01—Abstract
Summary
Summary of the 10-Q filed April 30, 2018. Cited figures are marked; the original filing is the authoritative source.
Royal Caribbean Cruises Ltd. (RCL) reported a slight increase in total revenues for the first quarter of 2018, reaching $2.03 billiona, up from $2.01 billion in the prior year's comparable period.
This growth was driven by a combination of increased passenger ticket prices and higher onboard spending per passenger, partially offset by a decrease in capacity due to ship sales and drydock schedules. Net income also saw a modest rise to $218.7 millionb, or $1.02 per diluted share, compared to $214.7 million, or $0.99 per diluted share, in Q1 2017. The company successfully navigated increased operating costs and marketing expenses, benefiting from lower fuel prices and effective hedging strategies.
Financially, RCL continues to invest in fleet expansion, taking delivery of the 'Symphony of the Seas' and purchasing the 'Azamara Pursuit' during the quarter. The company maintained a strong liquidity position with $2.0 billionc in cash and available credit facilities.
Management highlighted a positive outlook for the full year 2018, projecting net yields between 3.5% and 4.5%, reflecting confidence in continued demand and pricing power. However, an impairment loss of $23.3 milliond related to the Skysea Holding investment was a notable expense in the quarter.
02—Key points
Key Highlights
- Total revenues increased by 1.0% to $2.03 billion in Q1 2018 compared to Q1 2017.
- Net income rose by 1.8% to $218.7 million, with diluted EPS increasing to $1.02 from $0.99.
- Capacity decreased by 3.9% due to ship sales and drydocking, but this was offset by higher ticket prices and onboard spending.
- Operating expenses were managed effectively, with total cruise operating expenses remaining flat year-over-year, despite some increases in payroll and maintenance.
- The company took delivery of its new ship, 'Symphony of the Seas,' and acquired 'Azamara Pursuit,' demonstrating continued investment in fleet modernization and expansion.
- An impairment loss of $23.3 million was recognized related to the Skysea Holding investment.
- RCL reaffirmed a positive outlook for the full year 2018, projecting net yields between 3.5% and 4.5%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, Royal Caribbean Cruises Ltd kept $0.11.
- Revenue$2.03B100.0%
- Cost of revenue−$1.18B58.0%
- Gross profit$851.7M42.0%
- Operating costs−$577.6M28.5%
- Operating income$274.1M13.5%
- Interest, other & tax−$55.5M2.7%
- Net income$218.7M10.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed April 30, 2018Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $2.03B$2.01B | +1.0% |
| Cost of Revenue | $1.18B$1.18B | 0.0% |
| Gross Profit | $851.74M$832.74M | +2.3% |
| SG&A Expenses | $337.36M$317.46M | +6.3% |
| Operating Income | $274.15M$279.52M | −1.9% |
| Interest Expense | $67.88M$80.32M | −15.5% |
| Net Income | $218.65M$214.73M | +1.8% |
| EPS (Basic) | $1.03$1.00 | +3.0% |
| EPS (Diluted) | $1.02$0.99 | +3.0% |
| Shares Outstanding (Basic) | 212.61M214.87M | −1.1% |
| Shares Outstanding (Diluted) | 213.60M215.81M | −1.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the first quarter of 2018?
Revenue growth was primarily driven by an increase in passenger ticket prices, especially on Asia/Pacific sailings, and higher onboard spending per passenger due to revenue-enhancing initiatives like beverage packages and specialty restaurant promotions. This growth was achieved despite a 3.9% decrease in capacity.
How did the company manage its operating expenses despite increased marketing efforts and fleet additions?
Total cruise operating expenses remained flat year-over-year due to a 3.9% decrease in capacity, which reduced related expenses. While there were increases in payroll and maintenance costs, these were largely offset by lower fuel expenses (excluding capacity impact) and timing adjustments in head taxes. Marketing, selling, and administrative expenses did increase due to higher advertising and promotional spending.
What is the significance of the impairment loss related to Skysea Holding?
The impairment loss of $23.3 million relates to Royal Caribbean's investment, debt facility, and other receivables from Skysea Holding, a joint venture that is expected to cease operations by the end of 2018. This represents a write-down of the carrying value of these assets to their estimated realizable value, impacting net income for the quarter.
What is the company's outlook for the rest of 2018?
Royal Caribbean provided guidance for full-year 2018 expecting Net Yields to grow between 3.5% to 4.5% (as reported) and Net Cruise Costs per APCD to increase by approximately 2.0% (as reported). The company also projected Adjusted Earnings per Share to be between $8.70 and $8.90.
06—Continue