Carnival PLC - Carnival Corporation 4Q 2023 Earnings

CARNIVAL CORPORATION & PLC REPORTS RECORD FOURTH QUARTER AND FULL YEAR REVENUES WITH CONTINUED STRONG BOOKINGS AND EARNINGS MOMENTUM

Tracking ahead of SEA Change targets

MIAMI, Dec. 21, 2023 -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) reports fourth quarter and full year 2023 earnings and provides an outlook for the full year and first quarter 2024.

Key Highlights 

Full Year 2023

• Full year revenues hit an all-time high of $21.6 billion.
• Full year cash from operations was $4.3 billion and adjusted free cash flow was $2.1 billion (see "Non-GAAP Financial Measures" below).
• U.S. GAAP net loss of $74 million and positive adjusted net income of $1 million outperformed the September guidance range (see "Non-GAAP Financial Measures" below).
• The company made debt payments of $6 billion, reducing its debt balance by $4.6 billion from its peak in the first quarter of 2023 and ended the year with $5.4 billion of liquidity.
• The company entered 2024 with its best booked position on record, for both price and occupancy

Fourth Quarter 2023

• Record fourth quarter revenues of $5.4 billion with record net per diems (in constant currency) significantly exceeding 2019 levels and above the September guidance range and record net yields (in constant currency) (see "Non-GAAP Financial Measures" below).
• Booking volumes for the two weeks around Black Friday and Cyber Monday reached an all-time high for that period.
• Total customer deposits reached a fourth quarter record of $6.4 billion, surpassing the previous fourth quarter record of $5.1 billion (as of November 30, 2022), by 25 percent.

"We ended the year on a high note with another record-breaking quarter that exceeded expectations and achieved positive full year adjusted net income. In fact, we consistently outperformed in all four quarters of the year, buoyed by a strengthening demand environment across all our brands," commented Carnival Corporation & plc's Chief Executive Officer Josh Weinstein.

"Net yields for the fourth quarter continued on a positive trajectory, were significantly higher than a very strong 2019 and even higher than we had anticipated, enabling us to overcome four years of high cost inflation to deliver five percent higher per unit EBITDA than 2019 (holding fuel and currency constant)," Weinstein added.

"Thanks to a strong second half of 2023, we are already tracking ahead of our plan to achieve SEA Change, our three-year financial targets calling for the highest adjusted ROIC and adjusted EBITDA per ALBD in nearly two decades. Based on our 2024 guidance, we expect to deliver another big step forward, positioning us more than halfway toward realizing all our 2026 SEA Change targets. With nearly two-thirds of 2024 on the books already, we are well positioned to obtain another year of record revenues and adjusted EBITDA," Weinstein noted.

Fourth Quarter 2023 Results

• U.S. GAAP net loss of $48 million, or $(0.04) diluted EPS, and adjusted net loss of $90 million, or $(0.07) adjusted EPS, was above the better end of the September guidance range (see "Non-GAAP Financial Measures" below).
• Adjusted EBITDA of $946 million exceeded the September guidance range, driven by continued strength in demand, which is driving ticket prices higher (see "Non-GAAP Financial Measures" below).
• Record fourth quarter revenues of $5.4 billion, with record net per diems (in constant currency) significantly exceeding 2019 levels, and above the September guidance range and record net yields (in constant currency).
• While gross margin yields were down 4.6 percent, net yields (in constant currency) exceeded strong 2019 levels by 7.8 percent.
  • Occupancy in the fourth quarter of 2023 was over 101 percent, in line with the company's expectations and historical levels.
  • Gross margin per diems were down 2.3 percent compared to 2019, while net per diems (in constant currency) exceeded 2019 levels by over 10 percent and were three percentage points better than the midpoint of the September guidance range.

• Cruise costs per ALBD increased 12 percent as compared to the fourth quarter of 2019. Adjusted cruise costs excluding fuel per ALBD (in constant currency) increased 11 percent compared to the fourth quarter of 2019 and were in line with September guidance (see "Non-GAAP Financial Measures" below).
• Total customer deposits reached a fourth quarter record of $6.4 billion, surpassing the previous fourth quarter record of $5.1 billion (as of November 30, 2022), by 25 percent.

