Royal Caribbean Cruises Ltd. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; compared with Q1 2022. Amounts are in U.S. dollars. Royal Caribbean Group operates Royal Caribbean International, Celebrity Cruises and Silversea Cruises, and has a 50% interest in TUI Cruises. Its full fleet returned to service by June 2022; Q1 2022 reflected only a partial restart.
Key financial and operating metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Total revenue | $2.885 billion | $1.059 billion |
| Operating income (loss) | $271.6 million | $(859.2) million |
| Operating margin | 9.4% | (81.1)% |
| Net loss | $(47.9) million | $(1.167) billion |
| Diluted loss per share | $(0.19) | $(4.58) |
| Adjusted EBITDA (non-GAAP) | $641.7 million | $(549.7) million |
| Operating cash flow | $1.310 billion | $(528.8) million |
Passenger ticket revenue was $1.897 billion and onboard and other revenue was $988.6 million. Occupancy was 102.1%, versus 57.4%; available passenger cruise days rose to 11.23 million from 7.69 million. Adjusted net loss was $58.9 million, or $0.23 per diluted share, compared with $1.164 billion, or $4.57 per share, in Q1 2022. Adjusted measures are non-GAAP.
Material changes and cash, debt and liquidity
- Revenue increased $1.826 billion year over year, primarily reflecting full operations in 2023 versus partial operations in 2022. Cruise operating expenses rose $608.0 million; inflation also affected costs, and fuel cost per metric ton, net of fuel swaps, increased 25%.
- Interest expense, net, increased $81.7 million to $359.4 million, reflecting refinancing activity and higher rates on floating-rate debt. Equity investment results improved to $20.5 million of income from a $31.1 million loss.
- Operating cash flow was $1.310 billion, supported in part by a $1.103 billion increase in customer deposits. Investing cash outflow was $234.1 million, with property and equipment purchases of $251.9 million; financing cash outflow was $1.784 billion, largely reflecting debt repayments.
- Cash and cash equivalents were $1.227 billion at quarter-end, down from $1.935 billion at December 31, 2022. Reported liquidity was $3.9 billion, including $2.6 billion of undrawn revolving credit capacity.
- Total debt was $21.889 billion gross, or $21.460 billion net of unamortized issuance costs; the weighted-average interest rate was 6.35%. The company issued $700 million of 7.25% guaranteed notes due 2030 and repaid $2.4 billion drawn on revolving facilities. About 84% of debt was effectively fixed-rate.
- Current liabilities included $5.271 billion of customer deposits, up from $4.168 billion at year-end. Shareholders’ equity was $3.025 billion, including $173.8 million of noncontrolling interests.
Outlook, risks and unusual items
- Management stated that available liquidity was sufficient to meet obligations for at least 12 months from issuance of the statements, while noting uncertainty in liquidity forecasts and continuing efforts to raise capital or extend maturities. Debt covenants were met at March 31, 2023; management estimated compliance for at least the following 12 months.
- Expected 2023 capital expenditures were approximately $4.2 billion, excluding partner-brand ship orders. Global-brand ships on order had an estimated aggregate cost of $10.2 billion, with $0.9 billion deposited; $7.8 billion of committed ship financing was reported. Future obligations include debt service and substantial ship installments.
- No earnings or revenue guidance is provided in the supplied filing text. The filing warns that demand, consumer spending, inflation, fuel and food prices, interest rates, foreign exchange, disease outbreaks, geopolitical events, weather, regulation, shipbuilding delays and access to financing could materially affect results.
- The Havana Docks lawsuit resulted in a December 2022 judgment of approximately $112 million; the company appealed and said it would vigorously pursue the appeal. A related approximately $130 million charge was recorded in Q4 2022, not Q1 2023.
- On March 31, 2023, the company closed an iCON partnership, selling 80% of PortMiami for $208.9 million while retaining 20% and continuing to consolidate the entity. Q1 adjusted-loss reconciliations also included a $13.3 million debt-extinguishment loss, $10.0 million of PortMiami-related tax, a $25.8 million Silver Whisper deferred-tax-liability release and other adjustments.
- The company reported no dividends and does not expect cash dividends for the foreseeable future. Dividend or share repurchases would require repayment of amounts deferred under export credit facilities.
Important facts for investors to verify
- Whether booking trends, occupancy and pricing sustain the recovery as capacity and operating costs rise.
- How much operating cash generation is supported by customer deposits and whether deposits remain strong.
- Debt maturities, refinancing access, floating-rate exposure and covenant compliance; verify the effect of interest-rate and credit-rating changes.
- Funding and timing of the $4.2 billion 2023 capital expenditure plan and ship-order commitments, including financing availability and delivery risks.
- Developments in the Havana Docks appeal and any resulting cash, legal or insurance exposure.
- Results and future obligations of the iCON/PortMiami partnership, including the treatment of the retained interest.