Norwegian Cruise Line Still Did Better Than Expected Despite Loss

Norwegian Cruise Line Holdings remain on target for profitability, with third quarter results exceeding expectations.

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Norwegian Cruise Line Holdings has a firm grasp on its financial recovery post-pandemic, showing better-than-expected results during the third quarter of 2022. NCLH continues to push itself away from the mainstream cruise companies and position itself as an up-scale cruise operator. This tactical decision is playing out well for the Miami-based cruise company.

Although NCLH still reported an adjusted net loss of $268 million, or -$0,61 per share, investors seem keen on the road NCLH President Frank Del Rio has mapped out, with share prices going up nearly 9% in the first hour of business today. 

Norwegian Cruise Line Holdings Beats Expectations

The return to profitability for Norwegian Cruise Line Holdings is taking shape, as the parent company for Norwegian Cruise Line, Regent Seven Seas, and Oceania Cruises posted better-than-expected Q3 results today, November 8. 

This includes positive adjusted earnings before interest, taxes, depreciation, and amortization for the first time since the pandemic, of approximately $28 million for the third quarter of 2022.

Norwegian Cruise Line Funnel
Photo Credit: zkolra / Shutterstock

While there were still losses for the past quarter, the expectations for the fourth quarter are looking positive. Onboard revenue and cruise ticket pricing exceeded expectations, increasing 14% compared to a strong 2019, cash flow is expected to turn positive in the coming quarter, and bookings are equal to those in 2019 but at much higher pricing. 

Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd: “We are demonstrating continued positive momentum as we consistently reach key operational and financial milestones, including positive Adjusted EBITDA in the third quarter for the first time since the start of the pandemic.”

According to del Rio, Norwegian Cruise Line Holdings has long been targeting upmarket customers to board its ships, a strategy that is starting to pay off.

“The underlying fundamentals of our business and our target upmarket consumer remain strong, and our strategy of focusing on maximizing long-term, sustainable profitability is working as intended, evidenced by our 2023 booked position, which is equal to 2019’s record levels and at record pricing.”

“We believe we are uniquely positioned within the cruise space to unlock value for our stakeholders given our dominance as the leading operator in upscale experiences, our sizeable yet nimble 29-ship fleet, our industry-best growth profile, and our differentiated go-to-market strategy of market-to-fill and value-add bundling.”

Slow and Steady

While most cruise companies have taken the approach of filling up ships as fast as possible through record-low pricing strategies, NCLH has always focused on long-term pricing. Where others have paid the price for the low pricing, NCLH now seems to be reaping the rewards.

 

Norwegian Pearl Cruise Ship
Photo Credit: Vytautas Kielaitis / Shutterstock

In Q3, NCLH reported a 17% increase in occupancy levels, reaching 82%. While this may seem on the low side, especially with other companies sailing up to and over 100% occupancy levels, this is exactly as expected and at higher pricing levels. 

By the second quarter of 2023, Norwegian Cruise Line Holdings expect to be back at historical levels without lowering cruise pricing. As fourth-quarter occupancy is typically lower due to seasonality, NCLH expects this to be in the mid-to-high 80 percent range, with the gap versus 2019 levels expected to narrow further.

Bookings On Target

With the elimination of COVID testing earlier this year, Norwegian Cruise Line Holdings sees increased bookings for its ships and cruises for Q4. While they are somewhat below the numbers seen in 2019, the company charges higher prices than before. For 2023, the numbers are running on par with 2019, leading to a possible record-breaking year.

Norwegian Prima Cruise Ship
Photo Courtesy: Norwegian Cruise Line

The successes that NCLH is reporting here can be explained through several factors. First and foremost, the elimination of COVID testing. However, Norwegian Cruise Line’s newest cruise ship, Norwegian Prima, played a role, as did Regent Seven Seas with the launch of the 2024-2025 Voyage collection, which broke a single-day booking record.

Norwegian Cruise Line Holdings posted an adjusted net loss of $268 million during the 3rd quarter, compared to an $801.4 million loss in the same period last year. Revenue increased to $1.6 billion, with much higher operating costs due to higher fuel costs, higher payroll costs, and inflation.  

With all three cruise lines, Norwegian Cruise Line, Regent Seven Seas, and Oceania Cruises looking healthy, the future looks strong for NCLH. 

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