Norwegian Cruise Line Holdings has reported financial results for the fourth quarter and full year ended December 31, 2015, as well as provided guidance for the first quarter and full year 2016.
Fourth Quarter 2015 Highlights
Adjusted EPS growth of 42% to $0.51 on Adjusted Net Income of $117.3 million.
Constant Currency Adjusted Net Yield on a Combined Company basis increased 7.4% (5.9% as reported), driven primarily by strong growth in pricing from same fleet operations as well as a partial quarter benefit from the addition of Norwegian Escape. Adjusted Net Yield on a Constant Currency basis increased 16.9% (15.2% as reported).
Thirtieth consecutive quarter of Adjusted EBITDA growth.
Approximately $100 million, or 1.7 million shares repurchased during the quarter under previously authorized three-year, $500 million share repurchase program.
Inclusion in the NASDAQ-100 Index.
Full Year 2015 Highlights
Adjusted EPS growth of 27% to $2.88 on Adjusted Net Income of $662.7 million.
Revenue increase of 39.0% to $4.3 billion compared to $3.1 billion in 2014.
Increase in Constant Currency Adjusted Net Yield on a Combined Company basis of 3.7% (2.0%, as reported), driven primarily by strong pricing performance from same fleet operations.
Adjusted Net Yield increased 20.0% on a Constant Currency basis (18.0% as reported).
Company’s Adjusted Return on Invested Capital of 9% surpasses Weighted Average Cost of Capital.
Successful launch of the Company’s largest ship to date, Norwegian Escape.
Announcement of customized newbuild dedicated to the China market to launch in mid-2017.
Full Year 2016 Targets and Highlights
Strong booked position continues into Wave season with encouraging early trends for 2017.
Strength in the Caribbean, Alaska and Bermuda markets more than offset softness in Mediterranean itineraries.
Anticipated strong earnings growth with Adjusted EPS projected to increase approximately 30% resulting in a four-year compounded annual growth rate of approximately 40%.
Adjusted Net Yield expected to increase approximately 4% on a Constant Currency basis, 3.5% as reported.
Adjusted ROIC projected to reach double digits in 2016 and on pace to reach target of 14% in 2018, doubling the metric from the time of the Company’s initial public offering in 2013.
Revenue expected to double from the time of the Company’s initial public offering to $5.0 billion.
Two ships will join the fleet - Sirena will join Oceania Cruises in the second quarter and the new Seven Seas Explorer will join Regent Seven Seas Cruises in the third quarter.
Launch of “Feel Free”, Norwegian Cruise Line’s new global brand campaign.
Announced ship enhancement programs for Regent Seven Seas Cruises and The Norwegian Edge™ for Norwegian Cruise Line.
“By all accounts, 2015 was a truly successful year for Norwegian - a year which included strong net yield growth driven primarily by the go to market strategies aimed at driving demand that were introduced earlier in the year and the successful launch of the largest ship in our fleet, Norwegian Escape,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings. “Our record fourth quarter results, which included Adjusted EPS growth of 42%, driven by a 7.4% increase in Constant Currency Adjusted Net Yield on a Combined Company basis mainly from improved pricing on same fleet operations, demonstrates just how successful our strategies have been,” continued Del Rio.
Fourth Quarter 2015 Results
The Company generated Adjusted Net Income of $117.3 million, or $0.51 per share compared to $77.6 million or $0.36 per share in the prior year. Adjusted EPS increased 42% over prior year and exceeded the top end of the Company’s guidance range, benefiting from solid Adjusted Net Yield performance as a result of strong pricing from same fleet operations along with the earnings benefit from a partial quarter of operation of Norwegian Escape. On a GAAP basis, Net Income was $38.3 million, or $0.17 per share compared to a loss of ($25.6) million or ($0.12) per share in the prior year.
On a Combined Company basis, which compares current results against the combined results of Norwegian and Prestige Cruises International, Inc. in the prior year, Adjusted Net Yield on a Constant Currency basis increased 7.4% (5.9% as reported), reflecting improved pricing in the quarter as a result of the Company’s initiatives to drive demand. Adjusted Net Yield on a Constant Currency basis improved 16.9% (15.2% as reported) primarily as a result of the Acquisition of Prestige which occurred in the fourth quarter of 2014.
