Norwegian Cruise Line Holdings Reports Fourth Quarter and Full Year 2018 Financial Results - EU-EN -

Strong Global Demand Drives Record Revenue and Earnings for Fourth Quarter and Full Year 2018

EPS Growth of 28% - Fifth Consecutive Year of Double-digit EPS Growth

Company Enters 2019 in Record Booked Position at Higher Pricing

Growth Profile Enhanced with 11 Ships on Order Across Three Award-Winning Brands

MIAMI, Florida – February 21, 2019 – Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) (together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company”) today reported financial results for the fourth quarter and full year ended December 31, 2018, as well as provided guidance for the first quarter and full year 2019.

Full Year 2018 Highlights

• The Company generated GAAP net income of $954.8 million or EPS of $4.25.  Adjusted Net Income was $1.1 billion or Adjusted EPS of $4.92.

• Company beat full year Adjusted EPS expectations by $0.07, and surpassed the midpoint of its initial February 2018 Adjusted EPS guidance by $0.37, despite a $0.07 impact from unfavorable fuel prices.

• Total revenue increased 12.2% to $6.1 billion. Gross Yield increased 3.4%.  Net Yield increased 3.5% on a Constant Currency basis, exceeding the Company's initial February 2018 guidance by 150 basis points.

• Achieved record gross Adjusted EBITDA Margin of 31.3%.

• Adjusted ROIC increased to 11.0% from 10.1% the prior year.

• Reached year-end Net Leverage target of low three times.

• Authorized $1 billion, three-year share repurchase program and embarked on meaningful capital returns to shareholders by opportunistically repurchasing approximately $665 million shares under previous and current program. Approximately $600 million remains available under current authorization.

• Record-breaking introduction of Norwegian Bliss, the first cruise ship specifically designed with features and amenities for the ultimate Alaska cruising experience.

• Broke ground on new, state-of-the-art passenger terminal at PortMiami.

Full Year 2019 Highlights

• Company’s 2019 booked position at all-time high entering the year and at higher pricing.

• Net Yield growth guidance on a Constant Currency basis for full year and first quarter 2019 of 3.0% to 4.0% and approximately 2.5%, respectively.

• Norwegian Joy to join record-breaking sister ship, Norwegian Bliss, in Alaska in spring 2019.

• Norwegian Encore, the fourth and final ship in the tremendously successful Breakaway Plus Class, will join the fleet in the Caribbean in the fourth quarter.

• Company reaffirms expectations to achieve its Full Speed Ahead 2020 targets provided at its 2018 Investor Day. 

"The team at Norwegian Cruise Line Holdings delivered a breakout year in 2018, once again generating industry-leading record financial performance.  Strong global demand for our portfolio of brands, the successful, record-breaking introduction of Norwegian Bliss and the flawless execution of our demand creation strategies drove our fifth consecutive year of double-digit earnings per share growth," said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd.  "Building on this momentum, we entered 2019 in the best booked position in our Company's history, with pricing above prior year's record levels.  The strong start to this year's WAVE season, coupled with our moderate in-year capacity growth and our solid booked position across our three brands, has us well-positioned to continue driving price throughout the year and into 2020, where we will also benefit from the first full year of sailings from Norwegian Encore and the addition of Regent's Seven Seas Splendor."

Full Year 2018 Results

GAAP net income was $954.8 million or EPS of $4.25 compared to $759.9 million or $3.31 in the prior year.  The Company generated Adjusted Net Income of $1.1 billion or Adjusted EPS of $4.92 compared to $907.7 million or $3.96 in the prior year.  Strong growth in 2018 including an increase in GAAP EPS of 28.4% and Adjusted EPS of 24.2% follows strong 2017 growth of 19.1% and 16.1%, respectively, further demonstrating the Company's continued underlying earnings power.

Revenue increased 12.2% to $6.1 billion compared to $5.4 billion in 2017. This increase was primarily attributed to an 8.5% increase in Capacity Days due to the delivery of Norwegian Bliss in April 2018 and Norwegian Joy in April 2017, as well as strong organic pricing growth across all core markets.  Gross Yield increased 3.4%. Net Yield increased 3.5% on a Constant Currency basis and 3.7% on an as reported basis.

Cruise operating expense increased 10.2% in 2018 compared to 2017, primarily due to an increase in Capacity Days.  Gross Cruise Costs per Capacity Day increased 2.7%.  Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 2.6% on a Constant Currency basis and 2.9% on an as reported basis.

Fuel price per metric ton, net of hedges increased to $483 from $465 in 2017.  The Company reported fuel expense of $392.7 million in the period. 

Interest expense, net was $270.4 million in 2018 compared to $267.8 million in 2017. The increase in interest expense primarily reflects additional debt incurred in connection with the delivery of Norwegian Bliss and Norwegian Joy in the second quarter of 2018 and 2017, respectively, Project Leonardo financing costs, and higher interest rates due to LIBOR rate increases. The increase in interest expense was partially offset by the benefit from the October 2017 full redemption of our 4.625% Senior Notes due 2020 and the benefit from the partial redemption totaling $135 million of our 4.75% Senior Notes due 2021 in April. This year's results included a non-recurring $6.3 million redemption premium and write-off of fees in connection with the partial redemption. 2017 included losses on extinguishment of debt and debt modification costs of $23.9 million.

