Royal Caribbean Cruises Q1 2022 Earnings Report Recap

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Royal Caribbean Cruises (RCL) Financial Results: Analysis

Royal Caribbean Cruises Ltd. (RCL) reported Q1 FY 2022 earnings that missed analyst expectations. The company posted a bigger adjusted loss per share than expected. It marked the ninth straight quarter of adjusted losses per share. Revenue for the quarter also missed analyst estimates but was up more than 25-fold as it rebounded off of the previous year's pandemic-depressed lows. Royal Caribbean's occupancy rate came in below expectations.

The company's shares fell more than 1% in pre-market trading. Over the past year, Royal Caribbean's shares have provided a total return of -7.4%, below the S&P 500's total return of 3.3%.

RCL Occupancy Rate

Royal Caribbean's occupancy rate, at 57.4% for the first quarter, is a significant improvement from the year-ago quarter's rate of 37.7%. However, it marks a slight deterioration from the previous quarter's rate of 59.3%.

The occupancy rate, which the company refers to simply as "occupancy," is a key metric gauging the amount of available passenger capacity being utilized. It is calculated by dividing passenger cruise days by the available passenger capacity, as measured by available passenger cruise days (APCD). Passenger cruise days are a metric calculated by taking the number of passengers carried during the measurement period and multiplying that by the number of days of the passengers' respective cruises. The measure of capacity assumes double occupancy per cabin, which is why occupancy rates greater than 100% are possible—sometimes cabins are occupied by more than two passengers.

While the higher occupancy rate is a sign that the company is recovering from the pandemic shock that essentially brought the cruise line industry to a halt, the recovery is far from over, as the company's occupancy rate is still well below levels reached prior to the pandemic.

Royal Caribbean said that, despite the impact of the Omicron variant of the coronavirus earlier in the year as well as the war in Ukraine, it was seeing strong demand and a steady acceleration in booking volumes. It added that booking volumes in March and April have been significantly higher than the same period in 2019, before the pandemic.

Royal Caribbean had returned 54 of 62 ships to operations by the end of the first quarter of 2022. That represents about 90% of its global fleet capacity. The company expects its full fleet to be in operation before the summer season of 2022.

The company's operating cash flow, while slightly negative in March, turned positive in April, an important step in returning to profitability. However, Royal Caribbean is facing a number of inflationary and supply chain challenges that are likely to weigh on earnings this year. Those challenges are mainly related to fuel and food costs as well as certain transitory costs related to health and safety protocols.

Royal Caribbean's next earnings report (for Q2 FY 2022) is expected to be released on Aug. 3, 2022.