Norwegian Cruise Line Holdings Reports Financial Results for the Third Quarter 2015

Third Quarter Adjusted EPS Improves 22% to $1.35

Strong Pricing Drives 4.7% Increase in Company’s Industry Leading Adjusted Net Yield

Company Takes Delivery of Norwegian Escape

Wiesbaden, November 3, 2015 – Norwegian Cruise Line Holdings Ltd. (Nasdaq: NCLH together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company”), today reported financial results for the quarter ended September 30, 2015 and provided guidance for the fourth quarter and full year 2015. 

Third Quarter 2015 Highlights

• Adjusted EPS growth of 22% to $1.35 on Adjusted Net Income of $311.1 million.
• Increase in Adjusted Net Yield on a Combined Company basis of 2.2%, or 4.7% on a      Constant Currency basis, driven by improved pricing in the quarter. Increase of 19.8% on an as reported basis.
• Adjusted EBITDA increase of 37% to $447.8 million from $326.7 million.

Third Quarter 2015 Results

“The continued momentum from our revenue enhancement strategies resulted in net yield growth of approximately five percent driving strong earnings performance in the quarter,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings.  “What is most impressive is that this yield performance was driven purely by organic growth, demonstrating that robust topline growth need not be predicated solely on the addition of new ships to our fleet.”

The Company generated Adjusted Net Income of $311.1 million, or $1.35 per share.  Adjusted EPS increased 22% over prior year and was at the top end of the Company’s guidance range, benefiting from solid Net Yield performance.  On a GAAP basis, net income was $251.8 million, or $1.09 per share compared to $201.1 million or $0.97 per share in the prior year.

Adjusted Net Yield improved 19.8% (22.7% on a Constant Currency basis) mainly due to the Acquisition of Prestige which occurred in the fourth quarter of 2014.  On a Combined Company basis, which compares current results against the combined results of Norwegian and Prestige in the prior year, Adjusted Net Yield increased 2.2%, (4.7% on a Constant Currency basis), reflecting improved pricing in the quarter which was driven by strength in the Caribbean, Bermuda and Alaska itineraries, partially offset by softness in certain Eastern Mediterranean itineraries.  Adjusted Net Revenue in the period was $978.2 million compared to $694.4 million in 2014, an increase of 40.9%, primarily as a result of the Acquisition of Prestige.

Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 30.5% (32.1% on a Constant Currency basis),primarily as a result of the Acquisition of Prestige, while on a Combined Company basis increased 6.4% (7.8% on a Constant Currency basis), primarily due to the timing of marketing expenses and incremental discretionary shipboard enhancement and maintenance costs.  The Company’s fuel price per metric ton, net of hedges, decreased 11.7% to $566 from $641 in 2014.

Interest expense, net increased to $49.8 million from $32.3 million as a result of the incremental debt incurred in connection with the Acquisition of Prestige. 

The Company repurchased 83,396 shares in the quarter at an average price of $55.94 under its three year, $500 million share repurchase program which was authorized in April 2014. As of September 30, 2015, $413 million remained available for repurchases under the program.

Full Year 2015 Outlook

As a result of strong Net Yield performance the Company has increased its full year 2015 Adjusted Net Yield guidance.  Adjusted Net Cruise Cost Excluding Fuel is expected to modestly increase due to the aforementioned timing of certain expenses.  As a result of these changes, the Company narrowed the range and raised the midpoint of its full year 2015 Adjusted EPS guidance which is now $2.85 to $2.90.

“The alignment of revenue management strategies across our three brands has resulted in a lengthening of the booking curve, enabling us to drive higher pricing, particularly on the Norwegian brand,” said Wendy Beck, executive vice president and chief financial officer of Norwegian Cruise Line Holdings.  “This stronger pricing is contributing to robust earnings growth of approximately 27% in 2015, and brings our three year compound annual growth rate to over 40% since our initial public offering in 2013,” continued Beck.

2016 Outlook

The delivery of Norwegian Escape in October marks the latest chapter in the Company’s measured newbuild program which provides ship deliveries each year through 2019.  The Company will take delivery of two additional ships in 2016.  Sirena will join Oceania Cruises in March with her first sailing in late April following a 35-day, multi-million dollar upgrade and refurbishment.  Seven Seas Explorer will join the Regent fleet in the third quarter. 

