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Item 2. Management’s Discussion and Analysis

2023-07-27 compared with 2023-05-04 · 187 added, 101 removed, 283 unchanged (50% of the section changed)

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• a review of our financial presentation, including discussion of certain operational and financial metrics we utilize to assist us in managing our business;

• a discussion of our results of operations for the quarter ended March 31, 2023, compared to the same period in 2022;

• a discussion of our results of operations for the quarter and six months ended June 30, 2023, compared to the same period in 2022;

• a discussion of our liquidity and capital resources, including our future capital and material cash requirements and potential funding sources.

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(ii) gain on sale of controlling interest;

(iii) impa irment and credit losses (recoveries);

and (iv) restructuring charges and other initiative expenses.

A reconciliation of Net Loss to Adjusted EBITDA is provided below under Results of Operations.

Adjusted Loss per Share ("Adjusted EPS") is a non-GAAP measure that represents Adjusted Net Loss (as defined below) divided by weighted average shares outstanding or by diluted weighted average shares outstanding, as applicable.

(iii) recovery of losses from one of our equity method investees;

(iv) impa irment and credit losses (recoveries);

and (v) restructuring charges and other initiative expenses.

A reconciliation of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

to Adjusted EBITDA is provided below under Results of Operations.

Adjusted Earnings (Loss) per Share ("Adjusted EPS") is a non-GAAP measure that represents Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

(as defined below) divided by weighted average shares outstanding or by diluted weighted average shares outstanding, as applicable.

We believe that this non-GAAP measure is meaningful when assessing our performance on a comparative basis.

A reconciliation of Loss per Share to Adjusted Loss per share is provided below under Results of Operations.

Adjusted Net Loss is a non-GAAP measure that represents Net Loss excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis.

A reconciliation of Earnings (Loss) per Share to Adjusted Loss per share is provided below under Results of Operations.

Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

is a non-GAAP measure that represents Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis.

For the periods presented, these items included (i) loss on the extinguishment of debt;

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(iv) Silver Whisper deferred tax liability release;

(v) impairment and credit losses (recoveries); (vi) the amortization of the Silversea Cruises intangible assets resulting from the Silversea Cruises acquisition in 2018;

and (vii) restructuring charges and other initiative expenses.

A reconciliation of Net Loss to Adjusted Net Loss is provided below under Results of Operations.

(v) r ecovery of losses from one of our equity method investees;

(vi) impairment and credit losses (recoveries); (vii) the amortization of the Silversea Cruises intangible assets resulting from the Silversea Cruises acquisition in 2018;

and (viii) restructuring charges and other initiative expenses.

A reconciliation of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

to Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

Loss is provided below under Results of Operations.

Available Passenger Cruise Days ( “APCD” ) is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period, which excludes canceled cruise days and cabins not available for sale.

We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers that cause our cruise revenue and expenses to vary.

EBITDA is a non-GAAP measure that represents Net Loss excluding (i) interest income;

EBITDA is a non-GAAP measure that represents Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

excluding (i) interest income;

(ii) interest expense, net of interest capitalized;

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We believe that this non-GAAP measure is meaningful when assessing our operating performance on a comparative basis.

A reconciliation of Net Loss to EBITDA is provided below under Results of Operations.

A reconciliation of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

t o EBITDA is provided below under Results of Operations.

Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

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Gross Margin Yield represent Gross Margin per APCD.

Adjusted Gross Margin represent Gross Margin, adjusted for payroll and related, fuel, food, other operating expenses, and depreciation and amortization.

Adjusted Gross Margin represent Gross Margin, adjusted for payroll and related, food, fuel, other operating expenses, and depreciation and amortization.

Gross Margin is calculated pursuant to GAAP as total revenues less total cruise operating expenses, and depreciation and amortization.

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Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

A significant portion of our revenue and expenses are denominated in currencies other than the United States dollar.

Because our reporting currency is the United States dollar, the value of these revenues and expenses can be affected by changes in currency exchange rates.

Although such changes in local currency prices are just one of many elements impacting our revenues and expenses, they can be an important element.

For this reason, we also monitor Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel as if the current period's currency exchange rates had remained constant with the comparable prior period's rates, or on a "Constant Currency" basis.

It should be emphasized that Constant Currency is primarily used for comparing short-term changes and/or projections.

Changes in guest sourcing and shifting the amount of purchases between currencies can change the impact of the purely currency-based fluctuations.

