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Royal Caribbean Group schedules conference call for business update & third quarter

In:
Category: 
22Oct2020

Royal Caribbean Group announced it has scheduled a conference call with investors to discuss its third quarter results and provide a business update.

The call is scheduled for 10am Eastern Daylight Time on Thursday, October 29, 2020.

The call will be available on-line at the company's investor relations website, www.rclinvestor.com.

To listen to the call by phone, please dial (877) 663-9606 in the US and Canada.  International phone calls should be made to (706) 758-4628. 

Royal Caribbean stock rises this week on other cruise lines resuming cruises

In:
Category: 
04Sep2020

It was another positive week for Royal Caribbean (NYSE: RCL) stockholders, as shares of the stock finished the week 4% higher.

Photo by Volnei M.

Royal Caribbean's stock closed at $71.95 at the conclusion of trading on Friday, and followed other cruise line stocks upward trend for the week.

Optimism about cruises restarting

The primary reason why Royal Caribbean, and other cruise line, stocks went up this week was based mostly in Carnival's announcement that two of its brands would restart cruises in Europe soon.

Costa and its Carnival Corporation sibling AIDA Cruises plan to resume sailing in phases – Costa starting Sept. 6 and the German AIDA Cruises on Nov. 1.

Both lines will implement a number of new health policies to get going, following the success of other cruise lines in Europe, including MSC.

Carnival Corporation's announcement on Thursday sent all cruise line stocks higher on optimism that the cruise industry might be on its way to recovery after months of zero cruises at all.

The cruise industry has been decimated by the industry-wide shutdown caused by the current health crisis that have resulted in billions of dollars in losses for Royal Caribbean.

The success of any cruise line restarting operations has a wide impact on the industry, as it will open the doors for others to resume cruises.

Royal Caribbean International has not announced any plans of its own to resume operations in Europe (or anywhere), but Royal Caribbean Group partial-subsidary TUI Cruises has been sailing for a few weeks in Germany.

New fast and easy COVID-19 test drives Royal Caribbean stock up

In:
28Aug2020

Royal Caribbean Group stockholders have seen a nice bump this week in the cruise giant stock price, thanks in part to good news of a new COVID-19 test.

Abbott Laboratories announced on Thursday a "fast, $5, 15-minute, easy-to-use COVID-19 test" that has resulted in a two-day rally for cruise line stocks.

Royal Caribbean Group ($RCL) closed on Friday up 5.30%, at a closing price of $70.13. Share prices have been rocketing up since Thursday morning's announcement.

Fast and cheap testing

On Wednesday, the FDA issued an emergency use authorization (EUA) to Abbott for its BinaxNow COVID-19 Ag Card. 

The test costs $5, involves just a nasal swab, and results can be delivered in 15 minutes without any special equipment.

In addition to being cheap and fast, it is easy to use since the BinaxNow COVID-19 Ag Card works in concert with NAVICA, a new application for iPhone and Android devices that gives people with negative tests an encrypted digital health pass.

Theoretically, a cruise line like Royal Caribbean could insist guests take the test before admitted on a cruise by using the app.

According to Abbott, around 2.9% of patients taking the test receive a false negative when they're actually infected. About 1.5% of people who are not infected will receive a false positive. 

Abbott is manufacturing BinaxNow COVID-19 Ag Cards at scale in two new U.S. facilities. The company will begin shipping the test cards in September and expects to deliver at a rate of 50 million tests per month by October. 

Testing part of the strategy

While full details have not yet been released, Royal Caribbean has said COVID-19 testing is likely to occur.

Royal Caribbean International CEO Michael Bayley recently commented that testing is going to be one aspect of the protocols to expect onboard.

"Testing is part of the thinking that we have not yet reached a point in our protocols where we're ready to publish and release for for discussion," Mr. Bailey started, "But it's very likely that testing will occur."