Bookings 

"We entered the year with the best booked position we have ever seen, and now have nearly two-thirds of our occupancy already on the books for 2024, at considerably higher prices (in constant currency). We continue to experience strong bookings momentum across the board, with our European brands showing remarkable strength during the quarter with booking volumes running up well into the double digits at considerably higher prices (in constant currency)," Weinstein noted.

Weinstein continued, "Our yield management strategy to base load bookings is clearly working as we pull forward booking volumes on strong pricing. We continue to build on that momentum with our ongoing advertising investments and lead generation efforts, increasing support from our trade partners, and the exceptional guest experiences our team members provide onboard every day, helping to deliver millions of cruising advocates."

Booking volumes during the fourth quarter continued at significantly elevated levels, above both prior year and 2019 comparable periods, while recent booking volumes for the two weeks around Black Friday and Cyber Monday reached an all-time high for that period. Pricing on bookings during the fourth quarter was considerably higher than prior year pricing (in constant currency).

The cumulative advanced booked position is at considerably higher prices (in constant currency) than 2023 levels, with each quarter of 2024 booked above the high end of the historical range.

2024 Outlook 

For the full year 2024, the company expects:

• Adjusted EBITDA of approximately $5.6 billion, over 30 percent growth compared to 2023
• Net yields (in constant currency) up approximately 8.5 percent compared to 2023, with full year occupancy returning to historical levels and nicely higher net per diems (in constant currency) reflecting continued strength in pricing and onboard spending
• Adjusted cruise costs excluding fuel per ALBD (in constant currency) up approximately 4.5 percent compared to 2023

For the first quarter of 2024, the company expects:

• Adjusted EBITDA of approximately $0.8 billion, more than double the first quarter of 2023
• Net yields (in constant currency) up approximately 16.5 percent compared to the first quarter of 2023 with occupancy returning to historical levels as the company closes the remaining occupancy gap in the first half of the year
• Adjusted cruise costs excluding fuel per ALBD (in constant currency) up approximately 9.5 percent compared to the first quarter of 2023 primarily due to higher occupancy levels, the timing of advertising investments and dry-dock related expenses compared to the prior year

See "Guidance" and "Reconciliation of Forecasted Data" for additional information on the company's 2024 outlook.

Financing and Capital Activity

"During 2023, we made debt payments of $6 billion and ended the year with just over $30 billion of debt, which is $3 billion better than we forecasted just nine months ago during our March conference call and almost $5 billion off the first quarter peak," noted Carnival Corporation & plc Chief Financial Officer David Bernstein.

"And looking forward, we will continue to evaluate refinancing opportunities and opportunistically prepay additional debt. Furthermore, we expect durable revenue growth to drive increases in adjusted free cash flow in 2024 and beyond, which will be the primary driver for paying down our debt balances on our path back to investment grade," Bernstein added.

During 2023, the company generated cash from operations of $4.3 billion and adjusted free cash flow of $2.1 billion, making a significant contribution toward rebuilding the company's financial strength.

During the fourth quarter of 2023, the company reduced its debt by another $725 million and for the full year made debt payments of $6 billion while ending the fourth quarter with $5.4 billion of liquidity, including cash and borrowings available under the revolving credit facility. In addition, the company amended an agreement with one of its credit card processors and now expects an additional $800 million to be returned during the first quarter of 2024, representing substantially all of the credit card reserves balance as of November 30, 2023.

