Royal Caribbean Group reports second quarter 2022 results
Within the period, the return of its entire fleet to service and a positive operating cash flow are highlighted
Royal Caribbean Group (NYSE: RCL ) reported a net loss for the second quarter of 2022 of $(500 million) and a loss per share of $(2.05). Second quarter results were significantly above the company's expectations driven by strong and accelerating nearby demand, further improvement in onboard revenue and better cost performance. Operating cash flow and EBITDA were positive for the quarter.
"We reached two important milestones in our turnaround this quarter: returning our entire global fleet to operations and generating positive operating cash flow and EBITDA," said Jason Liberty, Chairman and CEO of Royal Caribbean Group. "Consumer propensity to travel and cruise remains strong. We continue to see a robust and accelerating demand environment for cruises and onboard spending. Cruises continue to be a very attractive value proposition for vacationers, and today we have the opportunity to further close the value difference with other vacation offers on land", added Liberty. "Our liquidity position remains strong and we are generating positive operating cash flow and EBITDA. With the fleet back in service,
- In June, the Group completed the return of its global fleet to operations in key destinations.
- Load factors in the second quarter were 82% overall, with June departures reaching nearly 90%.
- Based on continued strength in consumer demand, the company expects load factors to average approximately 95% in the third quarter and increase to triple digits by the end of the year.
- Booking volumes received in the second quarter for the second half of 2022 travel remained significantly higher than booking volumes received in the second quarter of 2019 for the second half of 2019.
- The second half of 2022 is booked below historical ranges but at higher prices than 2019, with and without Future Cruise Credits (FCC).
- For 2023, all quarters are currently booked within historical ranges at record prices.
- For the third quarter of 2022 and based on current currency exchange rates, fuel rates and interest rates, the company expects to generate approximately $2.9 billion - $3 billion in total revenue, adjusted EBITDA of $700 million - $750 million and adjusted earnings per share of $0.05 - $0.25.
Second Quarter 2022
The company reported a net loss for the second quarter of 2022 of $(0.5) billion or $(2.05) per share compared to a net loss of $(1.3) billion or $ (5.29) per share in the previous year. The company also reported an Adjusted Net Loss of $(0.5) billion or $(2.08) per share for the second quarter of 2022 compared to Adjusted Net Loss of $(1.3) billion or $ (5.06) per share in the previous year. Net Loss and Adjusted Net Loss for the quarter are primarily the result of the impact of the COVID-19 pandemic on the business.
Second quarter results exceeded the company's expectations driven by better revenue and cost performance. Second quarter load factors were 82%. Load factors increased to nearly 90% in June, with Caribbean itineraries averaging more than 100%. Total passenger cruise day revenue reached record levels and increased 4% as reported and 5% in constant currency compared to the second quarter of 2019.
Gross Cruise Costs per APCD improved 2.4% as reported and 1.9% in constant currency, compared to the first quarter of 2022. Net Cruise Costs (NCC), excluding fuel, per APCD improved 16.5% as reported and 16.2% in constant currency, compared to the first quarter of 2022. Gross cruise costs per APCD and NCC per APCD for the second quarter included $7.75 per APCD related to protocols improved health and one-time costs for ships and crew to return to operations.
The Group continues to benefit from the delivery of new, more efficient ships and earlier sales of less efficient ships, as well as actions taken to improve operating costs and margins that continue to materialize as operations ramp up.
Continued operational growth
The Group now offers cruises to all of its key destinations with the exception of China. China remains closed to cruise ships due to lockdowns related to the ongoing pandemic. While the Group remains optimistic about capturing long-term growth opportunities in that market, ships planned for China have been temporarily redeployed to meet demand in other markets.
"Since our return to service last year, we have seen more than 3 million passengers enjoy cruise vacations responsibly, in an evolving operating environment," said Liberty. "Last week, the CDC ended its COVID-19 program for cruise ships. Based on this change, we continue to adapt our protocols to more closely align with how the rest of society and other travel and leisure businesses operate. This means we are transitioning to the point where everyone will be able to vacation with us while always working with our destination partners to comply with their regulations Beginning August 8, testing will be required for unvaccinated guests on all sailings and for vaccinated guests only on trips that are six nights or more."
The Group expects to operate approximately 11.6 million APCDs for the third quarter and 11.5 million APCDs for the fourth quarter. Third quarter load factors are expected to average about 95%, with North American itineraries (including the Caribbean, Alaska, Bermuda, West Coast and Canada) averaging about 100%.
NCC excluding fuel per APCD is expected to improve significantly in the second half of the year compared to the first half of 2022 and to be higher for the second half of 2022 in mid-singles compared to the second half of 2019, all in a constant currency basis. The improvement in costs from the beginning of the year is expected to be driven by lower expenses related to the return of ships and crew to operations, the simplification of health protocols and the acceleration of the benefit of the actions taken to improve the margin. Some of the improvement is partially offset by inflationary and supply chain challenges, primarily related to fuel and food costs.
Los volúmenes de reservas recibidos en el segundo trimestre para los viajes de 2022 promediaron un 30 % por encima de los volúmenes de reservas de 2019 para los viajes de 2019 en el período correspondiente del segundo trimestre, con una fuerza aún mayor en julio. Los pasajeros siguen reservando sus cruceros más cerca que en años anteriores, lo que contribuye a que los factores de ocupación del segundo trimestre sean mejores de lo esperado. Además, la actividad de cancelación ahora ha vuelto a los niveles anteriores a COVID. Como se esperaba, los factores de ocupación para los viajes en la segunda mitad de 2022 se mantienen por debajo de los niveles históricos y se espera que finalicen en aproximadamente el 95 % en el tercer trimestre y alcancen los tres dígitos para fin de año. Los viajes de la segunda mitad de 2022 se reservan a precios más altos que los de 2019, incluidos y excluidos los FCC.
While Europe's critical season demand has been strong for the past three months, the combination of COVID-19 and the Russian-Ukrainian war has delayed load factor recovery, particularly for the third quarter of 2022, where European itineraries account for about a third of total capacity. As European itineraries generate higher-than-average prices, lower load factors are expected to have a negative impact on the comparison of fleet-wide revenue per passenger cruise day in the third quarter compared to the third quarter of 2019.
Booking volumes for 2023 have shown steady improvement week over week and have accelerated in recent weeks. Onboard pre-cruise purchases continue to outperform previous years at higher prices, indicating quality and healthy future demand. As a result, all quarters are currently booked within historical ranges at record prices.