Norwegian Cruise Line today reported results for the quarter ended September 30, 2014, and provided guidance for the fourth quarter and full year 2014.
Third Quarter Highlights
- Adjusted EPS improvement of 29.1% to $1.11 from $0.86 in 2013
- Net Yield increase of 3.0% (2.6% on a Constant Currency basis)
- Revenue increase of 13.7% to 907.0 million
- Adjusted EBITDA increase of 20.5% to $326.7 million
- Company agrees to acquire Prestige Cruises International, Inc. ("Prestige Cruises"), the leading cruise operator in the upscale segment, with the transaction expected to close in the fourth quarter of 2014
Third Quarter Results
"Our results this quarter mark an important milestone in Norwegian's evolution as we report growth in trailing twelve month Adjusted EBITDA for the 25th consecutive quarter coupled with our consistent margin improvement," said Kevin Sheehan, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. "In that more than six year period, Norwegian's Adjusted EBITDA has grown at an industry-leading compound annual growth rate of 23% with a commensurate margin expansion of over 1,600 basis points to 27.6%, with future expansion expected as we continue to successfully execute on our strategies," continued Sheehan.
For the third quarter of 2014, the Company reported a 29.1% increase in Adjusted EPS to $1.11, on Adjusted Net Income of $232.2 million, compared to $0.86, on Adjusted Net Income of $182.2 million, for the same period in 2013. On a GAAP basis, diluted earnings per share and net income were $0.97 and $201.1 million, respectively.
Net Revenue in the period increased 16.5% to $694.4 million driven by a 13.1% increase in Capacity Days and a 3.0% improvement in Net Yield. The increase in Capacity Days was primarily from the addition of Norwegian Getaway which entered the fleet in January 2014. The Net Yield improvement was due to higher net ticket and onboard and other revenue. Revenue for the period increased to $907.0 million from $797.9 million in 2013.
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 2.6% (2.2% on a Constant Currency basis) which includes investments in the Company's Norwegian NEXT program which is designed to elevate the guest experience through new enhancements, experiences and transformations. The Company's fuel price per metric ton, net of hedges, was $641 compared to $695 in 2013.
Interest expense, net increased to $32.3 million in the quarter compared to $26.6 million in 2013 as a result of higher incremental borrowings and interest rates.
2014 Guidance and Sensitivities
In addition to the results for the third quarter, the Company also provided the following guidance for the fourth quarter and full year 2014, along with accompanying sensitivities. This guidance excludes the impacts from the acquisition of Prestige Cruises which is expected to close in the fourth quarter of 2014.
"We are confident that we will achieve our target of over 60% growth in full year Adjusted EPS that we established at the beginning of the year. This achievement will once again demonstrate our resilience and ability to deliver consistent financial performance despite the external headwinds that occurred throughout the year," said Sheehan.
As of September 30, 2014, the Company had hedged approximately 91%, 59%, 50% and 10% of its remaining 2014, 2015, 2016 and 2017 projected metric tons of fuel purchases, respectively.
Future capital commitments consist of contracted commitments, including future expected capital expenditures for business enhancements and ship construction contracts. As of September 30, 2014 anticipated capital expenditures together with amounts for ship construction and related export credit financing were as follows (in thousands, based on the euro/U.S. dollar exchange rate as of September 30, 2014.
In September, the Company announced an agreement to acquire Prestige Cruises, the parent company of Oceania Cruises and Regent Seven Seas Cruises, for total transaction consideration of $3.025 billion in cash, stock and the assumption of debt, for which fully committed financing is in place. Additionally, contingent cash consideration of up to $50 million would be payable to Prestige shareholders upon achievement of certain 2015 performance metrics. The acquisition is expected to be accretive to 2015 earnings excluding synergies with day one identified synergies of $25 million resulting in high single-digit percentage adjusted EPS accretion. The acquisition is expected to close in the fourth quarter of 2014.