“The momentum from the initiatives we have implemented is building and is reflected in the solid foundation of bookings which, coupled with the powerful earnings growth from our existing fleet and upcoming ship additions, have positioned 2016 to be a breakout year,” said Del Rio.  “With a clear path to significant earnings growth, we are confident in our targets of $5.00 earnings per share in 2017 and growing our already industry leading return on invested capital to 14% by 2018.”

Guidance and Sensitivities

In addition to announcing the results for the third quarter, the Company also provided guidance for the fourth quarter and full year 2015, along with accompanying sensitivities.  Guidance for Adjusted Net Yield and Adjusted Net Cruise Cost Excluding Fuel per Capacity Day are provided on an as reported basis as well as a Combined Company basis, which compares expectations to 2014 results that include the results of Prestige assuming the acquisition had occurred at the beginning of 2014.

Please see table 2 attached.

The following reflects the Company’s expectations regarding fuel consumption and pricing, along with accompanying sensitivities.

As of September 30, 2015, the Company had hedged approximately 59%, 59%, 54%, 42% and 8% of its total projected metric tons of fuel purchases in 2015, 2016, 2017, 2018 and 2019, respectively.  The average fuel price per metric ton of the hedge portfolio for the same periods is $475, $452, $392, $354 and $333, respectively.

Future capital commitments consist of contracted commitments, including ship construction contracts, and future expected capital expenditures necessary for operations. As of September 30, 2015, anticipated capital expenditures were $0.9 billion for the remainder of 2015, $1.0 billion and $1.1 billion for each of the years ending December 31, 2016 and 2017, respectively, of which we have export credit financing in place for the expenditures related to ship construction contracts of $0.6 billion for the remainder of 2015, $0.5 billion for 2016 and $0.6 billion for 2017.

Company Updates and Other Business Highlights

International Expansion and Entry into the China Cruise Market

In October 2015, the Company officially opened its previously-announced sales and marketing office in Sydney, Australia, its first in the Pacific region.  This office represents the Company’s three brands and includes a dedicated Sydney-based call center for travel partners and guests in Australia and New Zealand.

On October 12, 2015, the Company announced its plans to introduce the first purpose-built ship customized for the China market in 2017.  Currently under construction, this new ship will be the second of Norwegian Cruise Line’s Breakaway Plus Class series and will be designed with a level of customization that will go beyond just the physical design and will include a high quality-level of service, cuisine, entertainment and overall experiences that cater to the unique vacation preferences of Chinese guests.

These expansion efforts are part of a multi-pronged strategy. First, was the previously announced return of Norwegian Cruise Line to Asia for the first time since 2002.  Departing from Singapore and Hong Kong, Norwegian Star will offer 11- and 14-day sailings that will visit a diverse and compelling collection of famous Asian ports that mainly appeal to western guests.  Second, is the 2017 introduction of the first purpose-built ship which will offer the highest-level of customization for Chinese guests and will be the most innovative ship ever built exclusively for the China market.  Third, the Company announced the opening of sales and marketing offices in Hong Kong, Shanghai and Beijing which will support all three brands.  These offices house a dedicated leadership team focused on ensuring the success of local travel agent partners, which is crucial to the success of the Company’s expansion.  Lastly, the Company announced a coordinated initiative among its three brands to entice Chinese vacationers to long-haul cruising by increasing the number of Mandarin-speaking crew and offering menu items and onboard entertainment geared towards Chinese tastes on board certain voyages offered by the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands worldwide. 

Delivery of Norwegian Escape

On October 22, 2015, Norwegian Cruise Line took delivery of Norwegian Escape, the first ship in its Breakaway Plus Class series.  At approximately 4,200 berths it is the Company’s largest and most innovative ship to date with a host of new and exclusive amenities including the first Jimmy Buffet’s Margaritaville at Sea, two restaurant venues by Iron Chef Jose Garces and The Cellars, a Michael Mondavi Family Wine Bar.  These are coupled with proven concepts including the largest enclave of luxury suites, The Haven by Norwegian, and guest-favorite public areas The Waterfront and 678 Ocean Place.  After inaugural ceremonies and sailings in Europe, Norwegian Escape will sail to her homeport in Miami to embark on the first of her year round 7-day Eastern Caribbean sailings on November 14.