Norwegian Cruise Line Holdings Ltd. (Nasdaq: NCLH) (together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company,”) reported financial results for the second quarter ended June 30, 2017, and provided guidance for the third quarter and full year 2017.
The Company generated GAAP net income of $198.5 million or EPS of $0.87 compared to $145.2 million or $0.64 in the prior year. Adjusted Net Income was $232.7 million or Adjusted EPS of $1.02 compared to $192.6 million or $0.85 in the prior year.
Total revenue increased 13.3% to $1.3 billion. Gross Yield increased 7.4%. Adjusted Net Yield increased 8.1% on a Constant Currency basis.
The Company expects to generate record earnings for full year 2017, surpassing the high end of its prior full year guidance. Adjusted EPS is now expected to be in the range of $3.93 to $4.03, up $0.14 from the previous guidance of $3.79 to $3.89.
2017 full year Adjusted Net Yield growth guidance on a Constant Currency basis increased 150 basis points to 4.25% from 2.75%.
“Positive consumer sentiment in North American and key international markets has resulted in a robust booking environment that continues to be one of the strongest in recent history which, combined with our targeted strategic revenue initiatives drove second quarter revenue and yield growth well above expectations,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “All three of our brands benefitted from strength across each of their respective markets and contributed to our second quarter earnings beat.”
Second Quarter 2017 Results
GAAP net income was $198.5 million or EPS of $0.87 compared to $145.2 million or $0.64 in the prior year. The Company generated Adjusted Net Income of $232.7 million or Adjusted EPS of $1.02 compared to $192.6 million or $0.85 in the prior year.
Revenue increased 13.3% to $1.3 billion compared to $1.2 billion in 2016. This increase was primarily attributed to an increase in Capacity Days as a result of a reduction in the amount of Dry-docks during the period, as well as the benefit of sailings from the addition of Regent brand’s Seven Seas Explorer and Oceania Cruises’ Sirena to the fleet in 2016 along with an increase in Net Yield due to strength in ticket pricing and higher onboard and other revenue. Gross Yield increased 7.4%, while Adjusted Net Yield improved 8.1% on a Constant Currency basis and 7.2% on an as reported basis.
Gross Cruise Cost increased 10.6% compared to 2016 due to an increase in total cruise operating expense and marketing, general and administrative expenses. Gross Cruise Costs per Capacity Day increased 4.9%. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 2.7% on a Constant Currency basis and 2.6% on an as reported basis primarily due to an increase in marketing, general and administrative expenses partially offset by lower other cruise operating expenses.
Fuel price per metric ton, net of hedges was $469, which is commensurate with prior year. The Company reported fuel expense of $86.7 million in the period.
Interest expense, net decreased to $64.2 million in 2017 from $68.4 million in 2016. Interest expense for 2017 reflects an increase in average debt balances outstanding primarily associated with the delivery of new ships and newbuild installments, as well as higher interest rates due to an increase in LIBOR. Interest expense for 2016 included a write-off of $11.4 million of deferred financing fees related to the refinancing of certain of our credit facilities in 2016.
Other income (expense), net was an expense of $5.6 million in 2017 compared to an expense of $10.8 million in 2016. In 2017, the expense was primarily related to losses on foreign currency exchange of $8.1 million, partially offset by other income. In 2016, the expense was primarily related to unrealized and realized losses on fuel derivative hedge contracts and foreign exchange derivative contracts, partially offset by gains on foreign currency exchange.
“We are pleased to report strong booking trends across all markets for the back half of 2017 where pricing and occupancy are now up mid-single digits over prior year,” said Wendy Beck, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “Strong booking volumes and firm pricing have benefitted our booked business for the next four quarters, contributing to the increase of our 2017 full year outlook and further solidifying our expectation for strong earnings growth.”