What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-08 · 145 added, 155 removed, 256 unchanged (54% of the section changed)

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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, those regarding our business strategy, financial position, results of operations, plans, prospects, actions taken or strategies being considered with respect to our liquidity position, valuation and appraisals of our assets and objectives of management for future operations (including those regarding expected fleet additions, our expectations regarding the impact of macroeconomic conditions and recent global events, our expectations regarding cruise voyage occupancy, operational position, demand for voyages, plans or goals for our sustainability program and decarbonization efforts, our expectations for future cash flows and profitability, financing opportunities and extensions, and efforts to reduce operating expenses and capital expenditures) are forward-looking statements.

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, 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.

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● adverse general economic factors, such as fluctuating or increasing levels of interest rates, inflation, unemployment, underemployment 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;

● the spread of epidemics, pandemics and viral outbreaks, including the COVID-19 pandemic, and their effect on the ability or desire of people to travel (including on cruises), which has adversely impacted and may continue to adversely impact our results, operations, outlook, plans, goals, growth, reputation, cash flows, liquidity, demand for voyages and share price;

● 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;

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● changes involving the tax and environmental regulatory regimes in which we operate, including new regulations aimed at reducing greenhouse gas emissions;

● the accuracy of any appraisals of our assets as a result of the impact of the COVID-19 pandemic or otherwise;

● 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, such as Russia’s invasion of Ukraine or the Israel-Hamas war, or threats thereof, acts of piracy, and other international events;

● public health crises, including the COVID-19 pandemic, and their effect on the ability or desire of people to travel (including on cruises);

● adverse incidents involving cruise ships;

● breaches in data security or other disturbances to our information technology and other networks or our actual or perceived failure to comply with requirements regarding data privacy and protection;

● 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;

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● overcapacity in key markets or globally;

● other factors set forth under “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023 (“Annual Report on Form 10-K”).

● other factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024 (“Annual Report on Form 10-K”).

The above examples are not exhaustive and new risks emerge from time to time.

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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 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.

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 (Loss) 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 calculation our non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measure, we refer you to “Results of Operations” 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:

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Earnings (loss) per share.

● Explorer Class Ships.

Regent’s Seven Seas Explorer, Seven Seas Splendor, and Seven Seas Grandeur.

Generally accepted accounting principles in the U.S.

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● Prima Class Ships.

Norwegian Prima, Norwegian Viva and four additional ships on order.

Norwegian Prima, Norwegian Viva, Norwegian Aqua and three additional ships on order.

● Revolving Loan Facility.

$875 million senior secured revolving credit facility as of September 30, 2023, which was increased to $1.2 billion in October 2023.

$1.2 billion senior secured revolving credit facility.

Securities and Exchange Commission.

● Senior Secured Credit Facility.

The Credit Agreement, originally dated as of May 24, 2013, as amended and restated on October 31, 2014, June 6, 2016, October 10, 2017, January 2, 2019 and May 8, 2020, and as further amended on January 29, 2021, March 25, 2021, November 12, 2021 and December 6, 2022, by and among NCLC and Voyager Vessel Company, LLC, as co-borrowers, JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent, and various lenders and agents, providing for a senior secured credit facility consisting of (i) the Revolving Loan Facility and (ii) the Term Loan A Facility.

● 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.

● Term Loan A Facility .

The senior secured term loan A facility having an outstanding principal amount of approximately $0.8 billion as of September 30, 2023.

The Term Loan A Facility was fully repaid in October 2023.

Non-GAAP Financial Measures

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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.

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 (loss), 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.

Per Capacity Day data is not presented for the three or nine months ended September 30, 2022 as we do not consider it meaningful for comparison purposes due to our phased restart of cruise operations, which was completed in May 2022.

We believe that Adjusted EBITDA is appropriate as a supplemental financial measure as it is used by management to assess operating performance.

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Our revenue is seasonal based on demand for cruises, which has historically been strongest during the Northern Hemisphere’s summer months.

however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually, with full operation of our fleet resumed in May

Passenger ticket revenue primarily consists of revenue for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, port fees and taxes 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.

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.

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● 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 port fees and taxes and the costs associated with shore excursions and hotel accommodations included as part of the overall cruise purchase price.

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 and benefits 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.

● 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.

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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 February 2023, NCLC issued $600 million aggregate principal amount of 8.375% senior secured notes due 2028.

