Norwegian Cruise Line(US:NCLH)2025-08-04 15:59markdown PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q2 2025 financials show revenue growth to $2.5 billion, but net income sharply declined due to non-operating expenses, despite asset expansion [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2025 revenue increased to $2.52 billion, but net income significantly decreased to $30.0 million due to higher non-operating expenses, leading to lower EPS Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $2,517,497 | $2,372,492 | $4,645,050 | $4,563,707 | | **Operating Income** | $423,836 | $341,561 | $624,778 | $559,955 | | **Net Income (Loss)** | $29,992 | $163,436 | $(10,303) | $180,789 | | **Diluted EPS** | $0.07 | $0.35 | $(0.02) | $0.41 | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets grew to $21.6 billion and liabilities to $20.0 billion, primarily due to increased property and long-term debt Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $184,015 | $190,765 | | **Total assets** | $21,595,817 | $19,969,811 | | **Advance ticket sales** | $3,833,775 | $3,105,964 | | **Long-term debt** | $12,633,183 | $11,776,721 | | **Total liabilities** | $20,026,247 | $18,544,372 | | **Total shareholders' equity** | $1,569,570 | $1,425,439 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow was $1.39 billion, slightly down, while investing cash outflow surged to $1.87 billion, and financing cash flow turned positive Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,394,072 | $1,478,064 | | **Net cash used in investing activities** | $(1,868,062) | $(620,872) | | **Net cash provided by (used in) financing activities** | $467,240 | $(665,509) | | **Net (decrease) increase in cash** | $(6,750) | $191,683 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail operations, $2.4 billion liquidity, and H1 2025 financing activities, including €18.4 billion in future ship commitments - As of June 30, 2025, the company operated **33 ships** and had orders for **13 additional ships** for delivery through 2036[25](index=25&type=chunk)[26](index=26&type=chunk) - Total liquidity was approximately **$2.4 billion** as of June 30, 2025, comprising **$184.0 million** in cash, **$2.0 billion** available under the Revolving Loan Facility, and a **€200 million** newbuild payment commitment[27](index=27&type=chunk) - In H1 2025, the company undertook significant debt restructuring, including issuing **$1.8 billion** in **6.750%** senior unsecured notes due 2032, exchanging **$353.9 million** of 2025 Exchangeable Notes for new 2030 notes, and increasing its revolving credit facility to **$2.5 billion**[50](index=50&type=chunk)[55](index=55&type=chunk)[60](index=60&type=chunk) - The combined contract price for **13 ships** on order is approximately **€18.4 billion ($21.7 billion)**. Total minimum payments for ship construction contracts are scheduled at **$21.4 billion** through 2036[89](index=89&type=chunk)[163](index=163&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports strong bookings, Q2 2025 revenue up 6.1% to $2.5 billion, but net income sharply declined, while Adjusted EBITDA improved to $694.0 million - The company experienced strong bookings in the quarter, with its forward **12-month** booked position remaining within its optimal range[121](index=121&type=chunk) - Announced a second phase of expansion for its private island, Great Stirrup Cay, including a new waterpark expected to open in summer **2026**[122](index=122&type=chunk) Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $2.5 billion | $2.4 billion | +6.1% | | **Net Income** | $30.0 million | $163.4 million | -81.6% | | **Adjusted EBITDA** | $694.0 million | $587.7 million | +18.1% | | **Diluted EPS** | $0.07 | $0.35 | -80.0% | - As of June 30, 2025, liquidity was approximately **$2.4 billion**, and management believes it is sufficient to satisfy obligations for at least the next **12 months**[146](index=146&type=chunk)[151](index=151&type=chunk) [Results of Operations](index=34&type=section&id=MD%26A%20Results%20of%20Operations) Q2 2025 revenue rose to $2.5 billion due to increased capacity, but higher interest expense and foreign currency losses impacted profitability - Q2 2025 revenue increased primarily due to a rise in Capacity Days following the delivery of Norwegian Aqua in March **2025**[137](index=137&type=chunk) - Q2 2025 interest expense of **$236.8 million** included **$68.4 million** in losses from debt extinguishment and modification[139](index=139&type=chunk) - Other expense of **$156.4 million** in Q2 2025 was driven by net losses from foreign currency remeasurements of euro-denominated debt, a significant swing from a **$1.9 million** gain in Q2 2024[140](index=140&type=chunk) Key Operating Statistics | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Capacity Days** | 6,052,273 | 5,736,385 | | **Occupancy Percentage** | 103.9% | 105.9% | | **Net Yield** | $304.34 | $296.31 | | **Adjusted Net Cruise Cost Excl. Fuel per Capacity Day** | $163.67 | $163.36 | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained $2.4 billion liquidity, actively managing its capital structure through new debt issuances and facility increases, with advance ticket sales at $4.0 billion - In January 2025, NCLC issued **$1.8 billion** in senior unsecured notes due 2032 and used proceeds to redeem notes due in 2026 and 2028. The Revolving Loan Facility was increased to **$1.7 billion** and extended to **2030**[147](index=147&type=chunk) - In April 2025, **$353.9 million** of 2025 Exchangeable Notes were exchanged for new 2030 Exchangeable Notes and a **$64.0 million** cash payment[148](index=148&type=chunk) - In June 2025, the Revolving Loan Facility was further upsized from **$1.7 billion** to approximately **$2.5 billion**[149](index=149&type=chunk) - As of June 30, 2025, advance ticket sales stood at **$4.0 billion**[156](index=156&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and fuel prices, with 94% fixed-rate debt and significant unhedged euro exposure - **Interest Rate Risk:** **94%** of debt is fixed-rate. A **one percentage point** increase in annual variable rates would raise annual interest expense by approximately **$8.6 million**[174](index=174&type=chunk) - **Foreign Currency Risk:** The company has unhedged exposure on **€15.6 billion** in ship construction contracts. A **10%** change in the EUR/USD exchange rate would change the U.S. dollar value of these payments by **$1.8 billion**[175](index=175&type=chunk)[177](index=177&type=chunk) - **Fuel Price Risk:** The company has hedged **65%** of remaining 2025, **48%** of 2026, and **22%** of 2027 projected fuel purchases. A **10%** increase in average fuel price would increase anticipated 2025 fuel expense by **$34.7 million**[179](index=179&type=chunk)[180](index=180&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, **2025**[181](index=181&type=chunk) - No changes occurred in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[182](index=182&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is cooperating with ongoing investigations and successfully appealed a $112.9 million judgment in the Helms-Burton Act lawsuit - The company is cooperating with ongoing investigations by the Florida Attorney General and other agencies related to marketing during the COVID-19 pandemic[90](index=90&type=chunk) - In the Helms-Burton Act case (Havana Docks Matter), the Eleventh Circuit Court of Appeals reversed a lower court's judgment against the company and dismissed the claim in October **2024**[91](index=91&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported, though macroeconomic conditions may heighten previously disclosed risks - There have been no material changes in risk factors from those disclosed in the company's Annual Report on Form 10-K[188](index=188&type=chunk) [Other Information](index=43&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, **2025**[189](index=189&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed, including key agreements related to recent financing activities and amendments to incentive plans - Key exhibits filed include the indenture for the new **0.875%** Exchangeable Senior Notes due 2030 and the Second Amendment to the Seventh Amended and Restated Credit Agreement[191](index=191&type=chunk)