Carnival Corporation & plc — 2023 Q2 Form 10-Q Summary
Business context and reporting period
Joint unaudited Form 10-Q for Carnival Corporation and Carnival plc covering the three and six months ended May 31, 2023, compared with the same periods in 2022. Carnival reported that its return to guest cruise operations was complete by May 31, 2023, with its full fleet serving guests.
Key financial metrics
| Metric | Three months ended May 31, 2023 | Three months ended May 31, 2022 | Six months ended May 31, 2023 | Six months ended May 31, 2022 |
|---|---|---|---|---|
| Revenue | $4.911 billion | $2.401 billion | $9.343 billion | $4.024 billion |
| Operating income (loss) | $120 million | $(1.473) billion | $(52) million | $(2.964) billion |
| Operating margin | 2.4% | (61.3)% | (0.6)% | (73.7)% |
| Net income (loss) | $(407) million | $(1.834) billion | $(1.100) billion | $(3.726) billion |
| Net margin | (8.3)% | (76.4)% | (11.8)% | (92.6)% |
| Net cash from operating activities | Not separately provided | Not separately provided | $1.525 billion | $(1.209) billion |
Passenger ticket revenue was $3.141 billion in the quarter and $6.011 billion for the six-month period. Onboard and other revenue was $1.770 billion and $3.332 billion, respectively. Quarterly occupancy was 98%, versus 69% in 2022; six-month occupancy was 95%, versus 62%. Passenger cruise days increased to 21.8 million for the quarter and 42.0 million for the six months.
At May 31, 2023, cash and cash equivalents were $4.468 billion, total cash including restricted cash was $4.507 billion, and total debt before debt issuance costs and discounts was $34.511 billion. Long-term debt was $31.921 billion. Liquidity was $7.3 billion, including cash and available borrowing capacity under the existing revolving facility. Working capital deficit was $5.6 billion, substantially reflecting advance customer deposits of $6.9 billion.
Material changes versus the prior comparable period
- Revenue increased $2.510 billion, or approximately 105%, in the quarter and $5.319 billion, or approximately 132%, for the six months, primarily due to more ships in service and substantially higher occupancy.
- Operating results improved materially, with quarterly operating income of $120 million compared with a $1.473 billion loss in 2022. Six-month operating loss narrowed to $52 million from $2.964 billion.
- Despite improved operating performance, interest expense increased $172 million in the quarter and $343 million for the six months because of higher average interest rates. Six-month interest expense was $1.082 billion.
- Quarterly fuel expense decreased $56 million to $489 million as lower fuel prices and fuel-mix changes offset higher consumption. Six-month fuel expense increased $114 million to $1.024 billion because of higher consumption.
- Operating cash flow improved by $2.734 billion year over year to $1.525 billion for the six months, supported partly by a $2.029 billion increase in customer deposits.
- Capital expenditures were $1.772 billion for the six months, while financing activities used $1.552 billion, including $2.294 billion of long-term debt repayments and $1.016 billion of new long-term debt issuance.
Guidance, outlook, commentary, risks and unusual items
The filing does not provide a clear numerical earnings or revenue forecast. Management’s liquidity assumptions include continued cruise operations, higher 2023 revenue per passenger than in 2019, improved occupancy, stabilized fuel prices and moderated inflationary pressures. Management expects seasonal strength in the third quarter, which normally produces the largest share of annual operating income.
- Management believes available liquidity is sufficient to fund obligations and expects compliance with financial covenants for at least the twelve months following issuance of the financial statements. The company intends to pursue refinancing and maturity extensions.
- The existing $2.9 billion revolving facility matures in 2024. A new $2.1 billion multi-currency facility becomes available in August 2024 and is intended to replace it, subject to facility conditions.
- Debt maturities totaled $34.511 billion, including $394 million in the third quarter of 2023, $431 million in the fourth quarter of 2023, $2.420 billion in 2024 and $4.297 billion in 2025. The filing states that $300 million of 2024 maturities was prepaid after May 31, 2023.
- Principal risks include substantial leverage and interest costs, fuel prices, inflation, higher interest rates, foreign exchange, travel demand, pandemics, operational or ship incidents, environmental and climate regulation, cybersecurity, labor availability, supply-chain disruption and competition.
- Unusual or material matters include a $31 million net loss on debt extinguishment for the six months, a $239 million increase in debt and $229 million reduction in additional paid-in capital from adoption of convertible-debt accounting guidance, and ongoing legal proceedings.
- In the Havana Docks litigation, a $110 million judgment plus $4 million of fees and costs was entered against Carnival; Carnival has appealed. The filing also describes a $21 million jury award in Carnival’s favor in the DeCurtis matter, while DeCurtis subsequently filed for Chapter 11.
- New ship growth capital commitments totaled $4.051 billion, including $691 million for the remainder of 2023, $2.416 billion in 2024 and $944 million in 2025.
Facts investors should verify
- Whether higher occupancy and pricing translate into sustained positive net income and operating cash flow after interest expense and capital expenditures.
- The company’s ability to refinance or repay substantial 2024–2027 maturities while maintaining covenant compliance and minimum liquidity requirements.
- The sustainability of customer deposits as a source of operating liquidity and the potential cash impact of refundable deposits and future cruise credits.
- Fuel prices, interest rates, foreign exchange rates and inflation, which materially affect margins and cash flow.
- Progress on new ship commitments, export-credit financing and the August 2024 transition to the new revolving facility.
- Developments in the Havana Docks appeal, environmental proceedings, cybersecurity matters and other litigation or regulatory investigations.