The proceeds from the notes were used to repay the loans outstanding under our Term Loan A Facility that otherwise would have become due in January 2024, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.

In February 2023, our $1 billion commitment letter was extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.

Simultaneously, the amount of the commitment was reduced to $650 million, which may be drawn in up to two draws, and in connection with the execution of the amended commitment letter, NCLC issued $250 million aggregate principal amount of 9.75% senior secured notes due 2028.

NCLC used the net proceeds for general corporate purposes.

In October 2023, NCLC issued $790 million aggregate principal amount of 8.125% senior secured notes due 2029.

The proceeds from the notes, together with cash on hand, were used to repay the Term Loan A Facility, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.

Also in October 2023, the Senior Secured Credit Facility was amended and restated, which among other things, increased the aggregate amount of the lenders’ revolving facility commitments from $875 million to $1.2 billion.

No term loans remain outstanding.

Financing Transactions and Newbuild Orders

In February 2024, NCLC and the Commitment Parties entered into the third amended commitment letter, which became effective in March 2024.

Pursuant to the third amended commitment letter, the Commitment Parties have agreed to purchase from NCLC an aggregate principal amount of $650 million of senior unsecured notes due five years after the issue date at NCLC’s option, which option is available through March 2025.

In connection with the execution of the third amended commitment letter, NCLC agreed to repurchase all of the outstanding $250 million aggregate principal amount of 9.75% senior secured notes due 2028 at a negotiated premium plus accrued and unpaid interest thereon.

See Note 6 – “Long-Term Debt” for more information.

In April 2024, we obtained export credit financing for 80% of the contract price of two new Regent Seven Seas Cruises ship orders and two new Oceania Cruises ship orders as well as related premiums.

Contemporaneously, the ship orders became effective.

The Norwegian brand also expects a four-ship order to replace a separate, effective, two-ship order for Oceania Cruises initially placed to secure availability with the shipyard.

The four-ship order for Norwegian is still being finalized and is subject to financing.

We refer you to “—Liquidity and Capital Resources— Future Capital Commitments” and “—Liquidity and Capital Resources— Material Cash Requirements” for details regarding our newbuild orders.

Additionally, in April 2024, a €200 million commitment became available that can be used for future newbuild payments.

See Note 6 – “Long-Term Debt” for more information.

Update on Bookings

The Company continues to experience healthy consumer demand with the cumulative booked position for the fourth quarter of 2023 ahead of 2019 levels at continued higher pricing.

On a 12-month forward basis the Company also continues to be within its optimal booked position and at higher pricing.

However, because of our cancellation policies, bookings may not be representative of actual revenues.

Onboard revenue generation remains robust with broad-based strength across all revenue streams.

During the third quarter and into the fourth quarter, the Company experienced operational impacts from global events including the wildfires in Maui and the escalating conflict in Israel.

Pride of America, which offers year-round inter-island Hawaii itineraries, modified certain itineraries in August to avoid stressing local resources in Maui.

Beginning in early September, with the guidance and encouragement of the Hawaii Governor and Hawaii Tourism Authority, the Company resumed scheduled weekly calls to Kahului, Maui.

However, following the wildfires the Company experienced a temporary slowdown in close-in bookings for sailings in Hawaii, primarily concentrated in the fourth quarter of 2023.

Demand has improved in recent weeks and is now approaching normalized levels.

In addition to Pride of America, the Company also had one additional ship operating in the region, Norwegian Spirit, bringing total capacity with calls to Hawaii to approximately 6% for the fourth quarter of 2023.

In addition, as a result of the escalation of the conflict in Israel, the Company has cancelled and redirected all calls to Israel and certain calls to the surrounding region for the remainder of 2023.

The Company is also in the process of cancelling all calls to Israel in 2024 as well and will continue to closely monitor and evaluate future sailings and adjust as needed.

Prior to the conflict, approximately 7% of capacity in the fourth quarter of 2023 and 4% of capacity for the full year 2024 visited the Middle East, which includes Bahrain, Cyprus, Egypt, Israel, Jordan, Oman, Qatar, Saudi Arabia, and United Arab Emirates.

Occupancy averaged 106.1% for the third quarter of 2023 reflective of the Company’s strategic shift to longer, more immersive itineraries.