On a Combined Company basis, Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 5.9% on a Constant Currency basis (4.8% as reported),primarily as a result of two lengthy scheduled dry-docks in the quarter compared to the prior year which had no dry-docks in the period. Adjusted Net Cruise Costs Excluding Fuel per Capacity Day increased 17.8% on a Constant Currency basis (16.6% on as reported), primarily as a result of the Acquisition of Prestige. The Company’s fuel price per metric ton, net of hedges, decreased 15.0% to $509 from $599 in 2014. The Company’s fuel price per metric ton, excluding the impact of hedges, was $351 compared to $529 in 2014.
The Company repurchased approximately $100 million, or 1.7 million shares, of the Company’s stock under its previously authorized three-year, $500 million share repurchase program. As of December 31, 2015, $313.5 million remained available for repurchases.
Full Year 2015 Results
The Company reported a 27% increase in Adjusted EPS to $2.88 up from $2.27 in the prior year, on Adjusted Net Income of $662.7 million compared to $480.6 million in 2014. This strong growth follows a 61% increase in Adjusted EPS in 2014, which was fueled by the Company’s introduction of Norwegian Getaway, further demonstrating the Company’s continued underlying earnings power, particularly in a year of predominantly same-fleet growth. On a GAAP basis, diluted EPS and net income were $1.86 and $427.1 million, respectively.
On a Combined Company basis, Adjusted Net Yield on a Constant Currency basis increased 3.7% (2.0% as reported), reflecting improved pricing mainly as a result of the aforementioned strategies to drive demand. The Acquisition of Prestige along with improved overall pricing resulted in an improvement of Adjusted Net Yield on a Constant Currency basis of 20.0% (18.0% as reported).
On a Combined Company Constant Currency basis Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 3.8% (2.9% as reported). On a Constant Currency basis the metric increased 25.0% (24.0% as reported). The Company’s fuel price per metric ton, net of hedges, decreased 13.8% to $539 from $625 in 2014. The Company’s fuel price per metric ton, excluding the impact of hedges, was $424 compared to $605 in 2014.
Interest expense, net was $221.9 million compared to $151.8 million in 2014. Interest expense for 2015 reflected an increase in average debt outstanding in connection with the Acquisition of Prestige.
As a result of its post-acquisition strategies to drive demand, the Company entered the year in a solid booked position with more than 50% of overall 2016 inventory sold which is significantly ahead of the same time last year. The Company is seeing this trend continue into next year where the current booked position for the first half of 2017 is approximately 30% higher compared to this time last year on a capacity increase of approximately 5%.
“Our strong booked position coming into the year provides us more pricing leverage during Wave season and beyond for remaining inventory than in years past,” said Del Rio. “Our core itineraries in the Caribbean, Alaska and Bermuda are performing strongly and more than make up for softness in the Mediterranean region caused by geopolitical events and incidents in recent months which, when combined with the strengthening of the U.S. dollar, reduced anticipated earnings for the year by $0.10 per share. The strength in our North American destination, as well as encouraging booking volumes for early 2017 give us further confidence in our targets of reaching double-digit return on invested capital in 2016, growing to 14% by 2018, and exceeding $5.00 Adjusted EPS in 2017,” continued Del Rio.
The Company will take delivery of two ships in 2016. Sirena will join the Oceania Cruises’ fleet in March with her first sailing in late April following an extensive, multi-million dollar upgrade and refurbishment. Seven Seas Explorer, the first newbuild for Regent in over thirteen years, will join the fleet in the third quarter.
In the first quarter of 2016, the Company executed a purchase and sale agreement for the Company’s interest in certain land-based operations in Hawaii. The agreement is subject to customary closing conditions, including receipt of all required regulatory approvals. The sale is expected to be completed during 2016. The amount of the transaction is considered immaterial to the Company’s consolidated financial statements. For comparative purposes, the Company’s guidance excludes the results of these operations for both the current and prior year.