Norwegian Cruise Line Holdings Ltd. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the text provides selected fourth-quarter operating information, not a complete standalone Q4 income statement. The company operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.
Financial and operating performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $4.844 billion | $648.0 million |
| Operating loss | $1.552 billion | $2.552 billion |
| Net loss | $2.270 billion | $4.507 billion |
| Diluted loss per share | $5.41 | $12.33 |
| Adjusted net loss (non-GAAP) | $1.947 billion | $2.950 billion |
| Adjusted EBITDA (non-GAAP) | $(673.9) million | $(1.724) billion |
| Occupancy | 72.8%; Q4 averaged 87% | 52.7% |
| Operating cash flow | $210.0 million provided | $2.468 billion used |
Revenue rose 647.5% as the fleet returned to service: passenger cruise days increased to 12.8 million from 1.8 million. The full 29-ship fleet was operating by early May 2022. Adjusted Gross Margin was $3.451 billion, a non-GAAP measure; GAAP gross margin was negative $124.3 million. GAAP operating loss equaled 32.1% of revenue and net loss 46.9% of revenue.
Cash used in investing activities was $1.756 billion, primarily for delivery of Norwegian Prima and other capital spending. Cash provided by financing activities was $986.2 million. Cash and cash equivalents declined to $947.0 million from $1.507 billion at year-end 2021.
Debt and liquidity
- At December 31, 2022, total debt was $13.622 billion, including $991.1 million classified as current and $12.630 billion as long-term. Shareholders’ equity was $68.6 million.
- Cash was $947.0 million; the company also reported a $1 billion undrawn commitment available through March 31, 2023. In February 2023, that commitment was extended, but reduced to $650 million, with an option to extend further.
- Working capital deficit was $3.2 billion, including $2.5 billion of advance ticket sales, which the company describes as largely deferred revenue rather than an equivalent current cash liability. Total advance ticket sales, including the long-term portion, were $2.7 billion.
- Credit-card processors held $622.0 million in cash collateral reserves at year-end. Further collateral demands could reduce liquidity.
- The company reported compliance with debt covenants at December 31, 2022, after amendments. It said it had sufficient liquidity for at least 12 months, based on its assumptions and available resources, while warning that prolonged reduced occupancy or another suspension could require additional financing.
- Approximately $13.7 billion of assets were pledged as debt collateral. The company reported $16.141 billion of scheduled debt cash requirements, including estimated interest, and $6.762 billion of ship-construction commitments as of year-end; these figures exclude subsequent transactions and are subject to the filing’s stated assumptions.
Changes, outlook and material items
- Compared with 2021, revenue and occupancy improved substantially as sailings resumed; losses and operating cash burn narrowed. The company remained deeply loss-making, and Adjusted EBITDA remained negative.
- Costs rose with more ships operating and inflation, including higher fuel, payroll and logistics costs. FY2022 net interest expense was $801.5 million, down from $2.073 billion in 2021, which included substantially larger debt-extinguishment losses. FY2022 included $193.4 million of debt extinguishment and modification adjustments in the non-GAAP reconciliation.
- Management expected historical occupancy levels to return in Q2 2023, based on booking trends, but cautioned that the timing was uncertain. The company stated it expected a net loss in Q1 2023. Full-year 2023 booked position was reported ahead of 2019 at higher pricing, despite approximately 19% greater capacity; bookings may not translate directly into revenue.
- February 2023 financing, subsequent to year-end, included $600 million of 8.375% secured notes used to repay Term Loan A amounts otherwise due in January 2024, and $250 million of 9.75% secured notes for general corporate purposes. A further $300 million backstop facility was arranged. These transactions improve near-term maturity coverage but add secured debt and financing costs.
- Eight ships were on order at year-end, with combined contract prices reported at approximately $7.2 billion. The company expects export-credit financing to fund about 80% of contract prices, subject to conditions. In February 2023, delivery dates for the last two Prima-class ships were amended to 2027 and 2028, and the ships will be lengthened and configured for future methanol use.
- Russia’s invasion of Ukraine led to cancellation or modification of about 60 sailings in 2022 and removal of Russian port calls from 2023 and 2024 itineraries. Inflation, fuel and interest rates, foreign exchange exposure, and evolving environmental rules may pressure costs and operations.
- In the Havana Docks case under the Helms-Burton Act, a court entered a $112.9 million judgment in December 2022; the company appealed in January 2023 and recorded no liability, assessing loss as reasonably possible but not probable. A separate Garcia-Bengochea case remained pending, with potential loss not reasonably estimable. A vendor appeal challenges a roughly $159 million verdict in the company’s favor; no receivable was recorded.
- The filing reports no impairment loss in 2022, following $1.608 billion of impairment losses in 2020. Management’s year-end review supported the carrying values of goodwill and trade names.
Key investor verification points
- Track actual occupancy, ticket pricing and onboard revenue against management’s Q2 2023 historical-occupancy expectation and booking disclosures.
- Confirm liquidity availability and covenant compliance after the reduced $650 million commitment, collateral requirements, and subsequent debt transactions.
- Review debt maturities, interest costs, secured collateral and the company’s ability to fund operations and ship commitments from operating cash flow and financing.
- Monitor the outcome and financial exposure of the Havana Docks judgment, the Garcia-Bengochea litigation and the appealed vendor award.
- Assess whether cost inflation, fuel prices, foreign exchange movements, ship-delivery changes and environmental compliance costs affect recovery and cash needs.