Full year 2023 Occupancy is expected to average 102.6%, which includes temporary disruptions impacting the fourth quarter.

The Company continues to experience healthy consumer demand across all revenue streams and had record bookings during the three months ended March 31, 2024 leading to a continued record booked position for the next twelve months.

This strong demand is expected to almost fully offset the impact from the redeployed voyages related to the Middle East and Red Sea in 2024.

Macroeconomic Trends and Uncertainties

As a result of conditions associated with global macroeconomic events, the global economy, including the financial and credit markets, has experienced volatility and disruptions, including impacts to inflation rates, fuel prices, foreign currencies and interest rates.

Our costs have been, and are expected to continue to be, adversely impacted by these factors.

Our costs have been and may be adversely impacted by these factors.

We have used, and may continue to use, derivative instruments to attempt to mitigate the risk of volatility in fuel prices and interest rates.

The Company currently has hedged approximately 45%, 36% and 8% of its total projected metric tons of fuel consumption for the remainder of 2023, 2024 and 2025, respectively.

In an attempt to mitigate risks related to inflation, our supply chain department has negotiated contracts with varying terms, with a goal of providing us with the ability to take advantage of cost declines when they occur, and diversified our sourcing options.

an attempt to mitigate risks related to inflation, our supply chain department has negotiated contracts with varying terms, with a goal of providing us with the ability to take advantage of cost declines when they occur, and diversified our sourcing options.

These strategies may not fully offset the impact of current macroeconomic conditions;

however, during the third quarter of 2023, we continued to see progress from our ongoing margin enhancement initiative.

however, during 2024, we continued to see progress from our ongoing margin enhancement initiative.

The Company continues to prioritize identifying and evaluating a variety of initiatives to improve its cost structure and margin profile, while preserving its brand equity and optimal guest satisfaction levels.

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We believe the increasing focus on climate change, including the Company’s recently established targets for greenhouse gas reductions, and evolving regulatory requirements will materially impact our future capital expenditures and results of operations.

We are now targeting a reduction in greenhouse gas intensity of 10% by 2026 and 25% by 2030, compared

to a 2019 baseline and measured on a per Capacity Day basis (the targets cover the Company’s emissions from its fleet of ships, islands and facilities (Scopes 1 & 2) as well as upstream fuel- and energy-related activities, including well-to-tank emissions (a portion of Scope 3).

We expect to incur significant expenses related to these regulatory requirements and commitments, which may include expenses related to greenhouse gas emissions reduction initiatives and the purchase of emissions allowances, among other things.

If requirements become more stringent, we may be required to change certain operating procedures, for example slowing the speed of our ships, which could adversely impact our operations.

We have set interim targets to guide us on our path to net zero and provide more details about them in our annual Sail & Sustain Report.

We expect to incur significant expenses related to these regulatory requirements and commitments, which may include expenses related to greenhouse gas emissions reduction initiatives, including modifications to our ships, and the purchase of emissions allowances, among other things.

We have 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 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 greenhouse gas emissions;

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Quarterly Overview

Three months ended September 30, 2023 (“2023”) compared to three months ended September 30, 2022 (“2022”)

Three months ended March 31, 2024 (“2024”) compared to three months ended March 31, 2023 (“2023”)

● Total revenue increased 20.3% to $2.2 billion compared to $1.8 billion.

● Net income (loss) and diluted EPS were $17.4 million and $0.04, respectively, compared to $(159.3) million and $(0.38), respectively.

● Operating income was $523.3 million compared to operating loss of $(185.2) million.

● Gross margin was $862.7 million compared to $202.2 million.

Adjusted Gross Margin was $1.8 billion compared to $1.1 billion.

● Adjusted Net Income and Adjusted EPS were $388.0 million and $0.76, respectively, in 2023, which included $24.6 million of adjustments primarily related to share-based compensation.

● Operating income was $218.4 million compared to $10.7 million.

● Gross margin increased 65.5% to $595.7 million compared to $360.0 million.

Adjusted Gross Margin increased 25.6% to $1.6 billion compared to $1.3 billion.

● 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 Net Loss and Adjusted EPS were $(127.7) million and $(0.30), respectively, in 2023, which included $31.6 million of adjustments primarily related to share-based compensation.

