NCLH 1Q 2014 CONF CALL NOTES

In the face of lower yields in the Caribbean, fuel cost savings and the new share repurchase program are the offsets. Street remains overwhelmingly bullish. 

 

 

CONF CALL 

  • 23% increase in 1Q capacity
  • Getaway/Breakaway in 1Q:  good pricing, onboard revenue improvements 
  • 1Q:  Driving price at the expense of occupancy
  • 2014:  Wave Season in normal pressure.  Brutal winter/polar vortex hurt consumer spending and reason for lower yield guidance 
    • Most agents we contact with said the cold winter helped bookings 
  • 1Q:  Incremental dry dock- Norweigan Spirit dry dock of 3 weeks
  • 1Q:  Additional $2MM in onboard cost upgrade, also increased security for Norweigan Jade due to incident
  • 1Q weighted cost of debt:  3.8%;  should improve at Escape and Bliss enter fleet as financing is cheap
  • Income tax benefit:  change in corporate structure
  • Rolling over strong net yield comps from 2013
  • In a promotional environment
  • 2Q:  38% in Caribbean, 23% Europe, 11% Bermuda, 10% Alaska
  • European market:  improved pricing/occupancy
  • Alaska:  Norweigan Sun unique itinerary doing well; stronger pricing/bookings
  • Epic:  decision to move to Barcelona in April 2015
    • Removing transatlantic voyage, further improving yields

 

Q & A

  • Timing of share buyback:  feel stock not reflective of company potential particularly as cash builds in 2H 2014
  • Pricing comparisons:  800/900 bps different from other players
  • 1Q:  give up a little bit on load 
  • Asia:  on their radar
  • Genting ownership:  no new news, cleared requirement with HKSE;  stock right where they want it to be
    • Comfortable sitting and waiting but not happy about stock price
  • Caribbean trends:  Wave season did not start out robust;  booking trends since mid-Feb improved (some due to promotions); feel a little better about landscape
  • Europe:  quite confident trend going right direction but off of very low comps; could see a couple more years of nice growth
  • Want to get past Q2
  • Q4 too early to tell
  • Net yield downward revision:  driven by price, not onboard
  • Getaway:  $5MM fuel improvement 
  • 2015 deployment:  Europe (21%), Caribbean (45%)
  • One competitor had been holding price but NCLH would not be 'reckless' in holding price for empty cabins
  • Escape decision to homeport in Miami:  Epic redeployed to Europe.  Caribbean 2015/2016 capacity roughly flat
  • Book load factors:  highly favorable (esp Europe:  Baltic/Canary/Med); on par with Hawaii;  heavily booked in Canada/New England;  Caribbean:  still has opportunity
  • Pricing by region:  Europe (up double digits);  Alaska (low single digit);  Hawaii( doing well); Canada/New England (priced well);  Caribbean (lower than where they want to be)
  • Net yield reduction:  Caribbean is the reason
  • Core fleet vs 2 new ships:  contraction in overall industry but Getaway/Breakaway still maintain double digit premiums
    • We saw this in our pricing survey where the core fleet pricing is dropping faster than that of Getaway/Breakaway.
  • Industrywide Caribbean capacity in 2015:  cautiously optimistic; will be better environment in 2015.
  • Any share repurchases not included in guidance
  • Fuel efficiency:  seeing in organic fleet ($2.5m),  Getaway $5-6m better
  • Q3:  solidly booked, environment looks good

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