Sustainability

The company continues to work aggressively towards its greenhouse gases ("GHG") emission reduction goals and ambitions through innovative projects aligned with its four-part emission reduction strategy: fleet optimization; energy efficiency; itinerary efficiency; and new technologies & alternative fuels. In 2023, the company:

• Reduced its absolute GHG emissions by over 10 percent as compared to its peak year of 2011, despite capacity growth of 30 percent over the same period.
• Achieved a 15.5 percent reduction in fuel consumption per ALBD compared to 2019 and expects another four percent reduction in fuel consumption per ALBD for full year 2024 compared to 2023.
• Now expects to achieve its 2030 GHG emission intensity reduction goal four years early, targeting more than a 20 percent reduction in emission intensity by the end of 2026 compared to 2019.
• Surpassed its 2030 goal to achieve shore power capability for 60 percent of its fleet, seven years ahead of schedule; now, 64 percent of the company's fleet has the capability to connect to shore power.
• Successfully piloted the use of biofuels as a replacement for fossil fuel on one additional ship, bringing its cumulative completed biofuel pilots to three ships.
• Delivered 38 percent reduction in food waste per person relative to its 2019 baseline, nearing its interim goal to reduce food waste by 40 percent per person by 2025, and on pace toward its 2030 goal of a 50 percent reduction.

Other Recent Highlights 

• Carnival Corporation's brands launched advertising campaigns with Costa Cruises focusing on moments where guests are left speechless, P&O Cruises (UK) highlighting the unique experiences of a cruise holiday, AIDA Cruises inviting guests to experience oneself, and Holland America Line continuing its "Time of Your Life" campaign.
• Carnival Corporation was named one of the World's Top Female-Friendly Companies and one of the World's Best Employers of 2023 by Forbes, both for the third consecutive year.
• Carnival Cruise Line took delivery of Carnival Jubilee, offering an exciting mix of new entertainment, dining and fun to one of the line's most popular homeports, Galveston, Texas.
• Carnival Cruise Line announced hundreds of sailings to its new destination on Grand Bahama Island "Celebration Key" with 18 different ships departing from nine different homeports.

Guidance

(See "Reconciliation of Forecasted Data")

Capital Expenditures

The company's annual capital expenditure forecast for 2024, is as follows:

Committed Ship Financings

Outstanding Debt Maturities

As of November 30, 2023, the company's outstanding debt maturities are as follows:

Refer to Financial Information within the Investor Relations section of the corporate website for further details on the company's Debt Maturities: https://www.carnivalcorp.com/financial-information/supplemental-schedules

Conference Call 

The company has scheduled a conference call with analysts at 10:00 a.m. EST (3:00 p.m. GMT) today to discuss its earnings release. This call can be listened to live, and additional information can be obtained, via Carnival Corporation & plc's website at www.carnivalcorp.com and www.carnivalplc.com. 

Carnival Corporation & plc is the largest global cruise company, and among the largest leisure travel companies, with a portfolio of world-class cruise lines – AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O Cruises (Australia), P&O Cruises (UK), Princess Cruises, and Seabourn.

Additional information can be found on www.carnivalcorp.com, www.aida.de, www.carnival.com, www.costacruise.com, www.cunard.com, www.hollandamerica.com, www.pocruises.com.au, www.pocruises.com, www.princess.com and www.seabourn.com. For more information on Carnival Corporation's industry-leading sustainability initiatives, visit www.carnivalsustainability.com. 

Cautionary Note Concerning Factors That May Affect Future Results

Some of the statements, estimates or projections contained in this document are "forward-looking statements" that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, operations, outlooks, plans, goals, reputation, cash flows, liquidity and other events which have not yet occurred. These statements are intended to qualify for the safe harbors from liability provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts are statements that could be deemed forward-looking. These statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and the beliefs and assumptions of our management. We have tried, whenever possible, to identify these statements by using words like "will," "may," "could," "should," "would," "believe," "depends," "expect," "goal," "aspiration," "anticipate," "forecast," "project," "future," "intend," "plan," "estimate," "target," "indicate," "outlook," and similar expressions of future intent or the negative of such terms.