The winning combination

Taking into account Abbott's testing, along with a slew of new vaccine news, Wall Street seems to think the dual-pronged approach that addresses developing a vaccine as well as preventing infection is a good sign for the cruise lines.

A pair of new vaccine candidates from VBI Vaccines was also announced on Thursday, joining a field of other vaccines in various stages of testing.

In short, the more news about promising and effective testing and vaccines, the more positivity the market is showing cruise lines might get back to business sooner than later.

Note: Matt Hochberg has no position in any of the stocks mentioned, nor does he own any cruise line stock.

Wall Street thinks Royal Caribbean will not return to pre-Covid levels until 2024-2026

In:
Category: 
19Aug2020

While what is in store for Royal Caribbean's short term and long term future are anyone's guess, Wall Street analysts have no problem weighing on how they see things progressing.

Bears of Wall Street is a group of traders and financial analysts who recently wrote it may not be until 2024-2026 before Royal Caribbean Group can return to 2019 levels of business.

Royal Caribbean Group recently said they have a monthly cash burn of $200-290 million, and the financial group thinks Royal Caribbean has enough liquidity (cash) to deal with a prolonged cruise suspension.  That being said, the road back to recovery is going to be a long one.

Given the financial strains of trying to remain in business, the Bears of Wall Street estimates Royal Caribbean Group will be able to return to pre-COVID levels of business sometime around 2024-2026.

Royal Caribbean Group has $4.15 billion in cash reserves, and its net debt position is $15.46 billion. The good news is that the company faces only $0.3 billion and $1.3 billion in debt maturities in 2020 and 2021, respectively, which gives it enough breathing room not to worry about the liquidity crunch. At the same time, Royal Caribbean says that the company already has $11.3 billion in committed credit facilities to fund its expenses, so liquidity is not going to be a problem.

"We continue to take substantial actions to bolster our financial position," said Jason T. Liberty, executive vice president and CFO. "We have accessed the capital market in an opportunistic manner and continue to aggressively manage our spend. We are prepared to navigate a volatile period while making decisions that position the Company well for the recovery."

In concluding, Bears of Wall Street does not believe in short selling Royal Caribbean's stock for a few reasons:

  1. Royal Caribbean doesn’t have any major debt maturities in the upcoming years.
  2. They have the possibility to raise enough liquidity to stay afloat for a long time.
  3. The Federal Reserve will continue to push the stock market higher.

"For that reason, we have no position in the company and believe that there are better long and short opportunities on the market right now."

Note: Matt Hochberg has no position in any of the stocks mentioned, nor does he own any cruise line stock.

Royal Caribbean Group announces new $700 million loan

In:
Category: 
12Aug2020

Royal Caribbean Group announced on Wednesday it has gotten a loan facility from Morgan Stanley for $700 million.

If Royal Caribbean elects to use the loan, it will bear interest at Libor plus 3.75%, and will mature in 364 days. The purpose of the loan is to help pay for "general purpose corporate purchases".

The Company has the ability to increase the capacity of the facility by an additional $300 million from time to time subject to the receipt of additional or increased commitments and the issuance of guarantees from additional subsidiaries of the Company. 

Prior to taking this loan, Royal Caribbean Group reported on Monday that it had $4.1 billion in liquidity, has debt maturities of $300 million in 2020 and $1.3 billion in 2021, and estimated a monthly cash burn rate of $250 million to $290 million.

Royal Caribbean said it is considering ways to further reduce its average monthly cash burn under a further prolonged out-of-service scenario and during re-start of operations.

Perella Weinberg Partners LP served as financial advisor and Skadden Arps, Slate, Meagher & Flom LLP served as legal advisor to the company in connection with the term loan facility.

Royal Caribbean talks selling older ships, timeline on cruise return and more

In:
Category: 
10Aug2020

Royal Caribbean Group executives talked about some of the hottest cruise topics being discussed these days during a conference call with Wall Street investors.

