealized and realized losses on derivatives.
Company Outlook
“The strong global demand for our portfolio of brands which we experienced during 2017 has continued, as demonstrated by the successful, record-breaking launch of Norwegian Bliss, which entered the fleet as the best booked Norwegian Cruise Line newbuild in the history of our company,” said Mark Kempa, interim chief financial officer of Norwegian Cruise Line Holdings Ltd. “While our primary focus continues to be to delever to the low 3 times by year-end 2018, our recently announced $1 billion share repurchase program reflects our ongoing confidence in our financial position and the long-term strength of our business as well as our commitment to provide meaningful capital returns to our shareholders.”
2018 Guidance and Sensitivities
In addition to announcing the results for the first quarter, the Company also provided guidance for the second 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.
Second 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
|
Constant
Currency | ||||||||
Net Yield
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Approx. 2.75%
|
Approx. 2.0%
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Approx. 3.0%
|
Approx. 2.5%
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Adjusted Net Cruise Cost
Excluding Fuel per Capacity Day |
Approx. 9.0%
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7.5% to 8.0%
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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. $1.02
|
$4.55 to $4.70
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Adjusted Depreciation and Amortization (1)
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Approx. $135 million
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Approx. $552 million
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Adjusted Interest Expense, net
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Approx. $70 million
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Approx. $274 million
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Effect on Adjusted EPS of a
1% change in Net Yield (2) |
$0.05
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$0.16 (3)
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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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$0.08 (3)
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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 second quarter and full year 2018, respectively.
(2) Based on midpoint of guidance.
(3) For the remaining quarters of 2018.
The following reflects the Company’s expectations regarding fuel consumption and pricing, along with accompanying sensitivities.
Second Quarter 2018
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Full Year 2018
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Fuel consumption in metric tons
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205,000
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840,000
| |
Fuel price per metric ton, net of hedges
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$470
|
$470
| |
Effect on Adjusted EPS of a 10% change
in fuel prices, net of hedges |
$0.02
|
$0.07 (1)
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(1) For the remaining quarters of 2018.
As of March 31, 2018, the Company had hedged approximately 64%, 48%, and 26% of its total projected metric tons of fuel consumption for the remainder of 2018, 2019, and 2020, respectively. The following table provides amounts hedged and price per barrel of heavy fuel oil (“HFO”) and marine gas oil (“MGO”) which are hedged utilizing U.S. Gulf Coast 3% (“USGC”) and Brent, respectively.
Remainder of 2018
|
2019
|
2020
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% of HFO Consumption Hedged
|
83%
|
57%
|
52%
| ||
Average USGC Price / Barrel
|
$53.02
|
$47.82
|
$39.50
| ||
% of MGO Consumption Hedged
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17%
|
20%
|
11%
| ||
Average Brent Price / Barrel
|
$46.50
|
$49.25
|
$51.85
|
The following reflects the foreign currency exchange rates the Company used in its second quarter and full year 2018 guidance.
Current Guidance - May
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Prior Guidance – February
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Euro
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$1.21
|
$1.24
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British pound
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$1.38
|
$1.42
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Australian Dollar
|
$0.75
|
$0.81
| ||
Canadian Dollar
|
$0.78
|
$0.81
| ||
Future capital commitments consist of contracted commitments, including ship construction contracts, and future expected capital expenditures necessary for operations as well as our ship refurbishment projects. As of March 31, 2018, anticipated capital expenditures were $1.4 billion for the remainder of 2018, $1.3 billion and $0.9 billion for the years ending December 31, 2019 and 2020, respectively. We have export credit financing in place for the expenditures related to ship construction contracts of $0.7 billion for the remainder of 2018, $0.6 billion and $0.5 billion for the years ended December 31, 2019 and 2020, respectively.
Company Updates and Other Business Highlights
$1 Billion, Three-year Share Repurchase Program Authorized
In April 2018, the Company’s Board of Directors (the “Board”) authorized a three-year, $1 billion share repurchase program. This authorization reflects the Company’s ongoing confidence in its financial strength and the long-term outlook of its business. The Company may repurchase its ordinary shares from time to time, in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations. The Company may make repurchases in the open market, in privately negotiated transactions, in accelerated repurchase programs or in structured share repurchase programs, and any repurchases may be made pursuant to Rule 10b5-1 plans. The program will be conducted in compliance with applicable legal requirements and will be subject to market conditions and other factors.
Company Announces New Dedicated Terminal at PortMiami
Recently, the Company unveiled the design of the new and dedicated Norwegian Cruise Line terminal at PortMiami. The new terminal will set the standard for passenger comfort and experience and will become an iconic building on Miami’s waterfront, and once complete, it will be the new “pearl” of Miami, redefining the landscape of the city’s skyline. At nearly 166,500 square feet, the debuting terminal will accommodate ships of up to 5,000 passengers. On April 26, the Company celebrated the groundbreaking of the terminal, marking the start of construction. The project is scheduled for completion by fall of 2019, as Norwegian Encore, the newest ship of the Breakaway Plus Class, makes her debut in Miami with seasonal cruises to the Caribbean.
Delivery of Norwegian Bliss
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