The use of certain significant non-GAAP measures, such as Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel, allows us to perform capacity and rate analysis to separate the impact of known capacity changes from other less predictable changes which affect our business.

We believe these non-GAAP measures provide expanded insight to measure revenue and cost performance in addition to the standard GAAP based financial measures.

There are no specific rules or regulations for determining non-GAAP and Constant Currency measures, and as such, they may not be comparable to other companies within the industry.

We ha ve not provided a quantitative reconciliation of projected non-GAAP financial measures to the most comparable GAAP financial measures because preparation of meaningful U.S.GAAP projections would require unreasonable effort.

There are no specific rules or regulations for determining non-GAAP measures, and as such, they may not be comparable to other companies within the industry.

We ha ve not provided a quantitative reconciliation of projected non-GAAP financial measures to the most comparable GAAP financial measures because preparation of meaningful U.S.

GAAP projections would require unreasonable effort.

Due to significant uncertainty, we are unable to predict, without unreasonable effort, the future movement of foreign exchange rates, fuel prices and interest rates inclusive of our related hedging programs.

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Results of Operations

Net loss and Adjusted Net loss for the first quarter of 2023 was $47.9 million and $58.9 million, or $(0.19) and $(0.23) per share on a diluted basis, respectively, reflecting our return to full operations, compared to Net Loss and Adjusted Net Loss of $(1.17) billion and $(1.16) billion, or $(4.58) and (4.57) per share on a diluted basis, respectively, for the first quarter of 2022.

Significant items for the quarter ended March 31, 2023 include:

• Total revenues, excluding the effect of changes in foreign currency exchange rates, increased $1.9 billion, respectively, for the quarter ended March 31, 2023 as compared to the same period in 2022.

The increase reflects our return to full operations in 2023, compared to a partial return to operations during the same period in 2022.

APCD for the first quarter ended March 31, 2023 was 11,233,489, compared to 7,692,906 in the same period in 2022.

• Total cruise operating expenses, excluding the effect of changes in foreign currency exchange rates, increased $0.6 billion , for the quarter ended March 31, 2023 as compared to the same period in 2022.

The increase reflects our return to full operations in 2023, compared to a partial return to operations during the same period in 2022.

Net Income attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Income attributable to Royal Caribbean Cruises Ltd.

for the second quarter of 2023 was $458.8 million and $491.7 million, reflecting our full operations at higher occupancy in 2023, compared to Net Loss and Adjusted Net Loss of $(521.6) million and $(530.0) million, respectively, for the second quarter of 2022.

Net Income attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Income attributable to Royal Caribbean Cruises Ltd.

for the six months ended June 30, 2023 was $410.9 million and $432.8 million, compared to Net Loss and Adjusted Net Loss of $1,688.7 million and $1,694.4 million, respectively, for the six months ended June 30, 2022.

Significant items for the quarter and six months ended June 30, 2023 include:

• Total revenues, increased $1.3 billion and $3.2 billion, respectively, for the quarter and six months ended June 30, 2023 as compared to the same period in 2022.

The increase reflects our full operations in 2023 including a 13.7% and 27.5% higher capacity, and a 28.0% and 44.9% higher occupancy for the quarter ended and six months ended June 30, 2023, respectively, as well as an increase in ticket prices, compared to a partial return to operations during the same period in 2022.

• Total cruise operating expenses, increased $0.3 billion and $0.9 billion, respectively, for the quarter and six months ended June 30, 2023 as compared to the same period in 2022.

The increase reflects our full operations in 2023 at higher capacity and occupancy, compared to a partial return to operations during the same period in 2022.

• In January 2023, we amended and extended the majority of our two unsecured revolving credit facilities.

The amendment has extended the maturities of $2.3 billion of the $3.0 billion aggregate revolving capacity by one year to April 2025, with the remainder maturing in April 2024.

Additionally, during the quarter ended March 31, 2023, we repaid $2.4 billion under our revolving credit facilities, resulting in an aggregate borrowing capacity of $2.6 billion under the facilities as of March 31, 2023.

Additionally, during the six months ended June 30, 2023, we repaid $2.7 billion under our revolving credit facilities, resulting in an aggregate borrowing capacity of $3.0 billion under the facilities as of June 30, 2023.

• In February 2023, we issued $700 million aggregate principal amount of 7.25% Priority Guaranteed Notes.

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As part of the transaction, we sold 80% of PortMiami for $208.9 million and retained a 20% minority interest.

