Royal Caribbean Cruises Ltd. (RCL) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended March 31, 2026. Royal Caribbean Cruises Ltd. operates three global brands (Royal Caribbean, Celebrity Cruises, Silversea) and holds a 50% joint venture interest in TUI Cruises (Mein Schiff and Hapag-Lloyd Cruises). As of March 31, 2026, the combined fleet operated 69 ships. The company is a large accelerated filer incorporated in the Republic of Liberia.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenues | $4,452 million | $3,999 million |
| Operating Income | $1,162 million | $945 million |
| Net Income (Attributable to RCL) | $941 million | $730 million |
| Diluted EPS | $3.48 | $2.70 |
| Operating Cash Flow | $1,834 million | $1,627 million |
| Adjusted EBITDA | $1,702 million | $1,402 million |
| Adjusted EBITDA Margin | 38.2% | 35.1% |
| Total Debt (Gross) | $21,611 million | $21,902 million |
| Cash and Equivalents | $512 million | $386 million |
| Liquidity (Cash + Undrawn Credit) | $6.9 billion | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 11.3% ($453 million) driven by an 8.3% capacity increase (addition of Star of the Seas and Celebrity Xcel) and yield growth from higher pricing.
- Profitability: Operating income rose 23% to $1.162 billion. Net income attributable to RCL increased 29% to $941 million.
- Expense Management: Total cruise operating expenses increased 8.1% primarily due to capacity growth. Fuel expenses decreased slightly ($265M vs $277M) despite higher volume, aided by hedging.
- Debt Refinancing: In February 2026, the company issued $2.5 billion in new senior notes (due 2033 and 2038) to refinance maturing debt. This resulted in a $29 million loss on extinguishment of debt.
- Shareholder Returns: The company repurchased $836 million of common stock and paid dividends of $1.50 per share (declared Feb 2026) and $1.00 per share (paid Q1 2026).
- Derivative Gains: Other comprehensive income increased significantly due to a $221 million gain on cash flow derivative hedges, primarily driven by fuel swaps.
Outlook, Risks, and Contingencies
- Capital Expenditures: Full-year 2026 capital expenditures are anticipated to be approximately $5 billion. As of March 31, 2026, aggregate ship orders total approximately $16.2 billion, with $1.3 billion deposited.
- Liquidity: The company maintains $6.9 billion in liquidity, comprising $0.5 billion in cash and $6.4 billion in undrawn revolving credit facilities. Management believes resources are sufficient for the next 12 months.
- Legal Proceedings: The Havana Docks Action (Helms-Burton Act) remains pending. The 11th Circuit reversed a lower court judgment in 2024, but the U.S. Supreme Court granted certiorari in October 2025. A $130 million charge was recorded in 2022, with $124 million released in 2024; the final outcome remains uncertain.
- Market Risks: Significant exposure to fuel prices, foreign currency exchange rates (52.9% of ship order costs exposed to Euro fluctuations), and interest rates. The company utilizes extensive hedging programs to mitigate these risks.
- Operational Risks: Implementation of a new enterprise resource planning (ERP) system in Q1 2026 resulted in changes to internal controls, though management asserts controls remain effective.
Investor Verification Checklist
- Debt Maturities: Verify the schedule of debt maturities, noting $1.4 billion due in the remainder of 2026 and $2.5 billion in 2027.
- Ship Delivery Schedule: Confirm the delivery timeline for the Legend of the Seas (Q2 2026) and Mein Schiff Flow (Q2 2026) to assess near-term capital outflows.
- Legal Contingency: Monitor the status of the Supreme Court review in the Havana Docks Action for potential material financial impact.
- Hedging Effectiveness: Review the reclassification of unrealized gains from fuel swaps ($140 million expected to hit earnings in the next 12 months) to understand future earnings volatility.
- Share Repurchase Program: Track the remaining $1.0 billion authorization under the current buyback program.