Royal Caribbean Group (RCL) Misses Q2 EPS by $1.31, Revenue Beats

Royal Caribbean Group (NYSE: RCL) reported Q2 EPS of ($6.13), $1.31 worse than the analyst estimate of ($4.82). Revenue for the quarter came in at $175.6 million versus the consensus estimate of $43.5 million.

Update on Bookings

The extended suspension of cruising has significantly impacted bookings for the remainder of 2020 which are meaningfully lower than same time last year and at lower prices.

Although still early in the booking cycle, the booked position for 2021 is trending well and is within historical ranges. The Company has implemented various programs to best serve its booked guests providing the choice of future cruise credits ("FCCs") or the opportunity to "Lift & Shift" their booking to the same sailing the following year in lieu of providing cash refunds. For the booking period since our last business update, approximately 60% of the 2021 bookings are new and the rest are due to the redemption of FCCs 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 future cruise credits; it is slightly up year-over-year when excluding them.

As of June 30, 2020, the Company had $1.8 billion in customer deposits of which approximately $300 million correspond to fourth quarter 2020 sailings. Approximately 48% of the guests booked on cancelled sailings have requested cash refunds.

2020 Outlook

The magnitude, duration and speed of COVID-19 remains uncertain. As a consequence, the Company cannot estimate the impact of COVID-19 on its business, financial condition or near or longer-term financial or operational results with reasonable certainty. Notwithstanding the foregoing, the Company expects to incur a net loss on both a US GAAP and adjusted basis for its third quarter and the 2020 fiscal year, the extent of which will depend on the timing and extent of the return to service.

Interest expense for the remainder of the year (July 1, 2020 through December 31, 2020) will be in the range of $505 million to $515 million.

As of June 30, 2020, the Company had hedged approximately 64%, 40%, 23% and 5% of its total projected metric tons of fuel consumption for the remainder of 2020, 2021, 2022 and 2023, respectively. The current suspension of our cruise operations due to the COVID-19 pandemic resulted in reductions to our forecasted fuel consumption. As of June 30, 2020, we had outstanding fuel swaps of 172,050 and 15,200 metric tons maturing in 2020 and 2021, respectively, that no longer hedged our forecasted fuel consumption. For the same four-year period, the annual average cost per metric ton of the fuel swap portfolio is approximately $423, $435, $514 and $580, respectively.

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