Costs related to the acquisition of high-end Prestige Cruise Holdings drove Norwegian Cruise Line Holdings to a loss in the first quarter, but the Miami-based company said its results excluding those expenses were better than expected.
The cruise operator, which owns Norwegian Cruise Line and the recently added Oceania Cruises and Regent Seven Seas Cruises, reported a loss of $21.5 million for the quarter that ended March 31.
Adjusted net income was $62.6 million or 27 cents a share, higher than the company’s forecast of 20-24 cents per share. Analysts had expected earnings of 23 cents a share.
Revenues jumped to more than $938 million from $664 million at the same time last year.
Norwegian shares closed at $52.23, up 7.25 percent from the previous day’s close.
“I am pleased to report strong earnings out of the gate for our first full quarter of operations following the combination of Norwegian and Prestige late last year,” Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings, said in a statement. “These results are even more impressive as they come against strong comparables in the prior year, particularly for the Norwegian brand, and headwinds from foreign currency exchange rates.”
During a call with analysts, chief financial officer Wendy Beck said onboard spending by European guests slowed during the quarter as a result of the strong dollar.
“We expect exchange rates to continue to be a net headwind,” she said.
The company has previously said it expected to identify $40 million in synergies this year due to the acquisition of Prestige, but said Thursday it had found $75 million — $30 million in revenue and $45 million in cost.
Del Rio said Norwegian will reinvest $20 million of that money in sales and marketing efforts to drive demand and in improvements to the product on Norwegian Cruise Line ships.
“We do think that the Norwegian brand could improve from where it is today,” he said.
Even without those improvements, he said advance reservations for Norwegian ships are robust, with the booked load factor for 2016 roughly double what it was for 2015 at the same time last year.
“The necessary condition in my view of being able to raise prices and per diems, and therefore yields, is load factor,” Del Rio said. “When you’re as well booked into the future as we are at this point, that bodes very well for constant increases in pricing.”
In a note to investors, Morningstar analyst Jaime Katz noted the strong advance bookings, both for existing Norwegian capacity and for new ships coming to the Norwegian, Oceania and Regent brands.
“All this commentary indicates that close-in inventory should be better positioned this year versus the prior year, alleviating the need to add additional value to the cruising proposition closer in,” she wrote. “Since the Prestige acquisition, we think Norwegian is uniquely positioned to capitalize on the premium market segment, which tends to be more receptive to price increases that are tied to better product, and an improved value proposition.”