Norwegian Cruise Line Holdings Ltd NCLH

Like its no-moat competitor Royal Caribbean, Norwegian is facing higher cash burn metrics than expected as it prepares its ships for redeployment. During its second quarter, Norwegian experienced a monthly average cash burn of $200 million, slightly higher than the $190 million guidance it issued previously. Looking to the third quarter, this metric is set to rise to $285 million (not including new and existing bookings), which we expect to be the apex of burn during the pandemic. With 40% of the fleet set for deployment by the end of the third quarter and 75% operating by year-end, we expect cash generation from paying customers will reduce burn levels significantly, setting Norwegian up for an above break-even EBITDA year in 2022. There was little financial progress to report in the firm’s second quarter, as the company’s first ship (Encore) is scheduled to set sail from Seattle on Aug. 7. The quarter’s adjusted EPS loss of $1.93 was in line with our estimate as costs remained as controlled as possible. Liquidity remains robust, with $2.8 billion in cash on the balance sheet at June 30, enough to cover losses through mid-2022 in a zero-revenue environment.