This routine meeting focuses on the financial outlook for the company, but it also provides tremendous insight into what we can expect from a guest standpoint.

During the hour-long call, the Royal Caribbean Group answered questions and commented on a variety of topics of interest to cruisers.

Selling older ships?

The big question cruisers have asked over the last few weeks is if Royal Caribbean has any plans to sell ships, and that exact question was asked by an investor.

Royal Caribbean Group Chief Financial Officer Jason Liberty spoke on evaluating plans to sell ships in the future, but nothing planned for now.

Mr. Liberty said Royal Caribbean typically sells one to two ships per year, but nothing to report today.

"This time we are evaluating opportunities to to sell ships or to take other actions with ships."

"If we don't think we have a good plan for that ship, for it to be generating sizable returns or it's difficult to make it a strategic fit to our brand by modernizing and so forth, we have looked to to to sell the ships."

"We're valuating all all options, but of course, we've put a lot of money into these ships. These ships do exceptionally well, and so it's a difficult decision to depart with ship because they generate so much cash."

New ships and projects delayed or cancelled

One interesting anecdote came at the beginning of the call, when Royal Caribbean Group Chairman and CEO Richard Fain gave an update on its big-money expenditures to indicate these are being pushed back.

In order to reduce expenses and improve cash conservation goals, spending on new projects has been hitting the brakes, according to Royal Caribbean Chairman and CEO Richard Fain.

"On top of all these efforts, most of our capital projects have been delayed or canceled because we don't know how long it will take to get beyond this epidemic."

"These are painful, but these are necessary decisions, I have to say that these five months have been the longest five months any of us can remember now since the crisis began."

No rush to start cruising immediately

While many cruise fans are very eager for cruises to resume, Royal Caribbean Group executives were insistent that they while they are equally eager to resume operations, they will only do so when it is safe to do so.

Mr. Fain emphasized the important of getting it right before cruises start up again.

"But it's fair to say that there is still a lot of uncertainty against this backdrop. We will not rush to return to service until we are confident that we have figured out the changes that we must make to offer our guests and crew strong health and safety protocols with the enjoyable experience that they rightly expect."

"We believe that our health is healthy. Return to service program will help get us there."

"Humbled and surprised" at 2021 bookings

Ever since the cruise shutdown began in March, Royal Caribbean has seen a tremendous amount of loyalty from its repeat customers.  

Once again, this quarter saw substantial bookings being made by past cruisers, which have largely buoyed the company's bottom line.

Mr. Fain started off the call with the surprising trend continuing, "We have been both humbled and surprised with the amount of bookings we're seeing for 2021, with literally no marketing efforts, and frankly, very little good news."

"The tone of our bookings, especially as we get into the second half of 2021, has been encouraging."

Since Royal Caribbean's last earnings call, Mr. Liberty noted bookings have averaged more than double the levels seen during the first eight weeks of the global cruise suspension.

He also noted good or bad news has an effect on bookings.

"The cadence of demand has generally been determined by the news cycle, we've received higher levels of bookings prior to the news regarding a surge of COVID-19 cases, and a decline thereafter."

"Bookings have been softer for the first quarter, but quite strong for the summer and back half of 2021."

China or Australia cruises could start first

While cruises from North America are stuck in limbo due to government regulations, the possibility of cruises resuming elsewhere first was broached during the call.

Royal Caribbean has no firm plans yet, but there is a possibility cruises could start up in places like China or Australia first, and even later this year.

Royal Caribbean International CEO Michael Bayley noted that while cruise operations are suspended until November, Australia and China are the exceptions.

"It may well be possible that we'll resume operations in China and potentially Australia before the end of October."

"But it's uncertain, and I not make any statements that that's going to happen, but there's some possibility.

Timeline for working with the CDC

The major obstacle for Royal Caribbean to resuming cruises where most of its customers are located is getting cruises back in North America, and questions were asked about when that might occur.

