Royal Caribbean: Guests satisfied, Wall Street maybe less so

Written by Nick Blenkey
Royal Caribbean

Royal Caribbean Group CEO Jason Liberty: “We expect 2022 will be a strong transitional year.”

Royal Caribbean Group (NYSE: RCL) had lots of positive news to report in a business update released today along with its FY 2021 financial results. Still, those results showed more red ink than analysts had predicted and the cruise giant pushed back its expectations for a return to profitability “by a few months.”

At midday, its shares were down some 4.45% but were recovering somewhat later in the day.

THE NUMBERS

Full Year 2021 Results: For the full year, the company reported US GAAP Net Loss of $(5.3) billion or $(20.89) per share compared to US GAAP Net Loss of $(5.8) billion or $(27.05) per share in the prior year. The company also reported Adjusted Net Loss of $(4.8) billion or $(19.19) per share for the full year 2021 compared to Adjusted Net Loss of $(3.9) billion or $(18.31) per share in the prior year.

Fourth Quarter 2021 Results: The company reported US GAAP Net Loss for the fourth quarter of 2021 of $(1.4) billion or $(5.33) per share compared to US GAAP Net Loss of $(1.4) billion or $(6.09) per share in the prior year. The company also reported Adjusted Net Loss of $(1.2) billion or $(4.78) per share for the fourth quarter of 2021 compared to Adjusted Net Loss of $(1.1) billion or $(5.02) per share in the prior year. During the fourth quarter of 2021, the company eliminated the three-month reporting lag for Silversea Cruises to reflect the brand’s financial position, results of operations and cash flows concurrently and consistently with the company’s fiscal calendar. The effect of this change resulted in a negative impact of approximately $(0.25) per share for the fourth quarter of 2021, which has been excluded from the company’s adjusted results for transparency and comparability purposes. The Net Loss and Adjusted Net Loss for the fourth quarter and full year of 2021 are the result of the impact of the COVID-19 pandemic on the business.

STRONG TRANSITIONAL YEAR EXPECTED

“2021 marked the beginning of our return to our mission of delivering the very best vacation experiences,” said Jason Liberty, president and chief executive officer of the Royal Caribbean Group. “During 2021, we made significant progress toward our recovery with over 85% of our capacity returning to operations and delivering safe and memorable experiences to approximately 1.3 million guests at record guest satisfaction scores. Our team has worked tirelessly to execute our successful and healthy return, and we are grateful for their extraordinary efforts.”

“We expect 2022 will be a strong transitional year, as we bring the rest of our fleet back into operations and well-nigh historical occupancy levels,” Liberty said. “Omicron created short-term operational challenges that have unfortunately weighed on close-in bookings. While the timing of Omicron was particularly unfortunate for the first half of 2022 bookings and will likely delay our return to profitability by a few months, we do not expect it to impact our overall recovery trajectory and the strong demand for cruising.”

HIGHLIGHTS

By the end of 2021, the group had returned 50 out of 61 ships to operations across its five brands, representing over 85% of its worldwide capacity. During the year, the group carried approximately 1.3 million guests across its five brands, achieving, its says “record guest satisfaction scores and onboard spend per passenger.”

Due to the impact of the Omicron variant, the company says that it experienced some service disruptions and canceled several sailings in Q1, although it still expects to operate approximately 95% of its planned capacity in Q1.

Bookings in the fourth quarter were sequentially higher than the third quarter. Due to the impact of the Omicron variant, bookings decreased in December and remained lower over the holiday period, but have started to increase with each consecutive week since the beginning of 2022 and are now back to pre-Omicron levels.

Cumulative advance bookings for the second half of 2022 are within historical ranges and at higher prices, with and without future cruise credits (FCCs).

The group expects to return the full fleet before the summer season of 2022 and load factors approaching historical levels in the third quarter of 2022. The company says it “is thoughtfully ramping up the fleet and load factors while emphasizing industry-leading health and safety standards, world-class guest experiences and financial prudence.”

The group says that, notwithstanding the impact from Omicron, it expects to be operating cash flow positive in late spring. It expects a net loss for the first half of 2022 and a return to profitability in the second half of 2022.

You can read the Seeking Alpha transcript of this morning’s RCL call with analysts HERE and read its earnings release HERE

Learn more from Royal Caribbean Group.

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