NCLH Posts $4 Billion Loss in 2020; Advance 2022 Bookings Look Positive

Norwegian Cruise Line Holdings (NCLH) reported a $4 billion loss for the 12 months ending December 31, 2020 (or, a loss of $15.75 per share) compared with 2019 net income of $930 million (a gain of $4.30 per share).

Parent of Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises, NCLH’s 2020 revenue was $1.3 billion compared to $6.5 billion in revenue for 2019, an 80 percent decrease. For the fourth quarter 2020, the net loss was nearly $739 million (a loss of $2.51 per share) versus net income of $121.3 million ($.56 earnings per share) in the prior year.

NCLH attributed the negative earnings results to cancellation of the vast majority of its 2020 sailings—a capacity day decrease of nearly 79 percent—as a result of the COVID-19 pandemic.

Positive 2022 Bookings

That said, the company’s 2022 advance bookings provide cause for optimism. NCLH’s financial press release reported that while it’s still early in the booking cycle, “2022 booking trends are very positive driven by strong pent-up demand.”

NCLH added it’s experiencing "robust future demand across all brands with the overall cumulative booked position for the first half of 2022 significantly ahead of 2019’s record levels.”

Also notable is that pricing, too, is in line with 2019 levels when excluding the dilutive impact of future cruise credits. “While 2020 has been without a doubt the most challenging year in the company’s 50-plus-year history, our team responded to the unprecedented environment with swift and decisive action,” said Frank Del Rio, NCLH’s president and CEO.

While overall booking volumes since the emergence of the COVID-19 global pandemic remain below historical levels, “there continues to be demand for future cruise vacations,” the line’s press release said. NCLH noted this is despite reduced sales/marketing investments and "a travel agency industry that has not been at full strength for months."

It added: "Bookings have been strong for future periods resulting in an elongated booking window as guests book further into the future.”

As of December 31, 2020, NCLH had $1.2 billion of advance ticket sales, including the long-term portion of advance ticket sales, which includes approximately $.85 billion of future cruise credits. Del Rio noted that the company has demonstrated adaptability and resiliency, underscored by the unwavering commitment and dedication from NCLH’s employees and crew across the globe. “Looking ahead, we are encouraged by the accelerating rollout of vaccines, the progress towards herd immunity and the strong demand for future cruise vacations,” said Del Rio.

Currently, the company’s three brands have been suspended all voyages through May 31, 2021. NCLH has 28 ships in its combined fleet with more than 59,000 cruise berths.

Cruise Restart?

While the company said it continues to work through the requirements of the U.S. Centers for Disease Control and Prevention (CDC) for a restart of cruises—following issuance in late October 2020 of a “Framework for Conditional Sailing" Order—the company added, “however, significant uncertainties remain regarding specific requirements of the conditional order including pending technical instructions from the CDC.”

NCLH said it continues to work with its expert advisors, the Healthy Sail Panel (a joint effort with Royal Caribbean Group, which also reported negative earnings earlier this week, plus good advance bookings), and global public health authorities and government agencies to refine its comprehensive and multi-layered health and safety strategy to enhance its already rigorous health and safety standards in response to COVID-19.  

The company is adjusting these standards as science, technology and knowledge of SARS-CoV-2 advance and said its strategy also includes incorporating recent vaccine advancements into the overall strategy for its eventual restart of cruises.

Cash Burn Status

As of December 31, 2020, the company’s total debt position was $11.8 billion and cash and cash equivalents totaled $3.3 billion. NCLH’s monthly average cash burn for the fourth quarter 2020 was approximately $190 million and included approximately $15 million per month of additional relaunch-related expenses.

Those occurred as the cruise company started preparing vessels for a potential return to service in early 2021, in connection with the CDC's "Framework for Conditional Sailing" Order. But that restart has not yet occurred, given the lack of follow-up detail that needs to be provided by the CDC to the cruise lines. 

“We continue to take proactive measures to bolster our efforts to weather the ongoing uncertainty of the public health environment, including two highly successful capital markets transactions executed in the fourth quarter which raised nearly $1.7 billion and demonstrate the continued confidence of our investors in our business model,” said Mark Kempa, NCLH’s executive vice president and CFO.

Kempa added the company was seeking to minimize cash burn and maximize financial flexibility in the near-term while balancing preparations for a future cruise restart: “Despite the near-term challenges we face, we remain focused on our long-term strategic priorities and creating a clear path to financial recovery.”

As for a 2021 outlook, the company can’t estimate the effect of the pandemic on its near- or longer-term financial position. It did say it plans to report a net loss for the first quarter ending March 31, 2021 and also expects to report a net loss until the company is able to resume voyages.

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