Specifically, analysts wanted to get a sense of how Royal Caribbean's Healthy Sail Panel recommendations arrival by the end of this month will coincide with the CDC's request for public comment on cruises restarting.

Mr. Bayley gave his view on the general timeline, "So the timing kind of starts to come together with with all of the public comment concluding towards the end of September, our work concluding towards the end of August. We think that that is some good opportunity in terms of how that comes together."

"I think it's important to to note that, as we know, there's just a huge amount of uncertainty with with how this will play out, and obviously, one of the biggest dynamics is, what's occurring with COVID itself."

Royal Caribbean reports $1.6 billion loss in second quarter of 2020

In:
Category: 
10Aug2020

Royal Caribbean Group reported its second quarter 2020 financial results on Monday with a $1.6 billion loss for the quarter.

The Company reported US GAAP Net Loss for the second quarter of 2020 of $1.6 billion or $7.83 per share compared to US GAAP Net Income of $472.8 million or $2.25 per share during the same time last year.

The 2020 results include a non-cash asset impairment loss of $156.5 million.  

The Company reported Adjusted Net Loss of $1.3 billion or $6.13 per share for the second quarter of 2020 compared to Adjusted Net Income of $532.7 million or $2.54 per share in the prior year.  The Net Loss for the quarter is a result of the impact of the COVID-19 pandemic on the business.

State of Royal Caribbean's business

In addition to the quarterly results, Royal Caribbean group provided a business update on what initiatives and changes it is doing during this shutdown.

Royal Caribbean Group Chairman and CEO touted its work with the Healthy Sail Panel to be ready to start up operations when the time is right.

"The COVID-19 pandemic is posing an unprecedented challenge to our industry and society. Our teams are working tirelessly to return to service soonest and doing so by developing new health and safety protocols to protect the well-being of our guests, crew and destinations we visit." 

"In the meantime, we are using this time to refine our operations to be as efficient as we can while providing the great experiences that so many people are eagerly awaiting."

Cash flow update

With the cruise lines shutdown and another quarterly loss, many investors are curious about the cash flow situation.

Royal Caribbean Group has prioritized its liquidity, "working to ensure it is well positioned for recovery." As of June 30, 2020, the Company had liquidity of approximately $4.1 billion all in the form of cash and cash equivalents.

Since the last earnings call, Royal Caribbean Group has

  • The issuance of $1.0 billion of priority guaranteed notes and $1.15 billion of convertible notes;
  • The issuance of GBP 300 million of commercial paper in the UK providing over $370 million of additional liquidity;
  • Completed a $0.9 billion 12-month debt amortization holiday from all export-credit backed facilities;
  • Amended over $11 billion of commercial bank and export credit facilities to provide covenant waivers through the fourth quarter of 2021; and
  • Further reduced operating expenses due to the fleet layup measures and actions to decrease sales, marketing and administrative expenses.

Of interest to cruise fans, Royal Caribbean has $11.3 billion of committed credit facilities that are available to fund ship deliveries originally planned through 2025.

Royal Caribbean's estimated monthly cash burn is about $250 million to $290 million per month during a prolonged suspension of operations. 

This range includes all interest expenses, including the increases driven by the latest capital raises. It also includes ongoing ship operating expenses, administrative expenses, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuilds) and excludes cash refunds of customer deposits, commissions, debt obligations and cash inflows from new and existing bookings.

The Company is considering ways to further reduce its average monthly cash burn under a further prolonged out-of-service scenario and during re-start of operations.

2021 Cruise bookings

While 2020 bookings have been significantly hit by the cruise shutdown, 2021 looks much better.

Royal Caribbean Group indicated 2021 cruise bookings are trending well and is within historical ranges.

The Lift & Shift program, along with Future Cruise Credit offers have proven popular with guests, with 40% of 2021 bookings coming from these options.

For the booking period since our last business update, approximately 60% of the 2021 bookings are new reservations.

