10-QPeriod: Q1 FY2018

ROYAL CARIBBEAN CRUISES LTD Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 30, 2018For Securities:RCL

Summary

Royal Caribbean Cruises Ltd. (RCL) reported a slight increase in total revenues for the first quarter of 2018, reaching $2.03 billion, 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 million, 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 billion 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 million related to the Skysea Holding investment was a notable expense in the quarter.

Financial Highlights

49 data points
Beta

Revenue

$2.03B

42.0% Gross Margin

Net Income

$218.65M

10.8% Net Margin

EPS (Diluted)

$1.02

Total Assets

$23.97B

Cash & Equivalents

$111.25M

Free Cash Flow

-$796.11M

Financial Statements
Beta
Revenue$2.03B
Cost of Revenue$1.18B
Gross Profit$851.74M
SG&A Expenses$337.36M
Operating Income$274.15M
Interest Expense$67.88M
Net Income$218.65M
EPS (Basic)$1.03
EPS (Diluted)$1.02
Shares Outstanding (Basic)212.61M
Shares Outstanding (Diluted)213.60M

Key Highlights

  • 1Total revenues increased by 1.0% to $2.03 billion in Q1 2018 compared to Q1 2017.
  • 2Net income rose by 1.8% to $218.7 million, with diluted EPS increasing to $1.02 from $0.99.
  • 3Capacity decreased by 3.9% due to ship sales and drydocking, but this was offset by higher ticket prices and onboard spending.
  • 4Operating expenses were managed effectively, with total cruise operating expenses remaining flat year-over-year, despite some increases in payroll and maintenance.
  • 5The company took delivery of its new ship, 'Symphony of the Seas,' and acquired 'Azamara Pursuit,' demonstrating continued investment in fleet modernization and expansion.
  • 6An impairment loss of $23.3 million was recognized related to the Skysea Holding investment.
  • 7RCL reaffirmed a positive outlook for the full year 2018, projecting net yields between 3.5% and 4.5%.

Frequently Asked Questions

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.

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.

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.

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.