10-QPeriod: Q2 FY2022

CARNIVAL CORP Quarterly Report for Q2 Ended May 31, 2022

Filed June 29, 2022For Securities:CCL

Summary

Carnival Corporation & plc (CCL) reported significant revenue recovery in the three and six months ended May 31, 2022, driven by the ongoing resumption of guest cruise operations, with 86% of capacity back in service. Despite this revenue rebound, the company continued to incur substantial net losses, reflecting the ongoing impact of the COVID-19 pandemic, inflation, and higher fuel prices. Operating costs and expenses saw a considerable increase compared to the prior year due to restart-related expenses, including crew repatriation, enhanced health protocols, and supply chain disruptions. Liquidity remains a key focus, with $7.5 billion in available liquidity as of May 31, 2022. The company has actively managed its debt, issuing new notes and utilizing export credit facilities. While compliance with debt covenants was maintained, the company is working to extend debt maturities. Management asserts sufficient liquidity for the next twelve months, contingent on their forward-looking assumptions regarding the continued return to service and operational efficiencies.

Financial Highlights

51 data points
Beta

Revenue

$2.40B

-11.7% Gross Margin

Net Income

-$1.83B

-76.4% Net Margin

EPS (Diluted)

$-1.61

Total Assets

$52.99B

Cash & Equivalents

$7.05B

Free Cash Flow

-$488.00M

Financial Statements
Beta
Revenue$2.40B
Cost of Revenue$2.68B
Gross Profit-$282.00M
SG&A Expenses$619.00M
Operating Expenses$3.87B
Operating Income-$1.47B
Interest Expense$370.00M
Net Income-$1.83B
EPS (Basic)$-1.61
EPS (Diluted)$-1.61
Shares Outstanding (Basic)1.14B
Shares Outstanding (Diluted)1.14B

Key Highlights

  • 1Total revenues significantly increased year-over-year, reaching $2.4 billion for the three months ended May 31, 2022, and $4.0 billion for the six months ended May 31, 2022, reflecting the ramp-up of cruise operations.
  • 2Despite revenue growth, the company continued to report substantial net losses: $(1.83 billion) for the three months and $(3.73 billion) for the six months ended May 31, 2022.
  • 3Operating costs and expenses increased substantially year-over-year due to restart-related expenses, higher fuel costs, and inflation.
  • 4Fuel costs more than quadrupled compared to the prior year period, driven by both increased consumption and higher per-unit prices.
  • 5Liquidity stood at $7.5 billion as of May 31, 2022, providing management confidence in meeting obligations for at least the next twelve months.
  • 6The company issued $1.0 billion in senior unsecured notes in May 2022, with a 10.5% interest rate, as part of its debt management strategy.
  • 7Occupancy rates showed a strong recovery, reaching 69% for the three months and 62% for the six months ended May 31, 2022, up from 31% and 27% respectively in the prior year.

Frequently Asked Questions

Carnival Corporation & plc experienced a significant increase in revenues in the first half of fiscal year 2022, driven by the resumption of cruise operations and a substantial increase in occupancy. However, the company continued to report substantial net losses due to significantly higher operating costs, including fuel expenses, restart-related expenditures, inflation, and supply chain disruptions. The company has actively engaged in debt management, including issuing new debt, to support its operations and liquidity.

As of May 31, 2022, Carnival reported $7.5 billion in liquidity, which management believes is sufficient for at least the next twelve months. The company has taken steps to extend debt maturities and secure financing, including issuing $1.0 billion in senior unsecured notes in May 2022. They are also compliant with their debt covenants but are actively seeking amendments if necessary.

While the return to cruise operations is progressing positively with 86% of capacity in service, the company's outlook remains cautious. Management expects continued profitability challenges in the near term, anticipating a net loss for the third quarter and the full year 2022. Key challenges include persistent inflation, high fuel prices, supply chain issues, and potential impacts from global events. The company's recovery is contingent on the continued resumption of operations, expected increases in per-passenger revenue, and improved occupancy.

Carnival is involved in several legal proceedings, including those related to the Helms-Burton Act, patent disputes, and COVID-19 related claims. While the company believes it has meritorious defenses in many of these cases and does not expect a material impact on its consolidated financial statements, significant monetary damages or unfavorable rulings could pose a risk. The company also settled with the New York Department of Financial Services and State Attorneys General regarding past cybersecurity incidents, with amounts not expected to be material.