Norwegian Cruise Line Holdings Ltd. (Nasdaq: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, 2016, as well as provided guidance for the second quarter and full year 2016.
Highlights
Adjusted EPS growth of 41% to $0.38 on Adjusted Net Income of $86.7 million. EPS increased to $0.32 on Net Income of $73.2 million.
The Company’s current booked position for 2016 is on par with prior year’s record levels and at higher prices. Strength in the Caribbean, Alaska, Hawaii, and other North American markets is offsetting softness in European itineraries.
Constant Currency Adjusted Net Yield increased 3.6% (2.5% as reported), driven primarily by solid demand in the Caribbean and strong onboard revenue. Gross Yield increased 2.4%.
First half of 2017 booking trends remain strong at higher prices.
Company remains confident in reaching previously stated targets of double-digit Adjusted ROIC in 2016, growing to 14% by 2018, and $5.00 Adjusted EPS in 2017.
Oceania Cruises welcomed its latest ship, Sirena, to its fleet.
Company revealed exciting features and amenities for Norwegian Joy, its purpose-built ship dedicated to the Chinese market.
“We are pleased to report another quarter of solid financial performance and significant earnings growth driven primarily by strong pricing with robust demand in the Caribbean driving net yield growth above our expectations,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings. “We are on track to reach our stated targets of $5.00 Adjusted EPS in 2017 and double-digit return on invested capital on an adjusted basis in 2016, growing to 14% by 2018. Our recent announcements regarding our China-dedicated ship, Norwegian Joy, have been extremely well-received in the Chinese market giving us strong momentum prior to the ship’s introduction in 2017,” continued Del Rio.
First Quarter 2016 Results
Net Income was $73.2 million, or $0.32 per share compared to a loss of ($21.5) million or ($0.10) per share in the prior year. The Company generated Adjusted Net Income of $86.7 million, or $0.38 per share compared to $62.6 million or $0.27 per share in the prior year. Adjusted EPS increased 41% over prior year, benefiting from solid Adjusted Net Yield performance as a result of strong pricing along with the earnings benefit from the Norwegian Escape which joined the fleet in October 2015.
Total Revenue for the Company increased 14.9% to $1.1 billion compared to $938.2 million in 2015. Adjusted Net Revenue in the period increased 15.1% to $838.7 million compared to $728.9 million in 2015, primarily as a result of the addition of Norwegian Escape. Adjusted Net Yield improved 3.6% on a Constant Currency basis (2.5% on an as reported basis), mainly due to higher pricing benefiting from strength in the Caribbean and strong onboard revenue. Gross Yield increased 2.4%.
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 1.5% on a Constant Currency basis (1.1% on an as reported basis), primarily due to an increase in marketing expense as well as two scheduled dry-docks in the quarter compared to the prior year which had one dry-dock in the period. Gross Cruise Costs per Capacity Day decreased 3.2%.
Fuel price per metric ton, net of hedges, decreased 16.7% to $438 from $526 in 2015. The Company reported fuel expense of $81.7 million, which excluded a loss of $5.2 million recorded in other income (expense), related to the ineffective portion of its fuel hedge portfolio due to market volatility.
Interest expense, net increased to $59.8 million from $51.0 million as a result of higher interest rates due to an increase in LIBOR rates as well as an increase in average debt balances outstanding primarily associated with the delivery of Norwegian Escape.
Other income (expense) of $2.8 million included a gain from the fair value increase related to a foreign exchange collar for the Seven Seas Explorer newbuild, partially offset by a $4.2 million loss on foreign currency exchange and the aforementioned loss on fuel hedges.
The Company repurchased approximately $50 million of the Company’s outstanding ordinary shares under its previously authorized three-year, $500 million share repurchase program. As of March 31, 2016, $264 million remained available for repurchases.
Sale of Hawaii Land-based Operations
In the first quarter of 2016, the Company executed an agreement to divest its interest in a certain land-based operation in Hawaii. The amount of the transaction is considered immaterial to the Company’s consolidated financial statements. The agreement is subject to customary closing conditions, including receipt of all required regulatory approvals. The sale is expected to be completed during 2016. The Company’s first quarter financial results include the results from this operation. For purposes of comparison to the guidance provided by the Company in its prior release, key operational metrics excluding the results of this operation are as follows:
Adjusted Net Yield growth on a Constant Currency basis would have been 3.9% compared to guidance of approximately 2.5% and 2.7% on an as reported basis (excluding the results of the aforementioned operation) compared to guidance of approximately 1.75%.
Adjusted Net Cruise Costs Excluding Fuel per Capacity Day growth on a Constant Currency basis would have been 1.6% compared to guidance of approximately 2.0% and 1.3% on an as reported basis (excluding the results of the aforementioned operation) compared to guidance of approximately 1.75%.