Norwegian Cruise Line Holdings today reported financial results for the fourth quarter and full year ended December 31, 2019, as well as provided guidance for the first quarter and full year 2020.

Full Year 2019 Highlights

• Company generated GAAP net income of $930.2 million or EPS of $4.30 compared to $954.8 million or $4.25 in the prior year. Adjusted Net Income was $1.1 billion or Adjusted EPS of $5.09 compared to $1.1 billion or $4.92 in the prior year. These results include a $0.67 per share impact primarily from the cessation of sailings to Cuba and Hurricane Dorian.

• Company exceeded full year Adjusted EPS expectations by $0.04 despite a $0.04 impact from unfavorable foreign exchange rates recognized during the fourth quarter. Excluding the aforementioned $0.67 of headwinds, the Company would have surpassed the high end of its initial February 2019 Adjusted EPS guidance by $0.46.

• Total revenue increased 6.7% to $6.5 billion. Gross Yield increased 4.6%. Net Yield increased 3.6% on a Constant Currency basis, outperforming November guidance by 60 basis points. If not for the previously mentioned adverse external impacts, Net Yield on a Constant Currency basis would have been 200 basis points higher and would have exceeded the high end of the Company’s initial February 2019 Net Yield guidance by 160 basis points.

Full Year 2020 Expectations

• Company entered year with a record booked position and at higher pricing. Despite the current known impact from the COVID-19 coronavirus outbreak, as of the week ending February 14, 2020, the Company’s booked position remained ahead of prior year and at higher prices on a comparable basis, which excludes cruises to Cuba in the prior year and the recent redeployment of Norwegian Spirit from Asia in the current year.

• Excluding both known and unknown impacts from the COVID-19 outbreak, Adjusted EPS for full year 2020 is expected to be in the range of $5.40 to $5.60 reflecting 2.0% to 3.0% Constant Currency Net Yield growth.

• The current known direct impact to operations from COVID-19 is expected to be approximately $0.75 per share and primarily includes customer incentive compensation and 40 cancelled, modified or redeployed Asia voyages across the Company’s three brands. This includes the close-in redeployment of 21 cancelled Asia voyages on Norwegian Spirit which have been redeployed to the Eastern Mediterranean for summer 2020 with an extremely condensed booking window.

• The COVID-19 outbreak continues to impact consumer travel sentiment regarding travel for cruises in Asia and throughout the Company’s areas of operation worldwide. The duration and extent of this indirect impact cannot be quantified at this time and is therefore not included in the approximately $0.75 known direct impact outlined above.

• Prior to COVID-19, the Company was on a solid trajectory to achieve its Full Speed Ahead 2020 Targets established at its May 2018 Investor Day. Given the known and quantifiable direct impact of COVID-19 to-date of approximately $0.75, the Company does not anticipate achieving these targets by year-end but remains committed to expanding Adjusted ROIC, growing Adjusted EPS, maintaining a strong balance sheet and returning capital to shareholders.

• First quarter 2020 Adjusted EPS is expected to be approximately $0.48 reflecting approximately 0.25% Constant Currency Net Yield growth. This guidance excludes known and unknown impacts from the COVID-19 outbreak in the quarter.

• Company launched Regent’s Seven Seas Splendor, the second ship in the highly successful Explorer Class. Captain Serena Melani, a 30-year veteran, will helm the ship and was the first woman in cruise industry history to captain a brand-new ocean cruise ship at launch.

“I am pleased to announce that Norwegian Cruise Line Holdings’ business model once again demonstrated its resilience in the face of significant exogenous headwinds by delivering yet another successful year in 2019, which included the sixth consecutive year of record revenue and earnings per share and seventh consecutive year of Net Yield growth,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd.

“As a result of the strong global demand for cruises witnessed throughout 2019, we entered 2020 in the best booked position and at prices higher than last year’s record levels. This trend continued through late January until the COVID-19 outbreak began having an adverse impact on our business.

“We have taken several proactive measures to protect the health and safety of our guests and crew throughout our fleet, including implementing strict protocols regarding passenger embarkation, and in an abundance of caution have cancelled or modified several voyages in the Asia region through the third quarter of this year. While the effect of these impacts cannot be fully quantified at this time, our Company has an exemplary track record of demonstrating its resilience in challenging environments and we remain confident in our ability to deliver strong financial performance over the long-term.”

Full Year 2019 Results

GAAP net income was $930.2 million or EPS of $4.30 compared to $954.8 million or $4.25 in the prior year. The Company generated Adjusted Net Income of $1.1 billion or Adjusted EPS of $5.09 compared to $1.1 billion or $4.92 in the prior year.

Revenue increased 6.7% to $6.5 billion compared to $6.1 billion in 2018. This increase was primarily due to an increase in Capacity Days and improved pricing. Gross Yield increased 4.6%. Net Yield increased 3.6% on a Constant Currency basis and 2.9% on an as reported basis.

Cruise operating expense increased 8.5% in 2019 compared to 2018, primarily due to the increase in Capacity Days, the redeployment of Norwegian Joy during the second quarter of 2019 and incremental direct costs related to air promotions. Gross Cruise Costs per Capacity Day increased 6.3%. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 6.2% on a Constant Currency basis and 5.5% on an as reported basis.

