10-QPeriod: Q1 FY2017

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 28, 2017For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) reported a significant increase in net income for the first quarter of 2017 compared to the same period in 2016. Total revenues rose by 4.7% to $2.01 billion, driven by higher passenger ticket prices and increased onboard spending. Despite a rise in marketing, selling, and administrative expenses, total cruise operating expenses saw a notable decrease of 5.3%, partly due to a gain from the sale of a ship. This operational efficiency, combined with robust revenue growth, led to a substantial improvement in profitability, with diluted earnings per share more than doubling from $0.46 to $0.99. The company is also actively managing its capital structure and future growth. RCL announced a new $500 million share repurchase program, signaling confidence in its financial position and a commitment to returning value to shareholders. Furthermore, the company provided guidance for the full year 2017, expecting a net yield increase of 4.0% to 5.5% and adjusted diluted earnings per share between $7.00 and $7.20. These positive financial results and forward-looking guidance suggest a strong operational performance and a positive outlook for the company.

Financial Highlights

49 data points
Beta

Revenue

$2.01B

41.5% Gross Margin

Net Income

$214.73M

10.7% Net Margin

EPS (Diluted)

$0.99

Total Assets

$22.02B

Cash & Equivalents

$109.31M

Free Cash Flow

$673.74M

Financial Statements
Beta
Revenue$2.01B
Cost of Revenue$1.18B
Gross Profit$832.74M
SG&A Expenses$317.46M
Operating Income$279.52M
Interest Expense$80.32M
Net Income$214.73M
EPS (Basic)$1.00
EPS (Diluted)$0.99
Shares Outstanding (Basic)214.87M
Shares Outstanding (Diluted)215.81M

Key Highlights

  • 1Total revenues increased by 4.7% to $2.01 billion in Q1 2017 compared to Q1 2016.
  • 2Net income more than doubled, reaching $214.7 million in Q1 2017, up from $99.1 million in Q1 2016.
  • 3Diluted earnings per share significantly improved from $0.46 in Q1 2016 to $0.99 in Q1 2017.
  • 4Total cruise operating expenses decreased by 5.3% to $1.18 billion, aided by a $30.9 million gain from the sale of the 'Legend of the Seas'.
  • 5The company generated $796.5 million in net cash from operating activities in the first three months of 2017, a substantial increase from $477.9 million in the same period of 2016.
  • 6A new $500 million common stock repurchase program was authorized in April 2017.
  • 7Full year 2017 guidance projects net yields between 4.0% and 5.5% and adjusted diluted EPS of $7.00 to $7.20.

Frequently Asked Questions

The primary driver for the significant increase in net income was a combination of higher total revenues, primarily due to increased passenger ticket prices and onboard spending, and a substantial decrease in total cruise operating expenses. The latter was partly due to a gain from the sale of the 'Legend of the Seas' and reduced air and payroll expenses.

The company is investing in future growth through new ship orders, with eleven ships on order as of March 31, 2017, and conditional agreements for two new 'Project Icon' ships. To return value to shareholders, a $500 million common stock repurchase program was authorized in April 2017. The company also provided positive guidance for full year 2017, indicating confidence in future performance.

For the full year 2017, Royal Caribbean Cruises Ltd. (RCL) forecasts Net Yields to be between 4.0% and 5.5% (or 4.5% to 6.0% on a constant currency basis). Net Cruise Costs per APCD are expected to be flat to slightly up (or flat to up 1.0% on a constant currency basis), and Net Cruise Costs per APCD Excluding Fuel are projected to be flat (or flat to up slightly on a constant currency basis).

The sale of 'Legend of the Seas' in March 2017 resulted in a gain of $30.9 million, which was reported within 'Other operating' expenses in the consolidated statements of comprehensive income. This gain contributed to the decrease in total cruise operating expenses for the quarter.