10-QPeriod: Q2 FY2017

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 1, 2017For Securities:RCL

Summary

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 million ($1.71 diluted EPS) from $229.9 million ($1.06 diluted EPS). For the six-month period, net income rose to $584.3 million ($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.

Financial Highlights

49 data points
Beta

Revenue

$2.20B

42.8% Gross Margin

Net Income

$369.53M

16.8% Net Margin

EPS (Diluted)

$1.71

Total Assets

$22.02B

Cash & Equivalents

$130.48M

Free Cash Flow

$714.00M

Financial Statements
Beta
Revenue$2.20B
Cost of Revenue$1.26B
Gross Profit$938.49M
SG&A Expenses$283.86M
Operating Income$419.70M
Interest Expense$76.63M
Net Income$369.53M
EPS (Basic)$1.72
EPS (Diluted)$1.71
Shares Outstanding (Basic)215.09M
Shares Outstanding (Diluted)216.06M

Key Highlights

  • 1Total 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.
  • 2Net 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.
  • 3For 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.
  • 4Net Yields saw significant improvement, increasing by 9.9% for the quarter and 7.9% for the six-month period on a reported basis.
  • 5Gross 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.
  • 6The company had $1.9 billion in liquidity as of June 30, 2017, comprising cash and cash equivalents and available credit facilities.
  • 7RCL 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.

Frequently Asked Questions

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.

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.

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.

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.