Fuel price per metric ton, net of hedges increased to $491 from $483 in 2018. The Company reported fuel expense of $409.6 million in the period.

Interest expense, net was $272.9 million in 2019 compared to $270.4 million in 2018. Interest expense for 2019 includes $16.7 million of losses on extinguishment of debt and debt modification costs. In 2019, interest expense also reflects lower outstanding debt balances and lower margins associated with recent refinancings, partially offset by newbuild financings and an increase in LIBOR. Interest expense for 2018 included losses on extinguishment of debt and debt modification costs of $6.3 million.

Other income (expense), net was income of $6.2 million in 2019 compared to income of $20.7 million in 2018. Other income in 2019 was primarily due to gains from insurance proceeds and a litigation settlement partially offset by losses on foreign currency exchange. Other income in 2018 was primarily due to gains on foreign currency exchange.
Fourth Quarter 2019 Results

GAAP net income was $121.3 million or EPS of $0.56 compared to $154.6 million or $0.70 in the prior year. The Company generated Adjusted Net Income of $155.7 million or Adjusted EPS of $0.73 compared to $188.8 million or $0.85 in the prior year. These results include a $0.09 per share adverse impact from voyage cancellations, itinerary modifications and relief efforts related to Hurricane Dorian.

Revenue increased 7.2% to $1.5 billion compared to $1.4 billion in 2018. This increase was primarily driven by the repositioning of Norwegian Joy to North America, an increase in Capacity Days with the addition of Norwegian Encore to the fleet, robust onboard spending along with strong growth in organic pricing. Gross Yield increased 4.0%. Net Yield increased 1.8% on a Constant Currency basis and 1.3% on an as reported basis.

Total cruise operating expense increased 8.6% in 2019 compared to 2018, primarily due to the introduction of Norwegian Encore and incremental direct costs related to air promotions. Gross Cruise Costs per Capacity Day increased 5.6%. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 4.0% on a Constant Currency basis and 3.4% on an as reported basis.

Fuel price per metric ton, net of hedges increased to $508 from $496 in 2018. The Company reported fuel expense of $111.9 million in the period.

Interest expense, net increased to $73.2 million in 2019 from $68.2 million in 2018. Interest expense for 2019 includes $9.4 million of losses on extinguishment of debt. In 2019, interest expense also reflects lower outstanding debt balances and lower margins associated with recent refinancings and a decrease in LIBOR, partially offset by newbuild financings and higher outstanding debt balances in connection with the delivery of Norwegian Encore.

2020 Outlook

“2020 was set to be a banner year buoyed by the introduction of our two newest vessels, Norwegian Encore and Regent’s Seven Seas Splendor, which are already making significant contributions to our bottom line,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “We have an exciting growth profile with nine ships on order over the next seven years which will further amplify our ability to generate cash through revenue and earnings growth. We are confident in the strength of the core fundamentals that drive our business and remain committed to expanding Adjusted ROIC, growing earnings, maintaining a strong balance sheet and returning capital to shareholders over the long-term.”

COVID-19 Coronavirus Update

The Company has proactively implemented several preventative measures to reduce potential exposure and transmission of COVID-19 and to protect the health, safety, security and well-being of its guests and crew. These measures include enhanced pre-boarding and onboard health protocols that go above and beyond standard operating procedures. Any guest or crew who have traveled to China, Hong Kong or Macau in the past 30 days, regardless of nationality, are not allowed to board the Company’s vessels. Certain itineraries have been modified and the Company has the flexibility to alter additional voyages as needed.

Out of an abundance of caution and as a result of the uncertainty surrounding port entry and berthing availability in various destinations in Asia, the Company has made the prudent decision to cancel all voyages in Asia across its three brands. A total of 40 voyages have been canceled, modified or redeployed including 24 voyages on Norwegian Cruise Line, 10 on Oceania Cruises and 6 on Regent Seven Seas Cruises. Following these changes, the Company will not have any vessels deployed in Asia through the end of the third quarter 2020.

At this time, the known direct impact to full year 2020 Adjusted EPS is expected to be approximately $0.75 and is excluded from the Company’s first quarter and full year 2020 guidance. This direct impact primarily includes customer incentive compensation and 40 cancelled, modified or redeployed Asia voyages across the Company’s three brands. This includes the close-in redeployment of 21 cancelled Asia voyages on Norwegian Spirit which have been redeployed to the Eastern Mediterranean for summer 2020 with an extremely condensed booking window.

Due to the fluidity and uncertainty as to the duration and extent of the outbreak, it is too early for the Company to fully quantify impacts from broader headwinds to its business resulting from decreased demand for travel and tourism globally. The Company’s financial performance could be materially impacted if travel restrictions and COVID-19 concerns continue for an extended period of time.

2020 Guidance and Sensitivities

In addition to announcing the results for the fourth quarter and full year 2019, the Company also provided guidance for the first quarter and full year 2020, along with accompanying sensitivities. This guidance excludes an approximately $0.75 per share known direct impact related to COVID-19 as outlined above