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Three Months Ended

Nine Months Ended

September 30,

Passengers carried

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Three Months Ended

Nine Months Ended

September 30,

Total revenue

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Three Months Ended

Nine Months Ended

September 30,

Total cruise operating expense

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Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Effect of dilutive securities - exchangeable notes

Net income (loss) and assumed conversion of exchangeable notes

Non-GAAP Adjustments:

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Adjusted Net Income (Loss)

Diluted weighted-average shares outstanding - Net income (loss) and assumed conversion of exchangeable notes and Adjusted Net Income (Loss)

Diluted weighted-average shares outstanding - Net income (loss) and Adjusted Net Income (Loss)

(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.

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Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

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(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 September 30, 2023 (“2023”) compared to three months ended September 30, 2022 (“2022”)

Total revenue increased to $2.5 billion in 2023 compared to $1.6 billion in 2022.

In 2023, revenue primarily increased as a result of increases in our Occupancy following our return to service with 6.2 million Passenger Cruise Days compared to 4.0 million in 2022.

Total cruise operating expense increased 19.7% in 2023 compared to 2022.

In 2023, our cruise operating expenses increased due to the phased Occupancy ramp-up, resulting in higher direct variable costs of fully operating ships.

Additionally, cruise operating expenses increased as a result of the deliveries of Norwegian Prima, Norwegian Viva and Oceania Cruises’ Vista in 2022 and 2023.

Gross Cruise Cost increased 12.0% in 2023 compared to 2022 primarily related to the change in costs described above.

Total other operating expense decreased 5.7% in 2023 compared to 2022 primarily due to a decrease in marketing costs.

Interest expense, net was $181.2 million in 2023 compared to $152.3 million in 2022.

The increase in interest expense is primarily as a result of higher rates.

Other income (expense), net was income of $12.1 million in 2023 compared to $31.5 million in 2022.

The income primarily related to net gains and losses on foreign currency remeasurements.

Nine months ended September 30, 2023 (“2023”) compared to nine months ended September 30, 2022 (“2022”)

Total revenue increased to $6.6 billion in 2023 compared to $3.3 billion in 2022.

In 2023, revenue primarily increased as a result of increases in our Occupancy following our return to service with 17.5 million Passenger Cruise Days compared to 8.4 million in 2022.

Total cruise operating expense increased 36.1% in 2023 compared to 2022.

In 2023, our cruise operating expenses increased due to the resumption of voyages, resulting in higher payroll, food and direct variable costs of fully operating ships.

In 2022, the nine months started with 16 ships operating with guests onboard and ended with the full fleet in service, which was completed in May 2022.

Gross Cruise Cost increased 27.5% in 2023 compared to 2022 primarily related to the change in costs described above.

Total other operating expense increased 4.0% in 2023 compared to 2022 primarily due to higher depreciation expense as a result of the deliveries of Norwegian Prima, Norwegian Viva and Oceania Cruises’ Vista in 2022 and 2023.

Three months ended March 31, 2024 (“2024”) compared to three months ended March 31, 2023 (“2023”)

Total revenue increased to $2.2 billion in 2024 compared to $1.8 billion in 2023 primarily due to an increase in Capacity Days and improved pricing.

Gross margin per Capacity Day increased 53.4% and Adjusted Gross Margin increased 25.6% to $1.6 billion in 2024 compared to $1.3 billion in 2023 due to an increase in Capacity Days of 7.9% and reflects an increase in passenger ticket pricing and onboard spending.

The increase in Capacity Days was primarily related to the delivery of three new ships in 2023.

Total cruise operating expense increased 8.4% and Gross Cruise Cost increased 8.3% in 2024 compared to 2023 primarily related to the delivery of three new ships in 2023.

Total other operating expense increased 10.3% in 2024 compared to 2023 largely related to the delivery of three new ships and also reflects an increase in general and administrative costs related to a consulting project.

Interest expense, net was $218.2 million in 2024 compared to $171.3 million in 2023.

The decrease in interest expense reflects lower losses in 2023 from extinguishment of debt and debt modification costs, which were $3.2 million in 2023 compared to $188.4 million in 2022.

Excluding these losses, interest expense increased primarily as a result of higher rates.

Other income (expense), net was expense of $4.9 million in 2023 compared to income of $100.6 million in 2022.

The increase in interest expense reflects higher losses in 2024 from extinguishment of debt and debt modification costs, which were $29.0 million in 2024 compared to $2.4 million in 2023.