The partnership will own, develop,

and manage cruise terminal facilities and infrastructure in key ports of call, initially including several development projects in Italy, Spain, and the U.S.

The partnership will own, develop, and manage cruise terminal facilities and infrastructure in key ports of call, initially including several development projects in Italy, Spain, and the U.S.

Virgin Islands.

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Investments and Other Assets in our consolidated financial statements for further information on the transaction.

• In June 2023, we took delivery of Silver Nova .

• In June 2023, we repaid $392.0 million of our 11.50% secured senior notes due in June 2025.

• In June 2023, our 4.25% Convertible Senior Notes with an outstanding balance of $350 million were settled using a combination of $337.8 million in cash, and the issuance of approximately 374,000 shares of common stock.

The issuance of equity increased additional paid in capital by $12.1 million.

For further information regarding the debt transactions discussed above, refer to Note 6 .

Debt to our consolidated financial statements.

Operating results for the quarter ended March 31, 2023 compared to the same period in 2022 are shown in the following table (in thousands, except per share data):

Quarter Ended March 31,

Operating results for the quarter and six months ended June 30, 2023 compared to the same period in 2022 are shown in the following table (in thousands, except per share data):

Quarter Ended June 30,

Revenues % of Total

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Operating Income (Loss) 771,581 21.9 % (218,644) (10.0) %

Other (expense) income:

Other income (expense):

Interest income 9,583 0.3 % 6,490 0.3 %

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Equity investment income (loss) 42,014 1.2 % (13,179) (0.6) %

Other (expense) income (5,386) (0.2) % 6,457 0.3 %

(309,301) (8.8) % (302,938) (13.9) %

Net Income (Loss) $ 462,280 13.1 % $ (521,582) (23.9) %

Net Income attributable to noncontrolling interest 3,519 0.1 % — — %

Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

$ 458,761 13.0 % $ (521,582) (23.9) %

Diluted Earnings (Loss) per Share $ 1.70 $ (2.05)

Six Months Ended June 30,

Revenues % of Total

Passenger ticket revenues $ 4,340,022 67.7 % $ 2,070,061 63.8 %

Onboard and other revenues 2,068,106 32.3 % 1,173,412 36.2 %

Total revenues 6,408,128 100.0 % 3,243,473 100.0 %

Cruise operating expenses:

Commissions, transportation and other 918,937 14.3 % 480,202 14.8 %

Onboard and other 378,950 5.9 % 230,009 7.1 %

Payroll and related 594,370 9.3 % 676,759 20.9 %

Food 402,086 6.3 % 255,410 7.9 %

Fuel 577,431 9.0 % 463,659 14.3 %

Other operating 876,007 13.7 % 758,822 23.4 %

Total cruise operating expenses 3,747,781 58.5 % 2,864,861 88.3 %

Marketing, selling and administrative expenses 895,703 14.0 % 765,455 23.6 %

Depreciation and amortization expenses 721,450 11.3 % 691,009 21.3 %

Operating Income (Loss) 1,043,194 16.3 % (1,077,852) (33.2) %

Other income (expense):

Interest income 24,391 0.4 % 9,812 0.3 %

Interest expense, net of interest capitalized (714,899) (11.2) % (580,365) (17.9) %

Equity investment income (loss) 62,485 1.0 % (44,238) (1.4) %

Other (expense) income (771) — % 3,919 0.1 %

(628,794) (9.8) % (610,872) (18.8) %

Net Loss $ (47,910) (1.7) % $ (1,167,142) (110.2) %

Diluted Loss per Share $ (0.19) $ (4.58)

Adjusted Net Loss and Adjusted Loss per Share were calculated as follows (in thousands, except per share data):

Quarter Ended March 31,

Net Loss $ (47,910) $ (1,167,142)

Net Income (Loss) $ 414,400 6.5 % $ (1,688,724) (52.1) %

Net Income attributable to noncontrolling interest 3,549 0.1 % — — %

Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

$ 410,851 6.4 % $ (1,688,724) (52.1) %

Diluted Earnings (Loss) per Share $ 1.60 $ (6.63)

Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd, were calculated as follows (in thousands, except per share data):

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

$ 458,761 $ (521,582) $ 410,851 $ (1,688,724)

Loss on extinguishment of debt 30,229 — 43,518 —

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Silver Whisper deferred tax liability release (3) — — (25,784) —

Recovery of losses from one of our equity method investees (4,228) — (4,228) —

Impairment and credit losses (recoveries) (4) — (10,943) (6,990) (10,770)

Amortization of Silversea Cruises intangible assets related to Silversea Cruises acquisition (5) 1,623 1,623

Amortization of Silversea Cruises intangible assets resulting from the Silversea Cruises acquisition (5) 1,623 1,623 3,246 3,246

Restructuring charges and other initiative expenses 5,288 902 5,288 1,875

Adjusted Net Loss $ (58,882) $ (1,164,373)

Loss per Share $ (0.19) $ (4.58)

Adjusted Loss per Share $ (0.23) $ (4.57)

Loss per Share $ (0.19) $ (4.58)

Adjusted Loss per Share $ (0.23) $ (4.57)

Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

$ 491,673 $ (530,000) $ 432,791 $ (1,694,373)

Earnings (Loss) per Share $ 1.79 $ (2.05) $ 1.61 $ (6.63)

Adjusted Earnings (Loss) per Share $ 1.92 $ (2.08) $ 1.69 $ (6.65)

Earnings (Loss) per Share (6) $ 1.70 $ (2.05) $ 1.60 $ (6.63)

Adjusted Earnings (Loss) per Share (6) $ 1.82 $ (2.08) $ 1.69 $ (6.65)

Weighted-Average Shares Outstanding:

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(1) Represents gain on sale of controlling interest in cruise terminal facilities in Italy.

Included in Other operating within our consolidated statements of comprehensive loss.

These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).

(2) Represents tax on the PortMiami sale of noncontrolling interest.

These amounts are included in Other income (expense) in our consolidated statements of comprehensive loss.

These amounts are included in Other (expense) income in our consolidated statements of comprehensive income (loss).

Refer to Note 5 .

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(3) Represents the release of the deferred tax liability subsequent to the execution of the bargain purchase option for the Silver Whisper .

These amounts are included in Other income (expense) within our consolidated statements of comprehensive loss .

These amounts are included in Other (expense) income within our consolidated statements of comprehensive income (loss).

(4) Represents asset impairments and credit loss recoveries for notes receivables for which credit losses were previously recorded.

These amounts are included in Other operating within our consolidated statements of comprehensive loss.

These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).

(5) Represents the amortization of the Silversea Cruises intangible assets resulting from the 2018 Silversea Cruises acquisition.

(6) Diluted EPS and Adjusted Diluted EPS includes the add-back of dilutive interest expense related to our convertible notes of $21.3 million and $4.2 million for the quarter and six months ended June 30, 2023, respectively.

Refer to Note 4 .

Earnings (Loss) Per Share to our consolidated financial statements for further information.

Selected statistical information is shown in the following table:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Passengers Carried 1,900,810 1,340,622 3,707,079 2,075,431

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EBITDA and Adjusted EBITDA were calculated as follows (in thousands):

Quarter Ended March 31,

Net Loss $ (47,910) $ (1,167,142)

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.

$ 458,761 $ (521,582) $ 410,851 $ (1,688,724)

Interest income (9,583) (6,490) (24,391) (9,812)

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Depreciation and amortization expenses 361,677 351,542 721,450 691,009

Income tax (benefit) expense (1) (8,343) 6,578

Income tax expense (benefit) (1) 7,806 (2,025) (537) 4,553

EBITDA 1,174,173 124,151 1,822,272 (422,609)

Other expense (income) (2) 3,758 (4,040)

Other (income) expense (2) (2,420) (4,432) 1,308 (8,472)

Gain on sale of controlling interest (3) — — (3,130) —

Recovery of losses from one of our equity method investees (4,228) — (4,228) —

Impairment and credit losses (recoveries) (4) — (10,943) (6,990) (10,770)

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Adjusted EBITDA $ 1,172,813 $ 109,678 $ 1,814,520 $ (439,976)

(1) Included in Other income (expense) within our consolidated statements of comprehensive loss.

(1) These amounts are included in Other (expense) income within our consolidated statements of comprehensive income (loss).

(2) Represents net non-operating income or expense.

For the periods reported, primarily relates to gains or losses arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies.

The amount excludes income tax (benefit) expense, included in the EBITDA calculation above.

The amount excludes income tax expense (benefit), included in the EBITDA calculation above.

(3) Represents gain on sale of controlling interest in cruise terminal facilities in Italy.

Included in Other operating within our consolidated statements of comprehensive loss.

