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Norwegian Cruise Line Holdings Ltd NCLH

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Higher Cash Burn to Restart Fleet Offset by Solid 2022 Pricing at No-Moat Norwegian; Shares on Sale

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

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.

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Company Profile

Business Description

Norwegian Cruise Line is the world's third- largest cruise company by berths (at nearly 60,000), operating 28 ships across three brands (Norwegian, Oceania, and Regent Seven Seas), offering both freestyle and luxury cruising. The company is set to have its entire fleet back in the water by April 1, 2022. Additionally, with nine passenger vessels on order among its brands through 2027 (representing 24,000 incremental berths), Norwegian is growing capacity faster than its peers, expanding its brand globally. Norwegian sails to more than 490 global destinations.

7665 Corporate Center Drive
Miami, FL, 33126
T +1 305 436-4000
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2019
Stock Type
Employees 34,300