Forward-looking statements include those statements that relate to our outlook and financial position including, but not limited to, statements regarding:

Because forward-looking statements involve risks and uncertainties, there are many factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied by our forward-looking statements. This note contains important cautionary statements of the known factors that we consider could materially affect the accuracy of our forward-looking statements and adversely affect our business, results of operations and financial position. Additionally, many of these risks and uncertainties are currently, and in the future may continue to be, amplified by our substantial debt balance incurred during the pause of our guest cruise operations. There may be additional risks that we consider immaterial or which are unknown. These factors include, but are not limited to, the following:

• Events and conditions around the world, including geopolitical uncertainty, war and other military actions, inflation, higher fuel prices, higher interest rates and other general concerns impacting the ability or desire of people to travel have led, and may in the future lead, to a decline in demand for cruises as well as negative impacts to our operating costs and profitability.
• Pandemics have in the past and may in the future have a significant negative impact on our financial condition and operations.
• Incidents concerning our ships, guests or the cruise industry have in the past and may, in the future, negatively impact the satisfaction of our guests and crew and lead to reputational damage.
• Changes in and non-compliance with laws and regulations under which we operate, such as those relating to health, environment, safety and security, data privacy and protection, anti-money laundering, anti-corruption, economic sanctions, trade protection, labor and employment, and tax may be costly and have in the past and may, in the future, lead to litigation, enforcement actions, fines, penalties and reputational damage.
• Factors associated with climate change, including evolving and increasing regulations, increasing global concern about climate change and the shift in climate conscious consumerism and stakeholder scrutiny, and increasing frequency and/or severity of adverse weather conditions could adversely affect our business.
• Inability to meet or achieve our targets, goals, aspirations, initiatives, and our public statements and disclosures regarding them, including those that are related to sustainability matters, may expose us to risks that may adversely impact our business.
• Breaches in data security and lapses in data privacy as well as disruptions and other damages to our principal offices, information technology operations and system networks and failure to keep pace with developments in technology may adversely impact our business operations, the satisfaction of our guests and crew and may lead to reputational damage.
• The loss of key team members, our inability to recruit or retain qualified shoreside and shipboard team members and increased labor costs could have an adverse effect on our business and results of operations.
• Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs.
• We rely on supply chain vendors who are integral to the operations of our businesses. These vendors and service providers may be unable to deliver on their commitments, which could negatively impact our business.
• Fluctuations in foreign currency exchange rates may adversely impact our financial results.
• Overcapacity and competition in the cruise and land-based vacation industry may negatively impact our cruise sales, pricing and destination options.
• Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests.
• We require a significant amount of cash to service our debt and sustain our operations. Our ability to generate cash depends on many factors, including those beyond our control, and we may not be able to generate cash required to service our debt and sustain our operations.
• Our substantial debt could adversely affect our financial health and operating flexibility.

The ordering of the risk factors set forth above is not intended to reflect our indication of priority or likelihood. 

Forward-looking statements should not be relied upon as a prediction of actual results. Subject to any continuing obligations under applicable law or any relevant stock exchange rules, we expressly disclaim any obligation to disseminate, after the date of this document, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based. 

Forward-looking and other statements in this document may also address our sustainability progress, plans, and goals (including climate change- and environmental-related matters). In addition, historical, current, and forward-looking sustainability- and climate-related statements may be based on standards and tools for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions and predictions that are subject to change in the future and may not be generally shared.

CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES (CONTINUED)

Data in the below table is compared against 2019 as it is the most recent year of full operations due to the pause and resumption of guest cruise operations.

Gross margin per diems and net per diems were computed by dividing the gross margin and adjusted gross margin by PCDs. Gross margin yields and net yields were computed by dividing the gross margin and adjusted gross margin by ALBDs as follows:

CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES (CONTINUED)

Data in the below table is compared against 2019 as it is the most recent year of full operations due to the pause and resumption of guest cruise operations.

Cruise costs per ALBD, adjusted cruise costs per ALBD and adjusted cruise costs excluding fuel per ALBD were computed by dividing cruise costs, adjusted cruise costs and adjusted cruise costs excluding fuel by ALBDs as follows: