UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
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There were
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | |||
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Norwegian Cruise Line Holdings Ltd.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Revenue |
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Passenger ticket | $ | | $ | | ||
Onboard and other |
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Total revenue |
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Cruise operating expense |
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Commissions, transportation and other |
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Onboard and other |
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Payroll and related |
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Fuel |
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Food |
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Other |
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Total cruise operating expense |
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Other operating expense |
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Marketing, general and administrative |
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Depreciation and amortization |
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Total other operating expense |
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Operating income |
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Non-operating income (expense) |
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Interest expense, net |
| ( |
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Other income (expense), net |
| ( |
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Total non-operating income (expense) |
| ( |
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Net income (loss) before income taxes |
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Income tax benefit (expense) |
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Net income (loss) | $ | ( | $ | | ||
Weighted-average shares outstanding |
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Basic |
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Diluted |
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Earnings (loss) per share |
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Basic | $ | ( | $ | |||
Diluted | $ | ( | $ | |||
The accompanying notes are an integral part of these consolidated financial statements.
3
Norwegian Cruise Line Holdings Ltd.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in thousands)
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Net income (loss) | $ | ( | $ | | ||
Other comprehensive income: |
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Shipboard Retirement Plan |
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Cash flow hedges: |
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Net unrealized gain |
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Amount realized and reclassified into earnings |
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Total other comprehensive income |
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Total comprehensive income (loss) | $ | ( | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
4
Norwegian Cruise Line Holdings Ltd.
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)
March 31, | December 31, | |||||
| 2025 |
| 2024 | |||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
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Inventories |
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Prepaid expenses and other assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Trade names |
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Other long-term assets |
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Total assets | $ | | $ | | ||
Liabilities and shareholders’ equity |
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Current liabilities: |
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Current portion of long-term debt | $ | | $ | | ||
Accounts payable |
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Accrued expenses and other liabilities |
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Advance ticket sales |
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Total current liabilities |
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Long-term debt |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 10) |
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Shareholders’ equity: |
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Ordinary shares, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
| ( |
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Accumulated deficit |
| ( |
| ( | ||
Total shareholders’ equity |
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Total liabilities and shareholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
5
Norwegian Cruise Line Holdings Ltd.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Cash flows from operating activities |
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Net income (loss) | $ | ( | $ | | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization expense | |
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(Gain) loss on derivatives | | ( | ||||
Loss on extinguishment of debt |
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Provision for bad debts and inventory obsolescence |
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Gain on involuntary conversion of assets | | ( | ||||
Share-based compensation expense |
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Net foreign currency adjustments on euro-denominated debt |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
| ( |
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Inventories |
| ( |
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Prepaid expenses and other assets |
| ( |
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Accounts payable |
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Accrued expenses and other liabilities |
| ( |
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Advance ticket sales |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Additions to property and equipment, net |
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Other | ( | | ||||
Net cash used in investing activities |
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Cash flows from financing activities |
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Repayments of long-term debt |
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Proceeds from long-term debt |
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Net share settlement of restricted share units |
| ( |
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Early redemption premium |
| ( |
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Deferred financing fees |
| ( |
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Net cash provided by (used in) financing activities |
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Net increase (decrease) in cash and cash equivalents |
| ( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
6
Norwegian Cruise Line Holdings Ltd.
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
(in thousands)
Three Months Ended March 31, 2025 | |||||||||||||||
Accumulated | |||||||||||||||
Additional | Other | Total | |||||||||||||
Ordinary | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||
| Shares |
| Capital |
| Income (Loss) |
| Deficit |
| Equity | ||||||
Balance, December 31, 2024 |
| $ | | $ | | $ | ( | $ | ( | $ | | ||||
Share-based compensation |
| — |
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| — |
| — |
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Issuance of shares under employee-related plans |
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| ( |
| — |
| — |
| — | |||||
Net share settlement of restricted share units |
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| ( |
| — |
| — |
| ( | |||||
Other comprehensive income, net |
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| — |
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| — |
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Net loss |
| — |
| — |
| — |
| ( |
| ( | |||||
Balance, March 31, 2025 | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Three Months Ended March 31, 2024 | |||||||||||||||
| Accumulated |
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Additional | Other | Total | |||||||||||||
Ordinary | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||
| Shares |
| Capital |
| Income (Loss) |
| Deficit |
| Equity | ||||||
Balance, December 31, 2023 |
| $ | | $ | | $ | ( | $ | ( | $ | | ||||
Share-based compensation |
| — |
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| — |
| — |
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Issuance of shares under employee-related plans |
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| ( |
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| — | |||||
Net share settlement of restricted share units |
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| ( |
| — |
| — |
| ( | |||||
Other comprehensive income, net | — |
| — |
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| — |
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Net income |
| — | — | — | | | |||||||||
Balance, March 31, 2024 | $ | | $ | | $ | ( | $ | ( | $ | | |||||
The accompanying notes are an integral part of these consolidated financial statements.
7
Norwegian Cruise Line Holdings Ltd.
Notes to Consolidated Financial Statements
(Unaudited)
Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries, (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, (v) “Oceania Cruises” refers to the Oceania Cruises brand and (vi) “Regent” refers to the Regent Seven Seas Cruises brand.
References to the “U.S.” are to the United States of America and “dollar(s)” or “$” are to U.S. dollars, the “U.K.” are to the United Kingdom and “euro(s)” or “€” are to the official currency of the Eurozone. We refer you to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Terminology” for the capitalized terms used and not otherwise defined throughout these notes to our consolidated financial statements.
1. Description of Business and Organization
We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of March 31, 2025, we had
We have
2. Summary of Significant Accounting Policies
Liquidity
As of March 31, 2025, we had liquidity of approximately $
We will continue to pursue various opportunities to optimize our liquidity, refinance future debt maturities to reduce interest expense and/or to extend the maturity dates associated with our existing indebtedness and obtain relevant financial covenant amendments or waivers, if needed.
Basis of Presentation
The accompanying consolidated financial statements are unaudited and, in our opinion, contain all normal recurring adjustments necessary for a fair statement of the results for the periods presented.
Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 27, 2025.
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Earnings Per Share
Basic earnings per share is computed by dividing net income by the basic weighted-average number of shares outstanding during each period. Diluted earnings per share is computed by dividing net income and assumed conversion of exchangeable notes by diluted weighted-average shares outstanding.
A reconciliation between basic and diluted earnings per share was as follows (in thousands, except share and per share data):
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Net income (loss) | $ | ( | $ | | ||
Basic weighted-average shares outstanding |
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Dilutive effect of share awards |
| — |
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Diluted weighted-average shares outstanding |
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Basic EPS | $ | ( | $ | | ||
Diluted EPS | $ | ( | $ | | ||
Each exchangeable note (see Note 7 – “Long-Term Debt”) is individually evaluated for its dilutive or anti-dilutive impact on EPS as determined under the if-converted method. Only the interest expense and weighted average shares for exchangeable notes that are dilutive are included in the effect of dilutive securities. During the three months ended March 31, 2025 and 2024, each of the exchangeable notes were anti-dilutive. Share awards are evaluated for a dilutive or anti-dilutive impact on EPS using the treasury stock method. For the three months ended March 31, 2025 and 2024, a total of
Segment Reporting
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which aims to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 has been applied retrospectively.
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The below table includes our calculation of adjusted operating income, our significant segment expenses therein, and a reconciliation of adjusted operating income to net income (loss) before income taxes (in thousands):
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Total revenue | $ | | $ | | ||
Cruise operating expense | ||||||
Commissions, transportation and other | | | ||||
Onboard and other | | | ||||
Adjusted payroll and related (1) | | | ||||
Fuel | | | ||||
Food | | | ||||
Other | | | ||||
Adjusted total cruise operating expense | | | ||||
Other operating expense | ||||||
Adjusted marketing, general and administrative (2) | | | ||||
Depreciation and amortization | | | ||||
Adjusted total other operating expense | | | ||||
Adjusted operating income | $ | | $ | | ||
Adjusted operating income | $ | | $ | | ||
Non-cash compensation (3) | ( | ( | ||||
Interest expense, net | ( | ( | ||||
Other income (expense), net | ( | | ||||
Net income (loss) before income taxes | $ | ( | $ | | ||
| (1) | Excludes non-cash share-based compensation expenses related to equity awards for shipboard officers (see Note 9 – “Employee Benefits and Compensation Plans”) and non-cash deferred compensation expenses related to the crew pension plan as follows (in thousands): |
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Service cost | $ | | $ | | ||
| (2) | Excludes non-cash share-based compensation expenses related to equity awards for corporate employees (see Note 9 – “Employee Benefits and Compensation Plans”). |
| (3) | Includes non-cash deferred compensation expenses related to the crew pension plan and non-cash share-based compensation expenses related to equity awards, which are included in payroll and related expense and marketing, general and administrative expense. |
Foreign Currency
The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. The resulting gains or losses are recognized in our consolidated statements of operations within other income (expense), net. We recognized losses of $
10
Depreciation and Amortization Expense
The amortization of deferred financing fees is included in depreciation and amortization expense in the consolidated statements of cash flows; however, for purposes of the consolidated statements of operations they are included in interest expense, net.
Recently Issued Accounting Guidance
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2024 and will be applied on a prospective basis. We are evaluating the impact of ASU 2023-09 on our notes to the consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregation of certain costs and expenses, including employee compensation, and requires other improvements to disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The update may be applied on a prospective or retrospective basis. We are evaluating the impact of ASU 2024-03 on our notes to the consolidated financial statements.
3. Revenue Recognition
Disaggregation of Revenue
Revenue and cash flows are affected by economic factors in various geographical regions. Revenues by destination were as follows (in thousands):
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
North America | $ | | $ | | ||
Europe |
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Asia-Pacific |
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Other | | | ||||
Total revenue | $ | | $ | | ||
North America includes the U.S., the Caribbean, Canada and Mexico. Europe includes the Baltic region, Canary Islands and Mediterranean. Asia-Pacific includes Australia, New Zealand and Asia. Other includes all other international territories.
Geographic Concentration
Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations through the U.S. Revenue attributable to U.S.-sourced guests has approximated
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Contract Balances
Receivables from customers are included within accounts receivable, net. As of March 31, 2025 and December 31, 2024, our receivables from customers were $
Our contract liabilities are included within advance ticket sales. As of March 31, 2025 and December 31, 2024, our contract liabilities were $
4. Leases
Operating Leases - Lessee
Operating lease balances were as follows (in thousands):
| Balance Sheet location |
| March 31, 2025 |
| December 31, 2024 | |||
Operating leases |
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Right-of-use assets |
| $ | | $ | | |||
Current operating lease liabilities |
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Non-current operating lease liabilities |
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Operating Leases - Lessor
In March and April 2025, we executed long-term leases for
5. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) for the three months ended March 31, 2025 was as follows (in thousands):
Three Months Ended March 31, 2025 | ||||||||||
|
| Change | ||||||||
Accumulated | Change | Related to | ||||||||
Other | Related to | Shipboard | ||||||||
Comprehensive | Cash Flow | Retirement | ||||||||
| Income (Loss) |
| Hedges | Plan | ||||||
Accumulated other comprehensive income (loss) at beginning of period | $ | ( | $ | ( | $ | |
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Current period other comprehensive income before reclassifications |
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| — |
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Amounts reclassified into earnings |
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| | (2) | ||
Accumulated other comprehensive income (loss) at end of period | $ | ( | $ | ( | (3) | $ | |
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Accumulated other comprehensive income (loss) for the three months ended March 31, 2024 was as follows (in thousands):
Three Months Ended March 31, 2024 | ||||||||||
|
| Change |
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Accumulated | Change | Related to | ||||||||
Other | Related to | Shipboard | ||||||||
Comprehensive | Cash Flow | Retirement | ||||||||
| Income (Loss) |
| Hedges | Plan | ||||||
Accumulated other comprehensive income (loss) at beginning of period |
| $ | ( | $ | ( | $ | |
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Current period other comprehensive income before reclassifications |
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| — |
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Amounts reclassified into earnings |
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| ( |
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| ( | (1) |
| | (2) |
Accumulated other comprehensive income (loss) at end of period |
| $ | ( |
| $ | ( | $ | |
| |
| (1) | We refer you to Note 8 – “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations. |
| (2) | Amortization of prior-service cost and actuarial loss reclassified to other income (expense), net. |
| (3) | Includes $ |
6.Property and Equipment, Net
Property and equipment, net increased $
7. Long-Term Debt
In January 2025, the full amount of outstanding borrowings under the Breakaway one loan, Breakaway two loan, Marina newbuild loan and Riviera newbuild loan, plus any accrued and unpaid interest thereon, was repaid with funds drawn from the Revolving Loan Facility, and the related collateral was also released.
Also in January 2025, NCLC issued $
The net proceeds from the issuance of the 2032 Notes, together with cash on hand, were used to redeem $
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released the related collateral. During the three months ended March 31, 2025, the related losses on extinguishment were approximately $
Concurrently with the above January 2025 transactions, NCLC entered into an amended and restated Revolving Loan Facility (the “Seventh ARCA”). The Seventh ARCA, among other things, increased the aggregate amount of commitments under the Revolving Loan Facility from $
The Seventh ARCA also modified certain existing negative covenant thresholds and the related collateral. The Seventh ARCA and related guarantees are now secured by first-priority interests in, among other things and subject to certain agreed security principles,
In March 2025, we took delivery of Norwegian Aqua. We had export credit financing in place for
In April 2025, NCLC entered into individually negotiated note exchange agreements with certain existing holders (the “Holders”) of the 2025 Exchangeable Notes, pursuant to which NCLC and the Holders agreed to exchange (the “Exchange”) approximately $
Additionally, in April 2025, the Company completed a registered direct offering of
The 2030 Exchangeable Notes are general senior unsecured obligations of NCLC and guaranteed by NCLH on a senior unsecured basis. Holders may exchange all or a portion of the 2030 Exchangeable Notes at the holder’s option (i) at any time prior to the close of business on the business day immediately preceding October 15, 2029, subject to the satisfaction of certain conditions and during certain periods, and (ii) on or after October 15, 2029 until the close of business on the business day immediately preceding the maturity date, regardless of whether such conditions have been met. Upon exchange of the 2030 Exchangeable Notes, NCLC will satisfy its exchange obligation by paying cash up to the aggregate principal amount of the 2030 Exchangeable Notes to be exchanged and paying or delivering, as the case may be, cash, ordinary shares or a combination of cash and ordinary shares, at NCLC’s election, in respect of the
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remainder, if any, of NCLC’s exchange obligation in excess of the aggregate principal amount of the 2030 Notes to be exchanged. The initial exchange rate per $
Exchangeable Notes
The following is a summary of NCLC’s exchangeable notes as of March 31, 2025 (in thousands):
Unamortized | ||||||||||||||
| Principal | Deferred | Net Carrying | Fair Value | ||||||||||
| Amount |
| Financing Fees |
| Amount |
| Amount |
| Leveling | |||||
2025 Exchangeable Notes (1) | $ | | $ | ( | $ | | $ | | Level 2 | |||||
2027 1.125% Exchangeable Notes | | ( | | | Level 2 | |||||||||
2027 2.5% Exchangeable Notes | | ( | | | Level 2 | |||||||||
The following is a summary of NCLC’s exchangeable notes as of December 31, 2024 (in thousands):
Unamortized | ||||||||||||||
| Principal | Deferred | Net Carrying | Fair Value | ||||||||||
| Amount |
| Financing Fees |
| Amount |
| Amount |
| Leveling | |||||
2025 Exchangeable Notes (1) | $ | | $ | ( | $ | | $ | | Level 2 | |||||
2027 1.125% Exchangeable Notes | | ( | | | Level 2 | |||||||||
2027 2.5% Exchangeable Notes | | ( | | | Level 2 | |||||||||
| (1) | Classified within current portion of long-term debt as of December 31, 2024. As of March 31, 2025, we reclassified $ |
The following provides a summary of the interest expense of NCLC’s exchangeable notes (in thousands):
Three Months Ended | ||||||
March 31, | ||||||
2025 |
| 2024 | ||||
Coupon interest | $ | | $ | | ||
Amortization of deferred financing fees | | | ||||
Total | $ | | $ | | ||
As of March 31, 2025, the effective interest rate is
15
Debt Repayments
The following are scheduled principal repayments on our long-term debt including exchangeable notes, which can be settled in NCLH ordinary shares, and finance lease obligations as of March 31, 2025 (in thousands):
Year |
| Amount | |
Remainder of 2025 (1) | $ | | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029 |
| | |
2030 (1) | | ||
Thereafter |
| | |
Total | $ | | |
| (1) | As a result of the Exchange, as of March 31, 2025, we reclassified $ |
Debt Covenants
As of March 31, 2025, we were in compliance with all of our debt covenants. If we do not continue to remain in compliance with our covenants, we would have to seek additional amendments to or waivers of our covenants. However, no assurances can be made that such amendments or waivers would be approved by our lenders. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact on our operations and liquidity.
8. Fair Value Measurements and Derivatives
Fair value is defined as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
Derivatives are generally recorded at fair value. Contracts that are designated as normal purchases and normal sales are not recorded at fair value. The normal purchases and normal sales exception requires, among other things, physical delivery in quantities expected to be used or sold over a reasonable period in the normal course of business. All of our allowance purchase agreements related to the European Union’s Emissions Trading System meet the criteria specified for this exception.
Fair Value Hierarchy
The following hierarchy for inputs used in measuring fair value should maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available:
Level 1 Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement dates.
Level 2 Significant other observable inputs that are used by market participants in pricing the asset or liability based on market data obtained from independent sources.
Level 3 Significant unobservable inputs we believe market participants would use in pricing the asset or liability based on the best information available.
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Derivatives
We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. We assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of our hedged forecasted transactions. We use critical terms match or regression analysis for hedge relationships and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction. If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to earnings. There are no amounts excluded from the assessment of hedge effectiveness, and there are no credit-risk-related contingent features in our derivative agreements. We monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. Credit risk, including but not limited to counterparty non-performance under derivatives, is not considered significant as we primarily conduct business with large, well-established financial institutions with which we have established relationships, and which have credit risks acceptable to us, or the credit risk is spread out among many creditors. We do not anticipate non-performance by any of our significant counterparties.
As of March 31, 2025, we had fuel swaps, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately
As of March 31, 2025, we had fuel swaps pertaining to approximately
As of March 31, 2025, we had foreign currency forwards and collars which were used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. The notional amount of our foreign currency contracts were €
The derivatives measured at fair value and the respective location in the consolidated balance sheets include the following (in thousands):
Assets | Liabilities | |||||||||||||
March 31, | December 31, | March 31, | December 31, | |||||||||||
| Balance Sheet Location |
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
Derivative Contracts Designated as Hedging Instruments | ||||||||||||||
Fuel contracts | ||||||||||||||
Prepaid expenses and other assets | $ | | $ | | $ | | $ | | ||||||
Other long-term assets | | | | | ||||||||||
Accrued expenses and other liabilities | | | | | ||||||||||
Other long-term liabilities |
| |
| |
| |
| | ||||||
Foreign currency contracts | ||||||||||||||
Prepaid expenses and other assets |
| |
| — |
| — |
| — | ||||||
Other long-term assets |
| |
| — |
| — |
| — | ||||||
Accrued expenses and other liabilities |
| — |
| — |
| — |
| | ||||||
Other long-term liabilities |
| — |
| — |
| |
| | ||||||
Total derivatives designated as hedging instruments | $ | | $ | | $ | | $ | | ||||||
Derivative Contracts Not Designated as Hedging Instruments | ||||||||||||||
Fuel contracts | ||||||||||||||
Prepaid expenses and other assets | $ | | $ | | $ | — | $ | — | ||||||
Accrued expenses and other liabilities | | — | | | ||||||||||
Other long-term liabilities | — |
| — |
| — |
| | |||||||
Total derivatives not designated as hedging instruments | $ | | $ | | $ | | $ | | ||||||
Total derivatives | $ | | $ | | $ | | $ | | ||||||
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The fair values of swap and forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The Company determines the value of options and collars utilizing an option pricing model based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The option pricing model used by the Company is an industry standard model for valuing options and is used by the broker/dealer community. The inputs to this option pricing model are the option strike price, underlying price, risk-free rate of interest, time to expiration, and volatility. The fair value of option contracts considers both the intrinsic value and any remaining time value associated with those derivatives that have not yet settled. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values.
Our derivatives and financial instruments were categorized as Level 2 in the fair value hierarchy, and we had no derivatives or financial instruments categorized as Level 1 or Level 3. Our derivative contracts include rights of offset with our counterparties. We have elected to net certain assets and liabilities within counterparties when the rights of offset exist. We are not required to post cash collateral related to our derivative instruments.
The following table discloses the gross and net amounts recognized within assets and liabilities (in thousands):
Gross | Gross | ||||||||||||||
Gross | Amounts | Total Net | Amounts | ||||||||||||
March 31, 2025 |
| Amounts |
| Offset |
| Amounts |
| Not Offset |
| Net Amounts | |||||
$ | | $ | ( | $ | | $ | ( | $ | | ||||||
| ( | | ( | | |||||||||||
Gross | Gross | ||||||||||||||
Gross | Amounts | Total Net | Amounts | ||||||||||||
December 31, 2024 |
| Amounts |
| Offset |
| Amounts |
| Not Offset |
| Net Amounts | |||||
$ | | $ | ( | $ | | $ | — | $ | | ||||||
| ( | | ( | | |||||||||||
The effects of cash flow hedge accounting on accumulated other comprehensive income (loss) were as follows (in thousands):
Location of Gain |
|
| ||||||||||||
(Loss) Reclassified | ||||||||||||||
from Accumulated | Amount of Gain (Loss) Reclassified | |||||||||||||
Amount of Gain (Loss) | Other Comprehensive | from Accumulated Other | ||||||||||||
Recognized in Other | Income (Loss) into | Comprehensive Income | ||||||||||||
Derivatives |
| Comprehensive Loss |
| Income (Expense) |
| (Loss) into Income (Expense) | ||||||||
Three Months | Three Months | Three Months | Three Months | |||||||||||
Ended | Ended | Ended | Ended | |||||||||||
| March 31, 2025 |
| March 31, 2024 |
| March 31, 2025 |
| March 31, 2024 | |||||||
Fuel contracts |
| $ | | $ | | Fuel |
| $ | | $ | | |||
Fuel contracts | — | — | Other income (expense), net | ( | | |||||||||
Foreign currency contracts |
|
| |
| — | Depreciation and amortization |
|
| ( |
| ( | |||
Total gain (loss) recognized in other comprehensive loss |
| $ | | $ | |
|
| $ | ( | $ | | |||
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The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||||||||||||
Depreciation | Depreciation | |||||||||||||||||
and | Other Income | and | Other Income | |||||||||||||||
| Fuel |
| Amortization |
| (Expense), net |
| Fuel |
| Amortization |
| (Expense), net | |||||||
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded | $ | | $ | | $ | ( | $ | | $ | | $ | | ||||||
|
|
|
| |||||||||||||||
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) |
|
|
|
|
|
|
|
|
|
|
| |||||||
Fuel contracts |
| |
| — |
| — |
| |
| — | — | |||||||
Foreign currency contracts |
| — | ( |
| — |
| — |
| ( | — | ||||||||
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) as a result that a forecasted transaction is no longer probable of occurring | ||||||||||||||||||
Fuel contracts | — | — | ( | — | — | | ||||||||||||
Long-Term Debt
As of March 31, 2025 and December 31, 2024, the fair value of our long-term debt, including the current portion, was $
Other
The carrying amounts reported in the consolidated balance sheets of all other financial assets and liabilities approximate fair value.
9. Employee Benefits and Compensation Plans
Restricted Share Unit Awards
In March 2025, NCLH granted
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of certain pre-established performance targets established through 2027 and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, 2028.
The following is a summary of restricted share unit activity for the three months ended March 31, 2025:
Number of | Weighted- | Number of | Weighted- | |||||||
Time-Based | Average Grant | Performance- | Average Grant | |||||||
| Awards |
| Date Fair Value |
| Based Awards |
| Date Fair Value | |||
Non-vested as of January 1, 2025 |
| | $ | |
| | $ | | ||
Granted |
| | | | | |||||
Vested |
| ( | | ( | | |||||
Forfeited or expired |
| ( | | ( | | |||||
Non-vested as of March 31, 2025 |
| | |
| | | ||||
The compensation expense recognized for share-based compensation for the periods presented include the following (in thousands):
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Payroll and related expense | $ | | $ | | ||
Marketing, general and administrative expense |
| |
| | ||
Total share-based compensation expense | $ | | $ | | ||
10. Commitments and Contingencies
Ship Construction Contracts
For the Norwegian brand, we have
The combined contract prices, including amendments and change orders, of the
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Our minimum annual payments for non-cancelable ship construction contracts, which exclude two contracts with options to cancel, are as follows (in thousands):
Year |
| Amount | |
Remainder of 2025 | $ | | |
2026 | | ||
2027 |
| | |
2028 |
| | |
2029 |
| | |
2030 |
| | |
Thereafter |
| | |
Total minimum annual payments | $ | | |
The above presentation reflects the current delivery dates; however, certain delivery dates may be delayed at the option of the builder, which would result in additional fees.
Litigation
Investigations
In March 2020, the Florida Attorney General announced an investigation related to the Company’s marketing during the COVID-19 pandemic. Following the announcement of the investigation by the Florida Attorney General, we received notifications from other attorneys general and governmental agencies that they are conducting similar investigations. The Company is cooperating with these ongoing investigations, the outcomes of which cannot be predicted at this time.
Helms-Burton Act
On August 27, 2019, lawsuit was filed against Norwegian Cruise Line Holdings Ltd. in the United States District Court for the Southern District of Florida under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, also known as the Helms-Burton Act. The complaint, filed by Havana Docks Corporation (the “Havana Docks Matter”), alleges it holds an interest in the Havana Cruise Port Terminal, which was expropriated by the Cuban Government. The complaint further alleges that the Company “trafficked” in the property by embarking and disembarking passengers at the facility, as well as profiting from the Cuban Government’s possession of the property. The plaintiff seeks all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. After various motions challenging the sufficiency of plaintiff’s complaint were resolved and voluminous discovery was completed, both sides filed motions for summary judgment. On March 21, 2022, the court issued an order granting plaintiff’s motion for summary judgment on the issue of liability and denying the Company’s cross-motion for summary judgment. The court scheduled a trial on determination of damages only for November 2022. The plaintiff elected to seek what the court ruled to be its baseline statutory damage amount, which was the amount of the certified claim plus interest, trebled and with attorneys’ fees. Given this, there was no fact issue to be tried, and the matter was removed from the trial calendar. On December 30, 2022, the court entered a final judgment of approximately $
Other
In the normal course of our business, various other claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability is typically
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limited to our deductible amount. Nonetheless, the ultimate outcome of these claims and lawsuits that are not covered by insurance cannot be determined at this time. We have evaluated our overall exposure with respect to all of our threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure. We are currently unable to estimate any other potential losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery. However, based on our current knowledge, we do not believe that the aggregate amount or range of reasonably possible losses with respect to these matters will be material to our consolidated results of operations, financial condition or cash flows. We intend to vigorously defend our legal position on all claims and, to the extent necessary, seek recovery.
Other Contingencies
The Company also has agreements with its credit card processors that govern approximately $
11. Other Income (Expense), Net
For the three months ended March 31, 2025, other income (expense), net consisted of expense of $
12. Supplemental Cash Flow Information
For the three months ended March 31, 2025 and 2024, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
Some of the statements, estimates or projections contained in this report are “forward-looking statements” within the meaning of the U.S. federal securities laws intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained, or incorporated by reference, in this report, including, without limitation, our expectations regarding our future financial position, including our liquidity requirements and future capital expenditures, plans, prospects, actions taken or strategies being considered with respect to our liquidity position, including with respect to refinancing, amending the terms of, or extending the maturity of our indebtedness, our ability to comply with covenants under our debt agreements, expectations regarding our exchangeable notes, valuation and appraisals of our assets, expectations regarding our deferred tax assets, expected fleet additions and cancellations, including expected timing thereof, our expectations regarding the impact of macroeconomic conditions and recent global events, and expectations relating to our sustainability program and decarbonization efforts may be forward-looking statements. Many, but not all, of these statements can be found by looking for words like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,” “estimate,” “intend,” “future” and similar words. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to the impact of:
| ● | adverse general economic factors, such as fluctuating or increasing levels of interest rates, inflation, unemployment, underemployment, tariff increases and trade wars, and the volatility of fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence; |
| ● | our indebtedness and restrictions in the agreements governing our indebtedness that require us to maintain minimum levels of liquidity and be in compliance with maintenance covenants and otherwise limit our flexibility in operating our business, including the significant portion of assets that are collateral under these agreements; |
| ● | our ability to work with lenders and others or otherwise pursue options to defer, renegotiate, refinance or restructure our existing debt profile, near-term debt amortization, newbuild related payments and other obligations and to work with credit card processors to satisfy current or potential future demands for collateral on cash advanced from customers relating to future cruises; |
| ● | our need for additional financing or financing to optimize our balance sheet, which may not be available on favorable terms, or at all, and our outstanding exchangeable notes and any future financing which may be dilutive to existing shareholders; |
| ● | the unavailability of ports of call; |
| ● | future increases in the price of, or major changes, disruptions or reduction in, commercial airline services; |
| ● | changes involving the tax and environmental regulatory regimes in which we operate, including new and existing regulations aimed at reducing greenhouse gas emissions; |
| ● | the accuracy of any appraisals of our assets; |
| ● | our success in controlling operating expenses and capital expenditures; |
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| ● | adverse events impacting the security of travel, or customer perceptions of the security of travel, such as terrorist acts, armed conflict or threats thereof, acts of piracy, and other international events; |
| ● | public health crises and their effect on the ability or desire of people to travel (including on cruises); |
| ● | adverse incidents involving cruise ships; |
| ● | our ability to maintain and strengthen our brand; |
| ● | breaches in data security or other disturbances to our information technology systems and other networks or our actual or perceived failure to comply with requirements regarding data privacy and protection; |
| ● | changes in fuel prices and the type of fuel we are permitted to use and/or other cruise operating costs; |
| ● | mechanical malfunctions and repairs, delays in our shipbuilding program, maintenance and refurbishments and the consolidation of qualified shipyard facilities; |
| ● | the risks and increased costs associated with operating internationally; |
| ● | our inability to recruit or retain qualified personnel or the loss of key personnel or employee relations issues; |
| ● | impacts related to climate change and our ability to achieve our climate-related or other sustainability goals; |
| ● | our inability to obtain adequate insurance coverage; |
| ● | implementing precautions in coordination with regulators and global public health authorities to protect the health, safety and security of guests, crew and the communities we visit and to comply with related regulatory restrictions; |
| ● | pending or threatened litigation, investigations and enforcement actions; |
| ● | volatility and disruptions in the global credit and financial markets, which may adversely affect our ability to borrow and could increase our counterparty credit risks, including those under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship progress payment guarantees; |
| ● | our reliance on third parties to provide hotel management services for certain ships and certain other services; |
| ● | fluctuations in foreign currency exchange rates; |
| ● | our expansion into new markets and investments in new markets and land-based destination projects; |
| ● | overcapacity in key markets or globally; and |
| ● | other factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025 (our “Annual Report on Form 10-K”). |
The above examples are not exhaustive and new risks emerge from time to time. There may be additional risks that we currently consider immaterial or which are unknown. Such forward-looking statements are based on our current beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we expect to operate in the future. You are cautioned not to place undue reliance on the forward-looking statements included in this report, which speak only as of the date made. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our
24
expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based, except as required by law.
Solely for convenience, certain trademark and service marks referred to in this report appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and service marks.
Terminology
This report includes certain non-GAAP financial measures, such as Adjusted Gross Margin, Net Yield, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. Definitions of these non-GAAP financial measures are included below. For further information about our non-GAAP financial measures including detailed adjustments made in calculating our non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measure, we refer you to “Results of Operations” below.
Unless otherwise indicated in this report, the following terms have the meanings set forth below:
| ● | 2025 Exchangeable Notes. On July 21, 2020, pursuant to an indenture among NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee, NCLC issued $450.0 million aggregate principal amount of exchangeable senior notes due 2025. |
| ● | 2027 1.125% Exchangeable Notes. On November 19, 2021, pursuant to an indenture among NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee, NCLC issued $1,150.0 million aggregate principal amount of exchangeable senior notes due 2027. |
| ● | 2027 2.5% Exchangeable Notes. On February 15, 2022, pursuant to an indenture among NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee, NCLC issued $473.2 million aggregate principal amount of exchangeable senior notes due 2027. |
| ● | Adjusted EBITDA. EBITDA adjusted for other income (expense), net and other supplemental adjustments. |
| ● | Adjusted EPS. Adjusted Net Income divided by the number of diluted weighted-average shares outstanding. |
| ● | Adjusted Gross Margin. Gross margin adjusted for payroll and related, fuel, food, other and ship depreciation. Gross margin is calculated pursuant to GAAP as total revenue less total cruise operating expense and ship depreciation. |
| ● | Adjusted Net Cruise Cost Excluding Fuel. Net Cruise Cost Excluding Fuel adjusted for supplemental adjustments. |
| ● | Adjusted Net Income. Net income (loss) adjusted for the effect of dilutive securities and other supplemental adjustments. |
| ● | Allura Class Ships. Oceania Cruises’ Vista and Oceania Cruises’ Allura. |
| ● | Berths. Double occupancy capacity per cabin (single occupancy per studio cabin) even though many cabins can accommodate three or more passengers. |
| ● | Capacity Days. Berths available for sale multiplied by the number of cruise days for the period for ships in service. |
| ● | Dry-dock. A process whereby a ship is positioned in a large basin where all of the fresh/sea water is pumped out in order to carry out cleaning and repairs of those parts of a ship which are below the water line. |
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| ● | EBITDA. Earnings before interest, taxes, and depreciation and amortization. |
| ● | EPS. Earnings (loss) per share. |
| ● | GAAP. Generally accepted accounting principles in the U.S. |
| ● | Gross Cruise Cost. The sum of total cruise operating expense and marketing, general and administrative expense. |
| ● | Gross Tons. A unit of enclosed passenger space on a cruise ship, such that one gross ton equals 100 cubic feet or 2.831 cubic meters. |
| ● | Net Cruise Cost. Gross Cruise Cost less commissions, transportation and other expense and onboard and other expense. |
| ● | Net Cruise Cost Excluding Fuel. Net Cruise Cost less fuel expense. |
| ● | Net Yield. Adjusted Gross Margin per Capacity Day. |
| ● | Occupancy Percentage. The ratio of Passenger Cruise Days to Capacity Days. A percentage greater than 100% indicates that three or more passengers occupied some cabins. |
| ● | Passenger Cruise Days. The number of passengers carried for the period, multiplied by the number of days in their respective cruises. |
| ● | Prestige Class Ships. Regent’s Seven Seas Prestige and one additional ship on order. |
| ● | Prima Class Ships. Norwegian Prima, Norwegian Viva, Norwegian Aqua, Norwegian Luna and two additional ships on order. |
| ● | Revolving Loan Facility. $1.7 billion senior secured revolving credit facility. |
| ● | SEC. U.S. Securities and Exchange Commission. |
| ● | Shipboard Retirement Plan. An unfunded defined benefit pension plan for certain crew members which computes benefits based on years of service, subject to certain requirements. |
Non-GAAP Financial Measures
We use certain non-GAAP financial measures, such as Adjusted Gross Margin, Net Yield, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS, to enable us to analyze our performance. See “Terminology” for the definitions of these and other non-GAAP financial measures. We utilize Adjusted Gross Margin and Net Yield to manage our business on a day-to-day basis because they reflect revenue earned net of certain direct variable costs. We also utilize Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to manage our business on a day-to-day basis. In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Adjusted Gross Margin, Net Yield, Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance.
We believe that Adjusted EBITDA is appropriate as a supplemental financial measure as it is used by management to assess operating performance. We also believe that Adjusted EBITDA is a useful measure in determining our performance as it reflects certain operating drivers of our business, such as sales growth, operating costs, marketing, general and administrative expense and other operating income and expense. In addition, management uses Adjusted EBITDA as a performance measure for our incentive compensation. Adjusted EBITDA is not a defined term under
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GAAP nor is it intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments and it includes other supplemental adjustments.
In addition, Adjusted Net Income and Adjusted EPS are non-GAAP financial measures that exclude certain amounts and are used to supplement GAAP net income (loss) and EPS. We use Adjusted Net Income and Adjusted EPS as key performance measures of our earnings performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparison to our historical performance. In addition, management uses Adjusted EPS as a performance measure for our incentive compensation. The amounts excluded in the presentation of these non-GAAP financial measures may vary from period to period; accordingly, our presentation of Adjusted Net Income and Adjusted EPS may not be indicative of future adjustments or results.
You are encouraged to evaluate each adjustment used in calculating our non-GAAP financial measures and the reasons we consider our non-GAAP financial measures appropriate for supplemental analysis. In evaluating our non-GAAP financial measures, you should be aware that in the future we may incur expenses similar to the adjustments in our presentation. Our non-GAAP financial measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of our non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our non-GAAP financial measures may not be comparable to other companies. Please see a historical reconciliation of these measures to the most comparable GAAP measure presented in our consolidated financial statements below in the “Results of Operations” section.
Financial Presentation
We categorize revenue from our cruise and cruise-related activities as either “passenger ticket” revenue or “onboard and other” revenue. Passenger ticket revenue and onboard and other revenue vary according to product offering, the size of the ship in operation, the length of cruises operated and the markets in which the ship operates. Our revenue is seasonal based on demand for cruises, which has historically been strongest during the Northern Hemisphere’s summer months. Passenger ticket revenue primarily consists of revenue for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, government taxes, fees and port expenses and includes revenue for service charges and air and land transportation to and from the ship to the extent guests purchase these items from us. Onboard and other revenue primarily consists of revenue from casino, beverage sales, shore excursions, specialty dining, retail sales, spa services and Wi-Fi services. Our onboard revenue is derived from onboard activities we perform directly or that are performed by independent concessionaires, from which we receive a share of their revenue.
Our cruise operating expense is classified as follows:
| ● | Commissions, transportation and other primarily consists of direct costs associated with passenger ticket revenue. These costs include travel advisor commissions, air and land transportation expenses, related credit card fees, certain government taxes, fees and port expenses and the costs associated with shore excursions and hotel accommodations included as part of the overall cruise purchase price. |
| ● | Onboard and other primarily consists of direct costs incurred in connection with onboard and other revenue, including casino, beverage sales and shore excursions. |
| ● | Payroll and related consists of the cost of wages, benefits and logistics for shipboard employees and costs of certain inventory items, including food, for a third party that provides crew and other hotel services for certain ships. |
| ● | Fuel includes fuel costs, the impact of certain fuel hedges and fuel delivery costs. |
| ● | Food consists of food costs for passengers and crew on certain ships. |
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| ● | Other consists of repairs and maintenance (including Dry-dock costs), ship insurance and other ship expenses. |
Critical Accounting Policies
For a discussion of our critical accounting policies and estimates, see “Critical Accounting Policies” included in our Annual Report on Form 10-K under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have made no significant changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K.
Financing Transactions
In January 2025, the full amount of outstanding borrowings under the Breakaway one loan, Breakaway two loan, Marina newbuild loan and Riviera newbuild loan, plus any accrued and unpaid interest thereon, was repaid with funds drawn from the Revolving Loan Facility, and the related collateral was also released. NCLC also issued $1.8 billion aggregate principal amount of 6.750% senior unsecured notes due 2032. The net proceeds, together with cash on hand, were used to redeem $600.0 million aggregate principal amount of 8.375% senior secured notes due 2028 and $1.2 billion aggregate principal amount of 5.875% senior unsecured notes due 2026, together with any accrued and unpaid interest thereon, and to pay any related transaction premiums, fees and expenses. Concurrently, the Revolving Loan Facility was increased from $1.2 billion to $1.7 billion with the maturity date extended to 2030, and the collateral of the Revolving Loan Facility and the 8.125% senior secured notes due 2029 were modified.
In April 2025, Holders exchanged $353.9 million of 2025 Exchangeable Notes for 0.875% 2030 Exchangeable Notes and an aggregate Cash Payment of $64.0 million, plus accrued and unpaid interest on the 2025 Exchangeable Notes that were exchanged to, but excluding, the closing date of the Exchange. Additionally, in April 2025, the Company completed an Equity Offering of 3,358,098 ordinary shares to the Holders at a price of $19.06 per share. The Company used the net proceeds from the Equity Offering, together with cash on hand, to make the Cash Payment.
See Note 7 – “Long-Term Debt” for more information.
Update on Bookings
The Company has seen softening in its 12-month forward booked position but continues to remain within the optimal range, even amid ongoing macroeconomic volatility.
Margin Enhancement Initiative
Our cost savings initiatives continue to deliver tangible results, positioning us well to cushion macroeconomic pressures. While there may be potential pressures on revenue, we believe these can be effectively offset by the continued execution of our cost savings initiatives. Our focus remains on managing the business for the long-term, balancing disciplined pricing and cost control with guest experience and strategic investments for the future. However, global macroeconomic events have created volatility and disruptions in the past that have adversely impacted our Company, and they may do so again in the future. Furthermore, we are exposed to fluctuations in the euro exchange rate for certain portions of ship construction contracts and various exchange rates for customer deposits that have not been hedged. See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for additional information.
Climate Change
We believe the increasing focus on climate change, including the Company’s targets for greenhouse gas reductions, and evolving regulatory requirements will materially impact our future capital expenditures and results of operations. We have set interim targets to guide us on our path to net zero greenhouse gas (“GHG”) emissions and provide more details about such targets in our annual Sail & Sustain Report (which does not constitute a part of, and shall not be deemed incorporated by reference into, this report). We expect to incur significant expenses related to these regulatory requirements and commitments, which have and will include expenses related to GHG emissions reduction initiatives, including modifications to our ships, and have and will include the purchase of emissions allowances and alternative
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fuels, among other things. We have changed and may continue to be required to change certain operating procedures, for example slowing the speed of our ships, to meet regulatory requirements, which could adversely impact our operations. We are also evaluating the effects of global climate change-related requirements, which are still evolving, including our ability to mitigate certain future expenses through initiatives to reduce GHG emissions; consequently, the full impact to the Company is not yet known. Additionally, our ships, port facilities, corporate offices and island destinations have in the past and may again be adversely affected by an increase in the frequency and intensity of adverse weather conditions caused by climate change. For example, certain ports have become temporarily unavailable to us due to hurricane damage and other destinations have either considered or implemented restrictions on cruise operations due to environmental concerns. Refer to “Impacts related to climate change may adversely affect our business, financial condition and results of operations” in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for further information.
Quarterly Overview
Three months ended March 31, 2025 (“2025”) compared to three months ended March 31, 2024 (“2024”)
| ● | Total revenue decreased 2.9% to $2.1 billion compared to $2.2 billion. |
| ● | Net income (loss) and diluted EPS were $(40.3) million and $(0.09), respectively, compared to $17.4 million and $0.04, respectively. |
| ● | Operating income was $200.9 million compared to $218.4 million. |
| ● | Gross margin increased 2.5% to $610.9 million compared to $595.7 million. Adjusted Gross Margin decreased slightly from 2024 to 2025. |
| ● | Adjusted Net Income and Adjusted EPS were $30.5 million and $0.07, respectively, in 2025, which included $70.8 million of adjustments primarily related to losses on extinguishment and modification of debt. Adjusted Net Income and Adjusted EPS were $69.5 million and $0.16, respectively, in 2024, which included $52.2 million of adjustments primarily related to losses on extinguishment and modification of debt and share-based compensation. |
| ● | Adjusted EBITDA decreased 2.4% to $453.1 million compared to $464.0 million. |
We refer you to our “Results of Operations” below for a calculation of Adjusted Gross Margin, Adjusted Net Income, Adjusted EPS and Adjusted EBITDA.
Results of Operations
The following table sets forth selected statistical information:
Three Months Ended | ||||
March 31, | ||||
2025 |
| 2024 | ||
Passengers carried | 669,099 |
| 736,559 | |
Passenger Cruise Days | 5,787,243 |
| 6,112,370 | |
Capacity Days | 5,700,563 |
| 5,841,015 | |
Occupancy Percentage | 101.5 | % | 104.6 | % |
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Adjusted Gross Margin and Net Yield were calculated as follows (in thousands, except Capacity Days and Yield data):
Three Months Ended | ||||||
March 31, | ||||||
2025 |
| 2024 | ||||
Total revenue | $ | 2,127,553 | $ | 2,191,215 | ||
Less: | ||||||
Total cruise operating expense |
| 1,303,938 |
| 1,387,423 | ||
Ship depreciation |
| 212,763 |
| 208,094 | ||
Gross margin | 610,852 | 595,698 | ||||
Ship depreciation | 212,763 | 208,094 | ||||
Payroll and related | 334,504 | 344,281 | ||||
Fuel | 175,014 | 197,734 | ||||
Food | 75,588 | 84,708 | ||||
Other | 184,631 | 192,454 | ||||
Adjusted Gross Margin | $ | 1,593,352 | $ | 1,622,969 | ||
Capacity Days | 5,700,563 | 5,841,015 | ||||
Gross margin per Capacity Day | $ | 107.16 | $ | 101.99 | ||
Net Yield | $ | 279.51 | $ | 277.86 | ||
Gross Cruise Cost, Net Cruise Cost, Net Cruise Cost Excluding Fuel and Adjusted Net Cruise Cost Excluding Fuel were calculated as follows (in thousands, except Capacity Days and per Capacity Day data):
Three Months Ended | ||||||
March 31, | ||||||
2025 |
| 2024 | ||||
Total cruise operating expense | $ | 1,303,938 | $ | 1,387,423 | ||
Marketing, general and administrative expense |
| 391,376 |
| 362,469 | ||
Gross Cruise Cost |
| 1,695,314 |
| 1,749,892 | ||
Less: |
|
|
|
| ||
Commissions, transportation and other expense |
| 395,343 |
| 436,210 | ||
Onboard and other expense |
| 138,858 |
| 132,036 | ||
Net Cruise Cost |
| 1,161,113 |
| 1,181,646 | ||
Less: Fuel expense |
| 175,014 |
| 197,734 | ||
Net Cruise Cost Excluding Fuel |
| 986,099 |
| 983,912 | ||
Less Other Non-GAAP Adjustments: |
|
|
|
| ||
Non-cash deferred compensation (1) |
| 553 |
| 719 | ||
Non-cash share-based compensation (2) |
| 20,281 |
| 21,948 | ||
Adjusted Net Cruise Cost Excluding Fuel | $ | 965,265 | $ | 961,245 | ||
Capacity Days |
| 5,700,563 |
| 5,841,015 | ||
Gross Cruise Cost per Capacity Day | $ | 297.39 | $ | 299.59 | ||
Net Cruise Cost per Capacity Day | $ | 203.68 | $ | 202.30 | ||
Net Cruise Cost Excluding Fuel per Capacity Day | $ | 172.98 | $ | 168.45 | ||
Adjusted Net Cruise Cost Excluding Fuel per Capacity Day | $ | 169.33 | $ | 164.57 | ||
| (1) | Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense. |
| (2) | Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense. |
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Adjusted Net Income and Adjusted EPS were calculated as follows (in thousands, except share and per share data):
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Net income (loss) | $ | (40,295) | $ | 17,353 | ||
Non-GAAP Adjustments: |
|
|
|
| ||
Non-cash deferred compensation (1) |
| 989 |
| 1,233 | ||
Non-cash share-based compensation (2) |
| 20,281 |
| 21,948 | ||
Extinguishment and modification of debt (3) |
| 49,542 |
| 29,000 | ||
Adjusted Net Income | $ | 30,517 | $ | 69,534 | ||
Diluted weighted-average shares outstanding - Net income (loss) and Adjusted Net Income |
| 441,147,186 |
| 431,019,206 | ||
Diluted EPS | $ | (0.09) | $ | 0.04 | ||
Adjusted EPS | $ | 0.07 | $ | 0.16 | ||
| (1) | Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense and other income (expense), net. |
| (2) | Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense. |
| (3) | Losses on extinguishment of debt and modification of debt are included in interest expense, net. |
EBITDA and Adjusted EBITDA were calculated as follows (in thousands):
Three Months Ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Net income (loss) | $ | (40,295) | $ | 17,353 | ||
Interest expense, net |
| 217,872 |
| 218,177 | ||
Income tax (benefit) expense |
| (1,140) |
| 1,001 | ||
Depreciation and amortization expense |
| 231,297 |
| 222,929 | ||
EBITDA |
| 407,734 |
| 459,460 | ||
Other (income) expense, net (1) |
| 24,505 |
| (18,137) | ||
Other Non-GAAP Adjustments: |
|
|
|
| ||
Non-cash deferred compensation (2) |
| 553 |
| 719 | ||
Non-cash share-based compensation (3) |
| 20,281 |
| 21,948 | ||
Adjusted EBITDA | $ | 453,073 | $ | 463,990 | ||
| (1) | Primarily consists of gains and losses, net for foreign currency remeasurements. |
| (2) | Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense. |
| (3) | Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense. |
Three months ended March 31, 2025 (“2025”) compared to three months ended March 31, 2024 (“2024”)
Revenue
Total revenue decreased to $2.1 billion in 2025 compared to $2.2 billion in 2024 primarily due to a decrease in Capacity Days. The decrease in Capacity Days was primarily related to increased Berths, due to larger ships, in Dry-dock in 2025.
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Expense
Total cruise operating expense decreased 6.0% and Gross Cruise Cost decreased 3.1% in 2025 compared to 2024 primarily related to a reduction in air costs largely due to changes in itinerary mix and fuel costs. Total other operating expense increased 6.4% in 2025 compared to 2024 primarily related to an increase in marketing, general and administrative expense from higher advertising and promotions.
Interest expense, net was $217.9 million in 2025 compared to $218.2 million in 2024. The change in interest expense reflects higher losses in 2025 from extinguishment of debt and debt modification costs, which were $49.5 million in 2025 compared to $29.0 million in 2024. Excluding these losses, interest expense decreased primarily as a result of lower average debt balances and lower rates.
Other income (expense), net was expense of $24.5 million in 2025 compared to income of $18.1 million in 2024. The income and expense primarily related to net gains and losses on foreign currency remeasurements.
Liquidity and Capital Resources
General
As of March 31, 2025, our liquidity was approximately $1.4 billion, including cash and cash equivalents of $184.4 million, $1.0 billion available under our Revolving Loan Facility and €200 million commitment that can be used for future newbuild payments through July 2025. Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.
In January 2025, the full amount of outstanding borrowings under the Breakaway one loan, Breakaway two loan, Marina newbuild loan and Riviera newbuild loan, plus any accrued and unpaid interest thereon, was repaid with funds drawn from the Revolving Loan Facility, and the related collateral was also released. NCLC also issued $1.8 billion aggregate principal amount of 6.750% senior unsecured notes due 2032. The net proceeds, together with cash on hand, were used to redeem $600.0 million aggregate principal amount of 8.375% senior secured notes due 2028 and $1.2 billion aggregate principal amount of 5.875% senior unsecured notes due 2026, together with any accrued and unpaid interest thereon, and to pay any related transaction premiums, fees and expenses. Concurrently, the Revolving Loan Facility was increased from $1.2 billion to $1.7 billion with the maturity date extended to 2030, and the collateral of the Revolving Loan Facility and the 8.125% senior secured notes due 2029 were modified.
In April 2025, Holders exchanged $353.9 million of 2025 Exchangeable Notes for 0.875% 2030 Exchangeable Notes and an aggregate Cash Payment of $64.0 million, plus accrued and unpaid interest on the 2025 Exchangeable Notes that were exchanged to, but excluding, the closing date of the Exchange. Additionally, in April 2025, the Company completed an Equity Offering of 3,358,098 ordinary shares to the Holders at a price of $19.06 per share. The Company used the net proceeds from the Equity Offering, together with cash on hand, to make the Cash Payment.
See Note 7 – “Long-Term Debt” for further details about the above financing transactions.
Based on our liquidity estimates and our current resources, we have concluded we have sufficient liquidity to satisfy our obligations for at least the next 12 months. There can be no assurance that the accuracy of the assumptions used to estimate our liquidity requirements will be correct, and our ability to be predictive is uncertain due to the dynamic nature of the current operating environment, including any current macroeconomic events and conditions such as inflation, tariff increases and trade wars, rising fuel prices and higher interest rates. Within the next twelve months, we may optimize our liquidity or pursue other refinancings in order to reduce interest expense and/or extend debt maturities. The remaining $225.0 million of the 5.875% senior unsecured notes due in March 2026 will be paid at maturity unless refinanced. We expect the holders of the remaining 2025 Exchangeable Notes maturing in August 2025 will exchange their 2025 Exchangeable Notes for NCLH ordinary shares. There is no assurance that cash flows from operations and additional financings will be available in the future to fund our future obligations. Beyond the next 12 months, we will pursue refinancings and other balance sheet optimization transactions in order to reduce interest expense and/or extend
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debt maturities. Refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for further details regarding risks and uncertainties that may cause our results to differ from our expectations.
As of March 31, 2025, we were in compliance with all of our debt covenants. If we do not continue to remain in compliance with our covenants, we would have to seek additional amendments to or waivers of the covenants. However, no assurances can be made that such amendments or waivers would be approved by our lenders. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact on our operations and liquidity.
Our Moody’s long-term issuer rating is B1, our senior secured rating is Ba3 and our senior unsecured rating is B3. Our S&P Global issuer credit rating is B+, our issue-level rating on our $790 million 8.125% senior secured notes due 2029 is BB, our issue-level rating on our other senior secured notes is BB- and our senior unsecured rating is B+. If our credit ratings were to be downgraded as has occurred in the past, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt or equity financing will be negatively impacted. We also have capacity to incur additional indebtedness under our debt agreements and may issue additional ordinary shares from time to time, subject to our authorized number of ordinary shares. However, there is no guarantee that debt or equity financings will be available in the future to fund our obligations or that they will be available on terms consistent with our expectations.
As of March 31, 2025, we had advance ticket sales of $3.9 billion, including the long-term portion. We also have agreements with our credit card processors that, as of March 31, 2025, governed approximately $3.5 billion in advance ticket sales that had been received by the Company relating to future voyages. These agreements allow the credit card processors to require under certain circumstances, including the existence of a material adverse change, excessive chargebacks and other triggering events, that the Company maintain a reserve which would be satisfied by posting collateral. Although the agreements vary, these requirements may generally be satisfied either through a percentage of customer payments withheld or providing cash funds directly to the card processor. Any cash reserve or collateral requested could be increased or decreased. We may be required to pledge additional collateral and/or post additional cash reserves or take other actions in the future that may adversely affect our liquidity.
Sources and Uses of Cash
In this section, references to “2025” refer to the three months ended March 31, 2025 and references to “2024” refer to the three months ended March 31, 2024.
Net cash provided by operating activities was $679.2 million in 2025 and $807.2 million 2024. The net cash provided by operating activities included net income (losses) and timing differences in cash receipts and payments relating to operating assets and liabilities. Advance ticket sales increased by $665.9 million in 2025 and by $592.2 million in 2024.
Net cash used in investing activities was $1.5 billion in 2025 and $255.2 million in 2024. The net cash used in investing activities was primarily related to the delivery of Norwegian Aqua in 2025. The net cash used in investing activities was primarily related to newbuild payments and ship improvements in 2024.
Net cash provided by financing activities was $846.6 million in 2025 primarily due to newbuild loans related to the delivery of Norwegian Aqua. Net cash used in financing activities was $394.5 million in 2024 primarily due to repayments of newbuild loans and our 9.75% senior secured notes due 2028.
Future Capital Commitments
Future capital commitments consist of contracted commitments, including ship construction contracts. Anticipated expenditures related to ship construction contracts and growth, which includes private island developments and enhancements and other strategic growth initiatives, were $1.3 billion for the remainder of 2025 and $2.5 billion and $2.5 billion for the years ending December 31, 2026 and 2027, respectively. The Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of $0.7 billion for the remainder of 2025 and
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$1.5 billion and $1.9 billion for the years ending December 31, 2026 and 2027, respectively. Anticipated other non-newbuild capital expenditures for the remainder of 2025 are approximately $0.4 billion. Future expected capital expenditures will significantly increase our depreciation and amortization expense.
Newbuilds
The following chart discloses details about our newbuild program. The impacts of initiatives to improve environmental sustainability and modifications the Company plans to make to its newbuilds and/or other macroeconomic conditions and events have resulted in delays in expected ship deliveries. These and other impacts could result in additional delays in ship deliveries in the future, which may be prolonged. Expected delivery dates for our most recently announced newbuilds are preliminary and subject to change.
Year | Brand | Class | Ship Name | Gross Tons(1) | Berths(1) | Status |
2025 | Oceania Cruises | Allura Class | Allura | ~68,000 | ~1,200 | Contract effective / financed(4) |
2026 | Norwegian Cruise Line | Prima Class | Norwegian Luna | ~156,000 | ~3,550 | Contract effective / financed(4) |
2026 | Regent Seven Seas | Prestige Class | Seven Seas Prestige | ~77,000 | ~850 | Contract effective / financed(4) |
2027 | Norwegian Cruise Line | Next Gen "Methanol-Ready(2)" Prima Class | To come | ~169,000 | ~3,850 | Contract effective / financed(4) |
2027 | Oceania Cruises | New Class | To come | ~86,000 | ~1,450 | Contract effective / financed(4) |
2028 | Norwegian Cruise Line | Next Gen "Methanol-Ready(2)" Prima Class | To come | ~169,000 | ~3,850 | Contract effective / financed(4) |
Expected 2029(3) | Oceania Cruises | New Class | To come | ~86,000 | ~1,450 | Contract effective / financed(4) |
2029(6) | Regent Seven Seas | Prestige Class | To come | ~77,000 | ~850 | Contract effective / financed(4) |
2030 | Norwegian Cruise Line | New Class | To come | ~225,000 | ~5,150 | Contract effective / financing is being negotiated. |
2030(6) | Oceania Cruises | New Class | — | ~86,000 | ~1,450 | Contract effective, but not financed. Option to cancel.(5) |
2031(6) | Oceania Cruises | New Class | — | ~86,000 | ~1,450 | Contract effective, but not financed. Option to cancel.(5) |
2032 | Norwegian Cruise Line | New Class | To come | ~225,000 | ~5,150 | Contract effective / financing is being negotiated. |
2034 | Norwegian Cruise Line | New Class | To come | ~225,000 | ~5,150 | Contract effective / financing is being negotiated. |
2036 | Norwegian Cruise Line | New Class | To come | ~225,000 | ~5,150 | Contract effective / financing is being negotiated. |
| (1) | Berths and gross tons are preliminary and subject to change as we approach delivery. |
| (2) | Designs for the final two Prima Class ships have been lengthened and reconfigured to accommodate the use of green methanol as a future fuel source. Additional modifications will be needed to fully enable the use of green methanol. |
| (3) | Delivery for the second Oceania Cruises ship is contractually scheduled for the fourth quarter of 2028 but may be delayed to 2029, which would result in additional fees. |
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| (4) | We have obtained export credit financing which is expected to fund approximately 80% of the contract price of each ship as well as related financing premiums, subject to certain conditions. |
| (5) | We have the option to cancel the effective two-ship order for Oceania Cruises. |
| (6) | Delivery dates may be delayed at the option of the builder, which would result in additional fees. |
The combined contract prices, including amendments and change orders, of the 12 ships on order for delivery (which excludes the two ships on order for Oceania Cruises, which are currently scheduled for delivery in 2030 and 2031, that we have the option to cancel) was approximately €17.2 billion, or $18.6 billion based on the euro/U.S. dollar exchange rate as of March 31, 2025. If the two ships on order for Oceania Cruises are cancelled, there will be incremental corresponding adjustments to the purchase price of other applicable newbuilds not to exceed €51 million. We do not anticipate any contractual breaches or cancellations to occur, except as noted above if we exercise our option to cancel. However, if any such events were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.
Capitalized interest for the three months ended March 31, 2025 and 2024 was $22.5 million and $10.1 million, respectively, primarily associated with the construction of our newbuild ships.
Material Cash Requirements
Our material cash requirements for debt and ship construction (which excludes the two ships on order for Oceania Cruises that we have the option to cancel) were as follows (in thousands):
| Remainder of |
|
|
|
| |||||||||||||||||||
2025 |
| 2026 |
| 2027 |
| 2028 |
| 2029 |
| 2030 |
| Thereafter |
| Total | ||||||||||
Long-term debt (1) | $ | 1,114,449 | $ | 1,623,882 | $ | 3,886,398 | $ | 1,629,864 | $ | 2,353,141 | $ | 2,094,594 | $ | 4,511,785 | $ | 17,214,113 | ||||||||
Ship construction contracts (2) |
| 936,783 | 2,232,872 | 2,287,272 | 2,113,863 | 1,011,537 | 2,304,909 | 6,879,169 |
| 17,766,405 | ||||||||||||||
Total | $ | 2,051,232 | $ | 3,856,754 | $ | 6,173,670 | $ | 3,743,727 | $ | 3,364,678 | $ | 4,399,503 | $ | 11,390,954 | $ | 34,980,518 | ||||||||
| (1) | Includes principal as well as estimated interest payments with Term SOFR held constant as of March 31, 2025. Includes exchangeable notes which can be settled in NCLH ordinary shares. Excludes the impact of any future possible refinancings and undrawn export-credit backed facilities. Subsequent to March 31, 2025, we completed an Exchange of $353.9 million 2025 Exchangeable Notes for an equal principal of 2030 Exchangeable Notes. The related principal repayment has been reclassified from 2025 to 2030 in the table above and the interest payments include the 2030 Exchangeable Notes. See Note 7 – “Long-Term Debt” for further information. |
| (2) | Ship construction contracts are for our newbuild ships based on the euro/U.S. dollar exchange rate as of March 31, 2025. We have committed undrawn export-credit backed facilities of approximately $7.8 billion which funds approximately 80% of our ship construction contracts, with the exception of the two ships on order for Oceania Cruises that we have the option to cancel and the four additional ships on order for Norwegian Cruise Line with currently scheduled delivery from 2030 to 2036. The above presentation reflects the current delivery dates; however, certain delivery dates may be delayed at the option of the builder. |
Funding Sources
Certain of our debt agreements contain covenants that, among other things, require us to maintain a minimum level of liquidity, as well as limit our net funded debt-to-capital ratio and maintain certain other ratios. The net book value of our ships pledged as collateral for certain of our debt is approximately $15 billion. We believe we were in compliance with our covenants as of March 31, 2025.
In addition, our existing debt agreements restrict, and any of our future debt arrangements may restrict, among other things, the ability of our subsidiaries, including NCLC, to make distributions and/or pay dividends to NCLH and NCLH’s ability to pay cash dividends to its shareholders. NCLH is a holding company and depends upon its subsidiaries for their ability to pay distributions to it to finance any dividend or pay any other obligations of NCLH. However, we do not believe that these restrictions have had or are expected to have an impact on our ability to meet any cash obligations.
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We believe our cash on hand, borrowings available under the Revolving Loan Facility, expected future operating cash inflows and our ability to issue debt securities or additional equity securities will be sufficient to fund operations, debt payment requirements and capital expenditures and maintain compliance with covenants under our debt agreements over the next 12-month period. Refer to “—Liquidity and Capital Resources—General” for further information regarding liquidity.
Other
Certain service providers may require collateral in the normal course of our business. The amount of collateral may change based on certain terms and conditions. We refer you to “—Liquidity and Capital Resources—General” for information regarding collateral that may be provided to our credit card processors.
As a routine part of our business, depending on market conditions, exchange rates, pricing and our strategy for growth, we regularly consider opportunities to enter into contracts for the building of additional ships, acquisitions and strategic alliances. If any of these transactions were to occur, they may be financed through the incurrence of additional permitted indebtedness, through cash flows from operations, or through the issuance of debt, equity or equity-related securities.
Additionally, we similarly consider opportunities for the sale of ships and long-term charters with purchase options. For example, the Company recently executed long-term charter agreements, each inclusive of purchase options, for Norwegian Sky and Seven Seas Navigator beginning in 2026 and Norwegian Sun and Insignia beginning in 2027. We are currently contemplating additional long-term charters with a purchase option for a nominal value at the end of the lease period. These types of agreements are being pursued as part of our ship disposal strategy for certain older vessels in our fleet.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
General
We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. The financial impacts of these derivative instruments are primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the notional, term and conditions of the derivatives with the underlying risk being hedged. We do not hold or issue derivatives for trading or other speculative purposes. Derivative positions are monitored using techniques including market valuations and sensitivity analyses.
Interest Rate Risk
As of March 31, 2025, 93% of our debt was fixed and 7% was variable. As of December 31, 2024, 94% of our debt was fixed and 6% was variable. The change in our fixed rate percentage from December 31, 2024 to March 31, 2025 was primarily due to the addition of variable rate debt proportionally higher than the addition of fixed rate debt. Based on our March 31, 2025 outstanding variable rate debt balance, a one percentage point increase in annual Term SOFR interest rates would increase our annual interest expense by approximately $10.3 million excluding the effects of capitalization of interest.
Foreign Currency Exchange Rate Risk
We use foreign currency derivatives to hedge the exposure to volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros. As of March 31, 2025, the payments not hedged aggregated €15.7 billion, or $17.0 billion based on the euro/U.S. dollar exchange rate as of March 31, 2025. As of December 31, 2024, the payments not hedged aggregated €16.0 billion, or $16.6 billion, based on the euro/U.S. dollar exchange rate as of December 31, 2024. The change from December 31, 2024 to March 31, 2025 was primarily due to the delivery of Norwegian Aqua offset by an increase in the contract prices or our Norwegian ships to be delivered from 2030 through
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2036. We estimate that a 10% change in the euro as of March 31, 2025 would result in a $1.7 billion change in the U.S. dollar value of the foreign currency denominated remaining payments.
Fuel Price Risk
Our exposure to market risk for changes in fuel prices relates to the forecasted purchases of fuel on our ships. Fuel expense, as a percentage of our total cruise operating expense, was 13.4% and 14.3% for the three months ended March 31, 2025 and 2024, respectively. We use fuel derivative agreements to mitigate the financial impact of fluctuations in fuel prices and as of March 31, 2025, we had hedged approximately 61%, 41% and 18% of our remaining 2025, 2026 and 2027 projected metric tons of fuel purchases, respectively. As of December 31, 2024, we had hedged approximately 56% and 21% of our 2025 and 2026 projected metric tons of fuel purchases, respectively. The percentage of fuel purchases hedged changed between December 31, 2024 and March 31, 2025 primarily due to additional fuel swaps.
We estimate that a 10% increase in our weighted-average fuel price would increase our anticipated 2025 fuel expense by $43.6 million. This increase would be offset by an increase in the fair value of all our fuel swap agreements of $23.4 million. Fair value of our derivative contracts is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms such as maturity, as well as other inputs such as fuel types, fuel curves, creditworthiness of the counterparty and the Company, as well as other data points.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of March 31, 2025. There are inherent limitations in the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2025 to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Our threshold for disclosing material environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.
See the section titled “Litigation” in “Item 1—Financial Statements—Notes to Consolidated Financial Statements—Note 10 Commitments and Contingencies” in Part I of this report for information about legal proceedings.
Item 1A. Risk Factors
We refer you to our Annual Report on Form 10-K for a discussion of the risk factors that affect our business and financial results. We caution you that the risk factors discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, elsewhere in this report or other SEC filings, could cause future results to differ materially from those stated in any forward-looking statements. You should not interpret the disclosure of a risk to imply that the risk has not already materialized. The impact of macroeconomic conditions and global conflicts have also had the effect of heightening many of the other risks described in the “Risk Factors” included in our Annual Report on Form 10-K, such as those relating to our need to generate sufficient cash flows to service our indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K.
Item 5. Other Information
10b5-1 Trading Arrangements
During the three months ended March 31, 2025, none of our directors or officers subject to Section 16 of the Securities Exchange Act of 1934
Item 6. Exhibits
1.1 | |||
1.2 | |||
4.2 | |||
4.3 | |||
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4.4 | |||
10.1 | |||
10.2 | |||
10.3 | |||
10.4* | |||
10.5 | |||
10.6 | |||
10.7 | |||
10.8 |
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10.9 | |||
10.10 | |||
10.11 | |||
10.12 | |||
10.13 | |||
10.14 | |||
10.15 | |||
10.16 | |||
10.17 | |||
10.18* | |||
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10.19* | |||
10.20* | |||
10.21* | |||
10.22 | |||
31.1* | |||
31.2* | |||
32.1** |
101* | The following unaudited consolidated financial statements from Norwegian Cruise Line Holdings Ltd.’s Quarterly Report on Form 10‑Q for the quarterly period ended March 31, 2025, formatted in Inline XBRL: | |
(i) the Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024; | ||
(ii) the Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2025 and 2024; | ||
(iii) the Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024; | ||
(iv) the Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024; | ||
(v) the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2025 and 2024; and | ||
(vi) the Notes to the Consolidated Financial Statements. | ||
104* | The cover page from Norwegian Cruise Line Holdings Ltd.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline XBRL and included in the interactive data files submitted as Exhibit 101. |
† Agreement restates previous versions of agreement.
# Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K Item 601(b)(10).
+ Management contract or compensatory plan.
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NORWEGIAN CRUISE LINE HOLDINGS LTD. | ||
(Registrant) | ||
|
| |
By: | /s/ HARRY SOMMER | |
Name: | Harry Sommer | |
Title: | President and Chief Executive Officer | |
| (Principal Executive Officer) | |
|
| |
By: | /s/ MARK A. KEMPA | |
Name: | Mark A. Kempa | |
Title: | Executive Vice President and Chief Financial Officer | |
| (Principal Financial Officer) | |
Dated: May 5, 2025 | ||
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