Excluding these losses, interest expense increased primarily as a result of higher debt outstanding and higher rates.

Other income (expense), net was income of $18.1 million in 2024 compared to expense of $9.0 million in 2023.

The income and expense primarily related to net gains and losses on foreign currency remeasurements.

Liquidity and Capital Resources

As of September 30, 2023, our liquidity was approximately $2.2 billion, including cash and cash equivalents of $681.6 million and borrowings available under our $875 million fully undrawn Revolving Loan Facility and $650 million undrawn commitment less related fees.

As of March 31, 2024, our liquidity was approximately $2.4 billion, including cash and cash equivalents of $559.8 million and borrowings available under our $1.2 billion fully undrawn Revolving Loan Facility and $650 million

undrawn commitment less related fees.

Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.

In February 2023, NCLC issued $600 million aggregate principal amount of 8.375% senior secured notes due 2028.

In February 2023, our $1 billion commitment letter was extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.

NCLC used the net proceeds for general corporate purposes.

In October 2023, NCLC issued $790 million aggregate principal amount of 8.125% senior secured notes due 2029.

No term loans remain outstanding.

See Note 7 – “Long-Term Debt” for more information on the above financing transactions.

The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties.

Refer to Note 2 – “Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for further information on liquidity.

Refer to “Item 1A.

Risk Factors” herein and in our Annual Report on Form 10-K for risks and uncertainties that may cause our results to differ from our expectations.

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, rising fuel prices and rising interest rates.

Based on the liquidity estimates and our current resources, we have concluded we have sufficient liquidity to satisfy our obligations for at least the next 12 months.

Within the next twelve months we will pursue refinancings in order to reduce interest expense and/or extend debt maturities.

In February 2024, NCLC and the Commitment Parties entered into the third amended commitment letter, which became effective in March 2024.

Additionally, in April 2024, a €200 million commitment became available that can be used for future newbuild payments.

See Note 6 – “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.

We intend to refinance the $565.0 million 3.625% senior unsecured notes due in December 2024 prior to September 2024.

Within the next twelve months, we may pursue other refinancings in order to reduce interest expense and/or extend debt maturities.

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 debt maturities.

We have received amendments to certain financial and other debt covenants, including the modification of our free liquidity requirements.

At September 30, 2023, taking into account such amendments, we were in compliance with all of our debt covenants.

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.

At March 31, 2024, 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.

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Our Moody’s long-term issuer rating is B2, our senior secured rating is B1 and our senior unsecured rating is Caa1.

Our S&P Global issuer credit rating is B, our issue-level rating on our $1.2 billion Revolving Loan Facility, 2028 Senior Secured Notes and 2029 Senior Secured Notes is BB-, our issue-level rating on our other senior secured notes is B+ and our senior unsecured rating is CCC+.

If our credit ratings were to be downgraded, 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 further negatively impacted.

Our S&P Global issuer credit rating is B+, our issue-level rating on our $1.2 billion Revolving Loan Facility, $600 million 8.375% senior secured notes due 2028 and $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 September 30, 2023, we had advance ticket sales of $3.1 billion, including the long-term portion, which included approximately $71.3 million of future cruise credits.

We also have agreements with our credit card processors that, as of September 30, 2023, governed approximately $2.8 billion in advance ticket sales that had been received by the Company relating to future voyages.

As of March 31, 2024, we had advance ticket sales of $3.8 billion, including the long-term portion, which included approximately $66.0 million of future cruise credits that have been issued as face value reimbursement for cancelled bookings due to COVID-19.

We also have agreements with our credit card processors that, as of March 31, 2024, governed approximately $3.4 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.

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Any cash reserve or collateral requested could be increased or decreased.

As of September 30, 2023, we had cash collateral reserves of approximately $42.0 million with credit card processors recognized in accounts receivable, net.

During the nine months ended September 30, 2023, the Company received a return of cash collateral from one credit card processor of $500 million, which was previously classified as other long-term assets.

As of March 31, 2024, we had cash

collateral reserves of approximately $51.3 million with credit card processors, which includes $19.8 million recognized in accounts receivable, net and $31.5 million recognized in other long-term assets.

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 “2023” refer to the nine months ended September 30, 2023 and references to “2022” refer to the nine months ended September 30, 2022.

Net cash provided by operating activities was $1.7 billion in 2023 as compared to net cash used in operating activities of $26.6 million in 2022.

