Royal Caribbean Group (NYSE: RCL) today announced a net loss of $0.5 billion in the second quarter of 2022 and a loss per share of $2.05. It’s the bad news that is not unexpected and investors looked past the red ink to send the company’s stock up 8.45% at the close of trading today.
The cruise giant said second-quarter results were well above expectations, thanks to accelerating demand and a strong closure, further improvement in onboard revenue and better cost performance. Operating cash flow and EBITDA were positive for the quarter.
- In June, the Group completed the return of its global fleet to operations at major destinations.
- Second quarter load factors were 82% overall, with June departures nearing 90%.
- Based on continued strength in consumer demand, the company expects load factors to average around 95% in the third quarter and reach triple digits by the end of the year.
- The volumes of bookings received in the second quarter for the second half of 2022 departures remained significantly higher than the volumes of bookings 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 in 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 exchange rates, fuel rates and interest rates, the company expects to generate approximately $2.9 billion – $3.0 billion in total revenue, adjusted EBITDA of $700 million – $750 million and adjusted earnings per share of $0.05. – $0.25.
Here are some of the insights Royal Caribbean CEO Jason Liberty shared with financial analysts on a conference call today:
“In June, we successfully completed the return to service of our entire fleet. It has been a herculean task on the part of our team, and I am so grateful and proud of our teams on board and ashore who have worked so incredibly hard under unthinkable and ever-changing circumstances to execute such a successful comeback and deliver the best vacation in the world.”
“Another significant milestone for the group in the last quarter was that our business generated positive operating cash flow and EBITDA. During the second quarter, we achieved positive EBITDA and operating cash flow earlier than expected. This achievement has further strengthened our liquidity position and positions us well to continue to methodically and proactively improve the balance sheet and refinance near-term maturities as we seek to quickly return to 2019 parameters and beyond. This outperformance in the second quarter compared to our expectations is explained by the continued strength of our onboard revenues and the acceleration of load factors, which reached almost 90% in June and reached 82% for the quarter. This combination has allowed us to achieve higher total revenue per guest compared to 2019 levels. Our North American routes are now sailing at over 100% load factors, and we are building on this momentum as we plan to to reach load factors in the mid-90s in the third quarter and then return to triple-digit load factors globally by the end of the year. This will prepare us very well for 2023.
“The combination of consumers’ strong propensity to experience travel, accelerating demographic trends, which are attracting more bucket lists and multi-generational travel, a very compelling value proposition and a strong preference for our brand result in stronger demand.
“Finally, the other major milestone for the group and the industry is related to the CDC ending its cruise ship program, as we are now moving to the point where everyone can vacation with us. we have always said that the health and safety of our guests, crew and the communities we visit is our top priority, and cruising has proven to be one of the safest environments in the world.
“After two years of successful collaboration with us, the CDC has moved from enforcing protocols and policies for the cruise industry to providing suggestions and recommendations to be in tune with the travel and tourism sector. It’s a testament to the great work we’ve done together as an industry.
“About 60% of our passengers book their onboard activities before they even set foot on our ships. As we’ve said in the past, every dollar a passenger spends pre-trip translates to approximately $0.70 more on the dollar when sailing with us and double the overall spend compared to other passengers.
“As we look to the second half of 2022, pre-cruise revenue ODA is up more than 40% from 2019 levels. Strong consumer demand in our commercial and technical capabilities is contributing to the strong performance.
“During the second quarter, we saw strong demand for close departures, which contributed to better than expected load factors. Bookings for 2022 departures averaged approximately 30% above 2019 throughout the second quarter and more recently reached 35% The second half of 2022 is booked below historical ranges, but at higher prices than 2019 with and without future cruise credits.
“Cancellations are at pre-COVID levels. Additionally, we are now seeing the booking window begin to lengthen, which builds confidence in forward-looking business as our customers plan thoughtfully for the future. As a result, all four quarters of 2023 are booked in historic ranges at record prices, with bookings accelerating each week. Deposits from our customers are at record highs and more than 90% of reservations made in the second quarter were new, while the study on FCC refunds continued. »
“While the last 2.5 years have certainly been difficult, we have proven that our business and our business are resilient. Our business is now fully operational and our operating platform is bigger and stronger than it has ever been.
- You can read Seeking Alpha’s full transcript of Royal Caribbean’s call, including Q&A with analysts, HERE
- You can read Royal Caribbean’s full second quarter earnings release HERE