Royal Caribbean Group turned in a second quarter loss that was wider than Wall Street's forecast while monthly cash burn could be slightly higher on higher interest costs from recent capital raises.

60% of 2021 bookings are new, not FCC-related

The booked position for 2021 is ‘trending well’ and ‘within historical ranges.’

For the booking period since the company’s last business update on May 10, approximately 60% of the 2021 bookings are new and the rest are due to the redemption of future cruise credits and the ‘Lift & Shift’ program. Pricing for 2021 bookings is relatively flat year-over-year when including the negative yield impact of bookings made with FCCs; it is slightly up year-over-year when excluding them.

As of June 30, the company had $1.8bn in customer deposits, with approximately $300m corresponding to fourth quarter 2020 sailings. Approximately 48% of the guests booked on canceled sailings have requested cash refunds.

Q2 impairment charge

Royal Caribbean’s second quarter adjusted net loss of $1.3bn, or $6.13 per share, compared to the year-ago profit of $532.7m, or $2.54 per share. The consensus expectation had been for a loss of $4.82 per share.

US GAAP net loss was $1.6bn, or $7.83 per share, compared to Q2 2019’s US GAAP profit of $472.8m, or $2.25 per share. The 2020 results include a non-cash asset impairment loss of $156.5m. 

Total revenues were just under $176m, down from $2.8bn a year ago.       

‘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,’ Royal Caribbean Chairman and CEO Richard Fain said.

Recent liquidity-boosting measures

Recent liquidity-boosting efforts include issuing $1bnof priority guaranteed notes and $1.15bn of convertible notes; issuing £300m of commercial paper in the UK, providing over $370m of additional liquidity; and completing a $0.9bn 12-month debt amortization holiday from all export-credit backed facilities.

In addition, RCL amended over $11bn of commercial bank and export credit facilities to provide covenant waivers through Q4 2021 and  further reduced operating expenses due to the fleet layup measures and actions to decrease sales, marketing and administrative expenses.

In addition, Royal Caribbean has $11.3bn of committed credit facilities that are available to fund ship deliveries originally planned through 2025.

Monthly cash burn $250m-$290m

The company estimates its cash burn to average approximately $250m to $290m per month — up from the $250m to $275m range foreseen in May — during a prolonged suspension of operations. This includes interest expenses — including the increases driven by the latest capital raises, ongoing ship operating expenses, administrative expenses, hedging costs and expected necessary capital expenditures (net of committed financings in the case of newbuilds). It excludes cash refunds of customer deposits, commissions, debt obligations and cash inflows from new and existing bookings.

Royal Caribbean is considering ways to reduce this average monthly cash burn under a further prolonged out-of-service scenario and during restart of operations.

$4.1bn in liquidity

At June 30, the company had liquidity of approximately $4.1bn all in the form of cash and cash equivalents. Scheduled debt maturities for the remainder of 2020 and 2021 are $0.3bn and $1.3bn, respectively.

The expected capital expenditures for the remainder of 2020 and 2021 are $0.6bn and $1.8bn, respectively. These are mostly related to newbuild projects.

Ship delivery delays

Coronavirus has impacted shipyard operations and will result in delivery delays for newbuilds. Currently, Royal Caribbean expects three of the five ships originally scheduled for delivery between July 2020 and December 2021 will be delivered within the remaining time frame. Two of these ships are Silver Moon (originally scheduled for hand-over last month) and Silver Dawn (planned for autumn 2021, with capacity lower than 600 berths.