Other income (expense), net was income of $20.7 million in 2018 compared to expense of $10.4 million in 2017. Other income in 2018 was primarily due to gains on foreign currency exchange.  Other expense in 2017 was primarily due to losses on foreign currency exchange.

Fourth Quarter 2018 Results

GAAP net income was $154.6 million or EPS of $0.70 compared to $98.8 million or $0.43 in the prior year.  The Company generated Adjusted Net Income of $188.8 million or Adjusted EPS of $0.85 compared to $156.8 million or $0.68 in the prior year.

Revenue increased 10.5% to $1.4 billion compared to $1.2 billion in 2017.  These increases were primarily attributed to the addition of Norwegian Bliss to the fleet, along with strong organic ticket pricing growth across all core markets and robust onboard spending.  Gross Yield increased 3.0%. Net Yield increased 4.7% on a Constant Currency basis and 4.2% on an as reported basis.

Total cruise operating expense increased 8.5% in 2018 compared to 2017, primarily due to an increase in Capacity Days.  Gross Cruise Costs per Capacity Day increased 1.8%.  Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 3.6% on a Constant Currency basis and 3.4% on an as reported basis.

Fuel price per metric ton, net of hedges increased to $496 from $460 in 2017.  The Company reported fuel expense of $104.4 million in the period. 

Interest expense, net decreased to $68.2 million in 2018 from $84.3 million in 2017. In connection with the redemption of senior notes and refinancing of certain of our credit facilities, interest expense, net included losses on extinguishment of debt and debt modification costs of $23.9 million in 2017.

2019 Outlook

"2018 marked a key inflection point for the Company as we have made significant progress towards achieving our Full Speed Ahead 2020 Targets.  Our cash generation continues to accelerate and we remain keenly focused on returning meaningful capital to our shareholders, already returning approximately one-third of our three-year targeted capital distribution," said Mark Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd.  "We are confident in our outlook for 2019 and beyond, and have built upon our foundation for measured capacity growth by enhancing our growth profile through 2027, with announced orders for all three of our award-winning brands, now totaling eleven vessels, enabling us to expand our presence both globally and domestically and further diversify our product offerings to continue driving outsized shareholder returns."

2019 Guidance and Sensitivities

In addition to announcing the results for the fourth quarter and full year 2018, the Company also provided guidance for the first quarter and full year 2019, along with accompanying sensitivities. The Company does not provide guidance on a GAAP basis because the Company is unable to predict, with reasonable certainty, the future movement of foreign exchange rates or the future impact of certain gains and charges. These items are uncertain and will depend on several factors, including industry conditions, and could be material to the Company's results computed in accordance with GAAP. The Company has not provided reconciliations between the Company's 2019 guidance and the most directly comparable GAAP measures because it would be too difficult to prepare a reliable U.S. GAAP quantitative reconciliation without unreasonable effort.

(1)     Excludes $4.6 million and $18.4 million of amortization of intangible assets related to the Acquisition of Prestige in the first quarter and full year 2019, respectively.

(2)     Excludes a one-time, non-cash write-off in depreciation and amortization of approximately $25 million for enhancements to Norwegian Joy associated with her redeployment to North America.

(3)     Based on midpoint of guidance.

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

 As of December 31, 2018, the Company had hedged approximately 57%, 53%, and 33% of its total projected metric tons of fuel consumption for the full year 2019, 2020, and 2021, respectively.  The following table provides amounts hedged and price per barrel of heavy fuel oil ("HFO") which is hedged utilizing U.S. Gulf Coast 3% ("USGC") and marine gas oil ("MGO") which is hedged utilizing Brent in 2019 and Gasoil in 2019, 2020 and 2021.   

(1)     Represents a blended rate that includes a $7.4 million benefit from 2020 Brent hedges that were replaced with Gasoil hedges in the third quarter of 2018.

The following reflects the foreign currency exchange rates the Company used in its first quarter and full year 2019 guidance. 

Future capital commitments consist of contracted commitments, including ship construction contracts, and future expected capital expenditures necessary for operations as well as our ship refurbishment projects. As of December 31, 2018, anticipated capital expenditures were $1.6 billion, $1.2 billion and $0.7 billion for the years ending December 31, 2019, 2020 and 2021, respectively. We have export credit financing in place for the anticipated expenditures related to ship construction contracts of $0.6 billion, $0.5 billion and $0.2 billion for the years ended December 31, 2019, 2020 and 2021, respectively.

Company Updates and Other Business Highlights

Oceania Cruises Announces Order for Two Allura Class Ships

The Company announced an order for the next generation of ships for Oceania Cruises.  The two Allura Class Ships mark the next phase of the line's OceaniaNEXT initiative and will be designed and built by Fincantieri S.p.A. for delivery in 2022 and 2025.  The two 67,000 gross ton Allura Class ships will each accommodate approximately 1,200 guests. This new class of mid-size cruise vessels will retain all the warmth, popular design elements, and signature amenities of the line's award-winning Marina and Riviera while affording guests an elevated level of comfort and convenience with the addition of new luxury offerings.  The contract price for each of the two vessels is approximately €575 million per ship.  The Company has obtained export credit financing with favorable terms to fund 80 percent of the contract price of each ship, subject to certain Italian government approvals.

