Norwegian Cruise Line Holdings (NCLH) reported its financial results for the fourth quarter and full year ending December 31, 2022, on Monday, February 28.
While the company reported strong pricing and onboard sales that led to a 225% rise in revenue, the cruise operator posted a higher-than-expected loss, sending its shares down. The company also provided disappointing guidance for 2023. Norwegian remains optimistic about its growth, and bookings are on track to reach historical occupancy levels in the second quarter of 2023 and beyond.
NCLH Financial Results for the Fourth Quarter
Norwegian Cruise Line Holdings’ adjusted loss was $1.04 per share in the fourth quarter, which missed estimates of an 86 cents loss that many analysts expected. The company’s revenue for the quarter rose more than 225% to $1.57 billion, beating expectations of $1.5 billion, driven by solid ticket pricing and onboard sales.
The fourth quarter also saw an occupancy improvement of approximately 87%, which was in accordance with expectations, but far removed from where competitors Carnival Corporation and Royal Caribbean Group are operating.
Despite the disappointing numbers, Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd., remains optimistic:
“2022 was an eventful year, as we successfully completed our nearly yearlong Great Cruise Comeback, welcomed our newest ship Norwegian Prima to our world-class fleet and achieved several key milestones on our post-pandemic financial recovery,”
“We are now squarely focused on the future and are taking deliberate and strategic actions to best position the Company for its next chapter, which includes an industry-leading growth profile representing approximately 50% Capacity growth over 2019.”
The second quarter of 2023 is a critical period for NCLH as it aims to regain its pre-pandemic financial performance. By achieving historical occupancy levels, the company can ensure that its ships are operating at full capacity, which can help to boost revenue and improve the overall financial performance of the company.
Despite strong revenue numbers in the last quarter, Norwegian Cruise Line Holdings missed analysts’ expectations for 2023. The company expects to post an adjusted loss of 45 cents per share in the year’s first quarter and a full-year profit of 70 cents per share.
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Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd: “We remain steadfast in our commitment to deliver value for all of our stakeholders. We are focused on identifying new and incremental opportunities to reinforce our solid foundation and become an even stronger and more nimble organization, while continuing to provide unparalleled vacation experiences for our valued guests.”
Analysts had expected a loss of 35 cents per share in the first quarter and a profit of $1.04 per share for the entire year.
Bookings on Target Says Norwegian
More people are booking cruises with Norwegian Cruise Line Holdings lately, thanks to the high demand during Wave season. One of the company’s brands, Norwegian Cruise Line, broke a record for the most bookings in a single month in November 2022, boosted by Black Friday and Cyber Monday sales. Oceania Cruises and Regent Seven Seas have been doing equally well in bookings.
The booked position, or the total cabins booked, for the coming year is 62%, which the company calls optimal.
This record was then broken again in January 2023. As a result, the company has more bookings for the full year 2023 than it did in 2019 (a record-breaking year) while also increasing its capacity by about 19%. Prices have also gone up. NCLH is on track to reach its occupancy goals for the second quarter of 2023 and beyond.
Fleet Expansion and New Offerings
As for the companies’ fleet of cruise ships, Oceania Cruises has announced the name of its second 1,200-guest Allura Class ship, which will debut in 2025 as the eighth vessel for the line. Allura will be the sister ship to Vista, set to sail in May 2023.
Regent Seven Seas Cruises achieved a major construction milestone with the floating out of its newest ship, Seven Seas Grandeur, in January 2023. The ship will sail in November 2023, cruising 18 Caribbean and Mediterranean voyages.
Additionally, Oceania Cruises has accelerated the debut of its new ship Vista due to unprecedented demand for its inaugural season. Originally scheduled to debut on May 20, 2023, the maiden voyage has now been pushed forward by a week.
The companies have also announced the creation of a new division, “Experiences at Sea,” which will combine Sixthman Festivals at Sea, a subsidiary of NCL, and the companies’ Charters, Meetings, and Incentives department. The new division will focus on serving the companies’ corporate, incentive, and affinity-focused clients across all three brands.
Norwegian Sets Course for Decarbonization
Norwegian Cruise Line Holdings also announced that the final two Prima-plus Class newbuilds for Norwegian Cruise Line would be ready to run green methanol. The company has modified newbuild contracts for the final two Prima-plus Class ships to accommodate the use of green methanol as an alternative fuel source in the future. The move will help Norwegian Cruise Line achieve its 2050 carbon-zero goals.
“While additional modifications will be needed in the future to fully enable the use of methanol in addition to traditional marine fuel on these ships, this reinforces the Company’s commitment to decarbonization and represents an important step forward in the pursuit of net zero greenhouse gas emissions by 2050,” Norwegian said in its earnings release.
The delivery dates for the two 3,550-guest vessels from Fincantieri are scheduled for 2026 and 2027.
In addition to its change to methanol, Norwegian Cruise Line Holdings has recently tested biofuel blends on three additional ships: the Norwegian Star, Norwegian Sun, and Norwegian Epic. All three ships were tested with a mix of approximately 30% biofuel and 70% MGO.
Norwegian Cruise Line Holdings’ shares tumbled after the company’s disappointing guidance for 2023. The company’s shares fell more than 10% in early trading on Tuesday following the release of the financial results.
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The pandemic has hit the cruise industry hard, with cruise lines unable to operate for much of 2020 and the first half of 2021. While NCLH’s financial results for the fourth quarter of 2022 showed signs of recovery, and 2023 bookings look strong for the second half of the year, the cruise industry still faces challenges in the wake of the pandemic.