Pricing for 2021 bookings is relatively flat year-over-year when including the negative yield impact of bookings made with future cruise credits; it is slightly up year-over-year when excluding them.

As of June 30, 2020, the Company had $1.8 billion in customer deposits of which approximately $300 million correspond to fourth quarter 2020 sailings. Approximately 48% of the guests booked on cancelled sailings have requested cash refunds.

Royal Caribbean Group amends loans and gives them more financial flexibility

In:
Category: 
04Aug2020

Royal Caribbean filed paper work with the United States Securities and Exchange Commission (SEC) that provides the company more financial flexibility in dealing with their existing loans and obligations.

This is not the first time Royal Caribbean has made these sort of arrangements since the start of the global cruise shutdown.

Essentially, it means they have extended or delayed loans to provide more time to pay them off later without defaulting on the loans.

The Form 8-K filing has two major components, which you can read verbatim right here.

Credit Facility Amendments

On July 28, 2020, Royal Caribbean Cruises Ltd. (the “Company,” “our” and “we”) amended our $1.55 billion unsecured revolving credit facility due 2022 with Nordea Bank ABP, New York Branch, as administrative agent (the “Nordea Revolver”), our $1.925 billion unsecured revolving credit facility due 2024 with The Bank of Nova Scotia, as administrative agent (the “BNS Revolver”), and our $1.0 billion unsecured three-year term loan agreement with Bank of America, N.A., as administrative agent (the “Term Loan” and together with the Nordea Revolver and the BNS Revolver, the “Credit Facilities”).

These amendments extend our waiver of the quarterly-tested fixed charge coverage and net debt to capitalization covenants in each Credit Facility through and including the fourth quarter of 2021 and increase the monthly-tested minimum liquidity covenant for the duration of the extended waiver period. Pursuant to these amendments, the restrictions on paying cash dividends and effectuating share repurchases during the wavier period were extended through and including the fourth quarter of 2021. In addition, these amendments incorporate the restrictions on investments set forth in the indentures governing our 9.125% senior guaranteed notes due 2023, 10.875% senior secured notes due 2023 and 11.500% senior secured notes due 2025.

Certain of the lenders participating in the amended Credit Facilities, and affiliates of those parties, provide banking, investment banking and other financial services to us from time to time for which they have received, and will in the future receive, customary fees.

The foregoing description of the provisions of the amendments is summary in nature and is qualified in its entirety by reference to the full and complete terms of the amendments, copies of which are filed herewith as Exhibit 10.1, 10.2 and 10.3 and incorporated herein by reference.

Export Credit Facility Amendments

On July 28, 2020, we entered into (i) a financial covenant waiver extension consent letter with KfW IPEX-Bank GmbH to amend our Hermes backed loan facilities, including but not limited to, those incurred to finance Quantum of the Seas, Anthem of the Seas, Ovation of the Seas, Spectrum of the Seas and Odyssey of the Seas (collectively, the Hermes Facilities”) and (ii) amendments to the BpiFAE backed loan facilities incurred to finance Celebrity Edge, Celebrity Apex, and Symphony of the Seas (the “Bpi Facilities”) in each case, in order to extend the period during which a breach of the financial covenants will not trigger a mandatory prepayment or default, as applicable, under each facility through and including the fourth quarter of 2021. Similarly, on July 31, 2020, we amended the Finnvera-backed loan facilities incurred to finance Icon 1Icon 2 and Icon 3 (the “Finnvera Facilities” and together with the Hermes Facilities and the Bpi Facilities, the “Export Credit Facilities”) in order to extend the period during which a breach of the financial covenants will not trigger a default under each facility through and including the fourth quarter of 2021; provided that certain structural enhancements are provided on or before September 30, 2020. In connection with these consents and amendments, we have agreed that certain of our subsidiaries (none of which directly own a vessel) will issue guarantees for the debt outstanding under the Export Credit Facilities.