The net cash provided by (used in) operating activities included net income (losses) and timing differences in cash receipts and payments relating to operating assets and liabilities.

The net cash provided by operating activities includes the return of $500 million cash collateral from one credit card processor in 2023.

In this section, references to “2024” refer to the three months ended March 31, 2024 and references to “2023” refer to the three months ended March 31, 2023.

Net cash provided by operating activities was $807.2 million in 2024 as compared to $503.3 million in 2023.

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 $592.2 million in 2024 and by $668.3 million in 2023.

The net loss also includes losses on extinguishment of debt of $188.4 million in 2022.

Net cash used in investing activities was $2.2 billion in 2023 and $1.6 billion in 2022.

Net cash used in investing activities was $255.2 million in 2024 and $236.4 million in 2023.

The net cash used in investing activities was primarily related to newbuild payments and ship improvements in 2024.

The net cash used in investing activities was primarily related to newbuild payments in 2023.

The net cash used in investing activities was primarily related to the delivery of Norwegian Prima in 2022.

Net cash provided by financing activities was $194.5 million in 2023 primarily due to newbuild loans and $850 million from our various note offerings, partially offset by debt repayments and a net decrease in our Revolving Loan Facility balance.

Net cash provided by financing activities was $1.3 billion in 2022 primarily due to newbuild loans and the proceeds of $2.1 billion from our various note offerings, partially offset by debt repayments and related redemption premiums associated with extinguishment of certain senior secured notes.

Net cash used in financing activities was $394.5 million in 2024 primarily due to repayments of newbuild loans and our 2028 Secured Notes.

Net cash used in financing activities was $513.4 billion in 2023 primarily due to debt repayments and a net decrease in our Revolving Loan Facility partially offset by the proceeds of $850 million from our various note offerings.

Future Capital Commitments

Future capital commitments consist of contracted commitments, including ship construction contracts.

Anticipated expenditures related to ship construction contracts as of September 30, 2023 were $0.6 billion for the remainder of 2023 and $0.4 billion and $1.9 billion for the years ending December 31, 2024 and 2025, respectively, reflecting delays in certain scheduled ship delivery dates.

As of September 30, 2023, the Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of $0.5 billion for the remainder of 2023 and $0.2 billion and $1.4 billion for the years ending December 31, 2024 and 2025, respectively.

Anticipated non-newbuild

capital expenditures for the remainder of 2023 are approximately $135 million.

Anticipated expenditures related to ship construction contracts (which includes two ships on order for Oceania Cruises that are expected to be cancelled, and excludes orders for four Norwegian Cruise Line ships, which are not yet effective) were $0.5 billion for the remainder of 2024 and $2.2 billion and $2.4 billion for the years ending December 31, 2025 and 2026, respectively, reflecting delays in certain scheduled ship delivery dates.

The Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of $0.3 billion for the remainder of 2024 and $1.6 billion and $1.5 billion for the years ending December 31, 2025 and 2026, respectively.

Anticipated non-newbuild capital expenditures for the remainder of 2024 are approximately $460 million.

Future expected capital expenditures will significantly increase our depreciation and amortization expense.

For the Norwegian brand, we have four Prima Class Ships on order, each ranging from approximately 156,300 to 169,000 Gross Tons with 3,450 or more Berths, with currently scheduled delivery dates from 2025 through 2028.

For the Regent brand, we have an order for one Explorer Class Ship to be delivered in 2023, which will be approximately 55,000 Gross Tons and 750 Berths.

For the Oceania Cruises brand, we have an order for one additional Allura Class Ship to be delivered in 2025, which will be approximately 67,000 Gross Tons and 1,200 Berths.

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.

As of September 30, 2023, the combined contract prices, including amendments and change orders, of the six ships on order for delivery was approximately €6.3 billion, or $6.7 billion based on the euro/U.S.

dollar exchange rate as of September 30, 2023.

We have obtained export credit financing which is expected to fund approximately 80% of the contract price of each ship and related financing premiums, subject to certain conditions.

We do not anticipate any contractual breaches or cancellations to occur.

Expected delivery dates for our most recently announced newbuilds are preliminary and subject to change.

Orders announced after March 31, 2024 are in bold.

Gross Tons (1)

Norwegian Cruise Line

Next Generation Prima Class

Norwegian Aqua