Norwegian Cruise Line Holdings Ltd. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request references 2023 Q4, this is an annual filing; it does not provide a complete standalone fourth-quarter income statement or cash-flow summary.
Business context and results
NCLH operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises. At year-end it had 32 ships and approximately 66,500 berths. Three ships were delivered during 2023. Five more are on order, with scheduled deliveries from 2025 through 2028.
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $8.55 billion | $4.84 billion |
| Operating income (loss) | $930.9 million | $(1.55) billion |
| Net income (loss) | $166.2 million | $(2.27) billion |
| Diluted EPS | $0.39 | $(5.41) |
| Adjusted EBITDA (non-GAAP) | $1.86 billion | $(673.9) million |
| Net cash from operating activities | $2.01 billion | $210.0 million |
Revenue rose 76.5%; capacity days increased 29.0%, and occupancy was 102.9%, versus 72.8% in 2022. The filing attributes the improvement principally to higher occupancy as operations returned to service; the full fleet was back in operation by May 2022. Passenger tickets represented 67.3% of 2023 revenue and onboard and other revenue 32.7%. Operating margin was 10.9% of revenue, compared with an operating loss margin of 32.1% in 2022; net margin was 1.9%.
Costs, cash flow and liquidity
- Total cruise operating expense was $5.47 billion, up 28.2%. Interest expense, net, was $727.5 million, down from $801.5 million; the decrease mainly reflected lower debt-extinguishment and modification losses, while interest expense excluding those losses increased, primarily due to higher rates.
- Operating cash flow was $2.01 billion, including a $503.7 million increase in advance ticket sales. Investing cash outflow was $2.90 billion, largely for three ship deliveries and newbuild payments. Financing cash inflow was $346.9 million.
- Cash and cash equivalents were $402.4 million at year-end, down from $947.0 million. Reported liquidity was approximately $2.3 billion, including cash, the undrawn $1.2 billion revolving facility and an undrawn $650 million commitment, less related fees.
- Working capital deficit was $4.7 billion, including $3.1 billion of current advance ticket sales, which the company describes as substantially deferred revenue rather than ordinary current cash liabilities. Total debt carrying value was $14.1 billion; approximately $16.2 billion of assets were pledged as collateral. The company reported compliance with all debt covenants at year-end.
Material changes, outlook and risks
- Debt transactions refinanced and repaid the Term Loan A Facility: NCLC issued $600 million of 8.375% secured notes due 2028 and $790 million of 8.125% secured notes due 2029. The revolving facility was increased from $875 million to $1.2 billion and extended to October 2026, subject to specified earlier-maturity conditions. No Term Loan A balance remained at year-end.
- The company said demand remained healthy, with an all-time-high booked position and strong onboard revenue, and reported maintaining its forward booked position while increasing pricing. It provided no specific full-year 2024 financial guidance in the supplied filing text. Management stated it expected sufficient liquidity for at least 12 months, subject to assumptions and continued access to funding.
- As of filing, the $650 million undrawn commitment had been extended only to March 2024. A further extension to March 2025 and refinancing were expected, subject to Board approval and effectiveness; the company also intended to refinance $565 million of 3.625% notes due December 2024 before September 2024. These were plans, not completed transactions in the filing.
- Advance ticket sales were $3.2 billion, including approximately $78 million of future cruise credits. Card processors could require additional reserves or collateral against approximately $2.9 billion of advance ticket sales; $51.6 million of cash collateral was held at year-end. Such demands could constrain liquidity.
- The company cancelled or redirected Middle East and Red Sea calls for the remainder of 2024 due to regional conflict. It cited inflation, fuel and interest rates, foreign exchange, supply chains, port access, public-health events, ship incidents, cybersecurity, labor, environmental regulation and potential ship-delivery delays as risks.
- Bermuda enacted a 15% corporate income tax effective for qualifying groups from 2025. NCLH expects to qualify for an international-shipping-income exclusion but cannot assure it will meet the requirements. Bermuda and U.S. deferred-tax valuation allowances were significant; the filing cites $532.4 million for Bermuda deferred tax assets and $159.8 million for U.S. net deferred tax assets.
- A Havana Docks Helms-Burton case had a $112.9 million judgment; the company appealed and reported the loss as reasonably possible but not probable, with no liability recorded. Florida and other governmental investigations relating to pandemic-era marketing remained ongoing. A vendor claim was settled in December 2023 through a new 10-year services arrangement; the benefit is to be recognized as services are provided.
Investor facts to verify
- Whether the planned commitment refinancing and 2024 debt refinancing closed on expected terms, and how they affect near-term maturities, interest expense and collateral.
- Whether operating cash flow and advance bookings convert to durable profitability after accounting for working-capital timing, refunds and cancellations.
- Debt maturities, covenant headroom, cash needs for newbuilds and availability of the expected export-credit financing.
- Actual costs and any passenger recovery from EU emissions rules, Bermuda tax implementation and other environmental requirements.
- Developments in the Havana Docks appeal and governmental investigations, plus any changes to card-processor collateral requirements.