Regent Seven Seas Cruises Announces Order for Third Explorer Class Ship  

The Company announced an order for a new Explorer Class Ship for Regent Seven Seas Cruises, which will be a sister ship to Seven Seas Explorer®, the most luxurious ship ever built, and Seven Seas SplendorTM, the ship that perfects luxury. The ship will be designed and built by Fincantieri S.p.A. for delivery in late 2023.  Building on the success of its predecessors, Regent Seven Seas Cruises' newest addition will continue to set the standard for defining elegance at sea. Accommodating up to 750 guests, the intimate and spacious new ship will be the brand's sixth-all-suite vessel. Voyages for the ship's inaugural season will go on sale in 2021. The contract price for the vessel is approximately €475 million.  The Company has obtained export credit financing with favorable terms to fund 80 percent of the contract price of the ship, subject to certain Italian government approvals.

Sponsors Exit from Long-Term Investment in Company

In connection with the closing of the secondary public offering by certain funds affiliated with Apollo Global Management, LLC (“Apollo”) and Star NCLC Holdings Ltd. (together, the “Sponsors”) in December, the  Company announced the Sponsor’s exit from their long-term investment in Norwegian Cruise Line Holdings Ltd.  The Company repurchased approximately $85 million of ordinary shares of Norwegian from the underwriter in connection with the offering under its existing $1.0 billion share repurchase program, of which approximately $600 million remains available for future share repurchases.

Refinancing of Senior Secured Credit Facility

In January 2019, the Company announced the refinancing of its senior secured credit facility to strengthen its liquidity profile. The Company amended its existing senior secured credit facility by repricing its $875 million revolving credit facility ("Revolver"), repricing and increasing its Term A loan facility to approximately $1.6 billion ("Term A Loan") and extending the maturity dates for both to January 2024. The proceeds from the increase in the Term A Loan were used to prepay the entire outstanding amount under the Company's then existing Term B loan facility.  The amendment also reduced the applicable margin under the Revolver and Term A Loan by 25 basis points.

Company Partners with Huna Totem Corporation to Construct New Pier at Icy Strait Point in Alaska

The Company announced a partnership with Alaska Native-owned Huna Totem Corporation to develop a second cruise pier in Icy Strait Point, Huna Totem's world-class cruise ship destination in Hoonah, Alaska. The pier is scheduled to be completed for the summer 2020 Alaska cruise season and will be built to accommodate Norwegian Cruise Line's Breakaway Plus Class ships. The partnership will provide Norwegian Cruise Line Holdings' brands with preferential berthing rights in the popular port destination and allow the Company to increase its calls to Icy Strait Point.  In addition, the new pier will provide more cruise passengers with access to Icy Strait's newly upgraded retail, restaurant and shore excursion amenities.

Norwegian Encore Entertainment and Recreation Line-Up Revealed at Keel Laying Ceremony

Norwegian Cruise Line held an unforgettable keel laying ceremony for Norwegian Encore, unveiling the award-winning entertainment line-up and leading recreational amenities scheduled for the ship's fall 2019 debut, which include the Tony Award®-Winning Broadway musical "Kinky Boots" as well as an enhanced two-level 1,150 foot race track with ten exhilarating turns, the largest open-air laser tag arena in the fleet and the Galaxy Pavilion, a 10,000-square-foot virtual reality complex. Following the major construction milestone and maritime tradition of embedding a "commemorative coin" within the keel blocks of the ship, attendees were treated to a surprise performance from "Kinky Boots".  At approximately 168,000 gross tons and accommodating up to 4,000 guests, Norwegian Encore will cruise out of Miami every Sunday and sail seven-day voyages to the Eastern Caribbean, beginning with her first journey in November 2019.

Second School Built with Proceeds from Hope Starts Here Hurricane Relief Campaign

The Company announced the re-opening of the Morne Prosper Pre and Primary Schools in Morne Prosper Village, Dominica, the second school to benefit from the Company's Hope Starts Here hurricane relief campaign.  Together with All Hands and Hearts, the Company raised over $2.5 million dollars to deliver early relief response and rebuild safe, resilient schools in the Caribbean communities impacted by Hurricanes Irma and Maria.  A portion of the proceeds were used to rebuild the pre and primary schools in Morne Prosper Village, which suffered extensive damage from Hurricane Maria. On January 10, officials from Norwegian Cruise Line Holdings and All Hands and Hearts along with local representatives from Dominica attended the grand opening celebration of the pre-Kindergarten through sixth grade school, which opened its doors to teachers and students on January 14.

About Norwegian Cruise Line Holdings Ltd.

Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands.  With a combined fleet of 26 ships with approximately 54,400 berths, these brands offer itineraries to more than 450 destinations worldwide. The Company will introduce eleven additional ships through 2027.