Certain of the lenders participating in the Export Credit Facilities, and affiliates of those parties, provide banking, investment banking and other financial services to us from time to time for which they have received, and will in the future receive, customary fees.

The foregoing description of the provisions of the amendments is summary in nature and is qualified in its entirety by reference to the full and complete terms of the amendments, copies of which are filed herewith as Exhibit 10.4, 10.5, 10.6, 10.7 and 10.8 and incorporated herein by reference.

The big questions for Royal Caribbean's earnings call next week

In:
03Aug2020

We are exactly one week away from Royal Caribbean's second quarter earnings report, and perhaps answers to many questions about the short and long term future of the cruise giant.

Earnings calls are when the executives will provide shareholders with a look at its financial situation and answer questions from analysts. With so much disruption to the entire cruise industry due to the cruise shutdown, there are plenty of ongoing concerns to address.

While we will not know exactly all topics to be covered, here are the top issues cruise fans are curious about (and Wall Street too).

How bad of a loss?

Royal Caribbean Group reported over $1 billion in losses in the first quarter of 2020, and that was just at the beginning of the cruise shutdown and global health crisis, so how bad will things be this time?

On the one hand, there have been no cruises in the second quarter at all, but on the other hand, it sounds like 2021 bookings are surprisingly high.

There is no doubt that the Royal Caribbean Group lost money in the second quarter, but was it less than analysts expected or worse?

The nature of their financial situation may be a good indication of the overall health of the company.

Any plans to sell ships?

Rival Carnival Corporation has announced it will sell over a dozen cruise ships by the end of the year, so the question is will Royal Caribbean do the same.

Carnival made announcements in its earnings call of selling ships, so the question is will Royal Caribbean do the same.

Royal Caribbean Group Chairman and CEO Richard Fain said two weeks ago there are no plans to sell ships, but it is a consideration. A swirl of rumors last week that Empress of the Seas was headed to the scrapyard turned out to be incorrect.

As we all know, these plans can change at any time, especially if the losses start adding up.

Will there be any new cost-cutting measures?

Something Royal Caribbean announced in its first quarter earnings call was a series of cost-cutting measures, and many are wondering if more are to come.

At the last earnings call, Royal Caribbean group was considering ways to further reduce the average monthly requirement under a further prolonged out-of-service scenario and during start-up of operations.

Whether that comes in the form of more layoffs, selling ships, taking out more loans, or something else remains to be seen.

Safety protocol update

The blue-ribbon panel dedicated to coming up with new policies and protocols to keep guests safe once cruising does resume is likely to be mentioned, if not talked about at length.

Since the day Royal Caribbean announced the Healthy Sail Panel, everyone has been curious what policies exactly will be put into place.

While Royal Caribbean has said the Healthy Sail Panel's first round of recommendations will not be made until the end of August, perhaps we will get insight into what they are considering or working on.

How well is the cruise line booked next year?

While 2020 has been an absolutely terrible year for Royal Caribbean (and all cruise lines), their booked position in 2021 has been a bright spot for the cruise line.

Essentially, a lot of people opted to defer their cruise vacations to next year instead of outright canceling plans, and the question is if this trend is holding up.

Wall Street has been skeptical of any cruise line's ability to lure customers back once cruises resume, so positive feedback on how 2021 (and beyond) is looking would put a lot of concerns at ease.

Royal Caribbean Group schedules conference call for business update & second quarter

In:
Category: 
31Jul2020

Royal Caribbean Cruises Ltd. announced it has scheduled a conference call with investors to discuss its second quarter results and provide a business update.

The call is scheduled for 10am Eastern Daylight Time on Monday, August 10, 2020.

The call will be available on-line at the company's investor relations website, www.rclinvestor.com.

To listen to the call by phone, please dial (877) 663-9606 in the US and Canada.  International phone calls should be made to (706) 758-4628. 

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