01—Abstract
Summary
Summary of the 10-Q filed August 1, 2017. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported strong financial performance for the second quarter and first half of 2017, demonstrating significant year-over-year growth in both revenue and profitability.
Total revenues increased by 4.3% for the quarter and 4.5% for the first six months, driven by higher passenger ticket prices and increased onboard spending per passenger. This top-line growth, combined with effective cost management, led to a substantial increase in operating income and net income. Net income for the quarter more than doubled compared to the prior year, reaching $369.5 milliona ($1.71 diluted EPS) from $229.9 million ($1.06 diluted EPS).
For the six-month period, net income rose to $584.3 millionb ($2.71 diluted EPS) from $329.0 million ($1.52 diluted EPS). The company's focus on revenue enhancement initiatives and cost efficiencies contributed to improved Net Yields and Net Cruise Costs, indicating a healthy operational performance. Looking ahead, RCL provided optimistic guidance for the full year 2017, projecting continued growth in Net Yields and strong Adjusted Earnings Per Share.
02—Key points
Key Highlights
- Total revenues increased by 4.3% to $2.195 billion for Q2 2017 and by 4.5% to $4.204 billion for the first six months of 2017 compared to the same periods in 2016.
- Net income for Q2 2017 surged to $369.5 million, a 61% increase from $229.9 million in Q2 2016, with diluted EPS rising to $1.71 from $1.06.
- For the first six months of 2017, net income grew by 78% to $584.3 million, and diluted EPS increased to $2.71 from $1.52 in the prior year.
- Net Yields saw significant improvement, increasing by 9.9% for the quarter and 7.9% for the six-month period on a reported basis.
- Gross Cruise Costs per APCD and Net Cruise Costs per APCD decreased by 1.0% and 1.4% respectively for the first six months of 2017, demonstrating effective cost control.
- The company had $1.9 billion in liquidity as of June 30, 2017, comprising cash and cash equivalents and available credit facilities.
- RCL provided positive full-year 2017 guidance, projecting Net Yield growth of approximately 5.5%-6.0% and Adjusted Diluted EPS between $7.35 and $7.45.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Royal Caribbean Cruises Ltd kept $0.17.
- Revenue$2.20B100.0%
- Cost of revenue−$1.26B57.2%
- Gross profit$938.5M42.8%
- Operating costs−$518.8M23.6%
- Operating income$419.7M19.1%
- Interest, other & tax−$50.2M2.3%
- Net income$369.5M16.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed August 1, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $2.20B$2.11B | +4.3% |
| Cost of Revenue | $1.26B$1.31B | −4.1% |
| Gross Profit | $938.49M$794.67M | +18.1% |
| SG&A Expenses | $283.86M$290.78M | −2.4% |
| Operating Income | $419.70M$282.27M | +48.7% |
| Interest Expense | $76.63M$78.75M | −2.7% |
| Net Income | $369.53M$229.91M | +60.7% |
| EPS (Basic) | $1.72$1.07 | +60.7% |
| EPS (Diluted) | $1.71$1.06 | +61.3% |
| Shares Outstanding (Basic) | 215.09M215.26M | −0.1% |
| Shares Outstanding (Diluted) | 216.06M216.13M | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in Q2 2017?
Revenue growth was primarily driven by an increase in passenger ticket prices, particularly on North America and Europe sailings, and higher onboard spending per passenger due to revenue-enhancing initiatives. The addition of new ships like Harmony of the Seas also contributed to higher ticket prices.
How did the company manage its costs during the period?
RCL demonstrated effective cost management. Total cruise operating expenses decreased primarily due to a reduction in capacity and lower payroll and related expenses. Marketing, selling, and administrative expenses also saw a slight decrease. Net Cruise Costs per APCD, excluding fuel, decreased by 1.4% for the six-month period, indicating successful cost control initiatives.
What is the company's outlook for the remainder of 2017?
The company provided an optimistic outlook for the full year 2017, guiding for approximately 5.5% to 6.0% growth in Net Yields on a constant currency basis and projecting Adjusted Diluted Earnings Per Share to be between $7.35 and $7.45. This indicates an expectation of continued strong performance.
How is the company managing its substantial future capital commitments, particularly new ship orders?
RCL has a robust plan for funding its significant capital commitments, which primarily consist of new ship orders. As of June 30, 2017, the company had $12.6 billion in ships on order. It secures financing for up to 80% of the contract price for new builds through various credit agreements, often backed by export credit agencies. The company anticipates that its cash flows from operations, combined with existing financing arrangements, will be sufficient to meet its capital expenditures and debt repayments over the next twelve months.
06—Continue