These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).

(4) Represents asset impairments and credit loss recoveries for notes receivables for which credit losses were previously recorded.

These amounts are included in Other operating within our consolidated statements of comprehensive loss.

These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).

Gross Margin Yields and Net Yields were calculated by dividing Gross Margin and Adjusted Gross Margin by APCD as follows (in thousands, except APCD and Yields):

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Total revenue $ 3,522,982 $ 2,184,242 $ 6,408,128 $ 3,243,473

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Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel were calculated as follows (in thousands, except APCD and costs per APCD):

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Total cruise operating expenses $ 1,954,876 $ 1,679,919 $ 3,747,781 $ 2,864,861

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(1) Represents gain on sale of controlling interest in cruise terminal facilities in Italy.

Included in Other operating within our consolidated statements of comprehensive loss

These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).

(2) Represents asset impairments and credit losses recoveries for notes receivables for which credit losses were previously recorded.

Included in Other operating within our consolidated statements of comprehensive loss.

(3) Included in Marketing, selling and administrative expenses within our consolidated statements of comprehensive loss.

Quarter Ended March 31, 2023 Compared to Quarter Ended March 31, 2022

In this section, references to 2023 refer to the quarter ended March 31, 2023 and references to 2022 refer to the quarter ended March 31, 2022.

These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).

(3) These amounts are included in Marketing, selling and administrative expenses within our consolidated statements of comprehensive income (loss).

Quarter Ended June 30, 2023 Compared to Quarter Ended June 30, 2022

In this section, references to 2023 refer to the quarter ended June 30, 2023 and references to 2022 refer to the quarter ended June 30, 2022.

Total revenues for 2023 increased $1.3 billion to $3.5 billion from $2.2 billion in 2022.

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Passenger ticket revenues for 2023 increased by $1.0 billion, or 72.3% to $2.4 billion from $1.4 billion in 2022.

The increase was primarily due to increase in ticket prices, and 28.0% higher occupancy in 2023 compared to the same period in 2022.

The remaining 30.6% of 2023 total revenues was comprised of Onboard and other revenues , which increased $0.3 billion, or 40.9% to $1.1 billion in 2023 from $766.0 million in 2022.

The increase in revenues reflects our return to full operations in 2023, compared to a partial return to operations during the same period in 2022.

The increase was primarily due to an increase in occupancy noted above in 2023 compared to the same period in 2022.

The increase in revenues reflect our full operations in 2023, compared to a partial return to operations during the same period in 2022.

Occupancy in 2023 was 105.0% compared to 82.0% in 2022.

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• a $186.1 million increase in Commissions, transportation and other expenses;

• a $113.0 million increase in Fuel expense ;

• a $99.2 million increase in Food expense;

• a $98.6 million increase in Other operating expenses;

• a $64.7 million increase in Onboard and other expenses;

The increase in operating expenses noted above reflects our return to full operations in 2023, compared to a partial return to operations during the same period in 2022.

Additionally, high inflation has impacted our operating costs, especially in fuel and food expense.

Our cost of fuel (net of the financial impact of fuel swap agreements) for 2023 increased 25% per metric ton compared to 2022 mainly due to the increase in fuel price.

• a $47.5 million increase in Food expense.

The increase in operating expenses noted above reflects our full operations in 2023;

at higher occupancy compared to the same period in 2022, as well as inflationary pressures on food expense.

Marketing, Sellin g and Administrative Expenses

Marketing, selling and administrative expenses for 2023 increased $63.4 million, or 17.1%, to $434.8 million from $371.4 million in 2022.

The increase reflects our return to full operations in 2023, compared to a partial return to operations during the same period in 2022.

Additionally, the 2022 expenses reflect the ramp up of our global sales and marketing efforts to return to full operations in 2022.

The increase was primarily due to higher benefits expense related to our performance share awards driven by higher stock prices in 2023 compared to the same period in 2022.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2023 increased $10.1 million, or 2.9%, to $361.7 million from $351.5 million in 2022.

The increase was primarily due to depreciation expenses for Celebrity Beyond and Silver Endeavour ships , which were not part of our fleet during the same period in 2022.

The increase was primarily due to depreciation expenses for Silver Endeavour, which was not part of our fleet during the same period in 2022.

Other (Expense) Income

Interest expense, net of interest capitalized for 2023 increased $52.8 million, or 17.4%, to $355.5 million from $302.7 million in 2022.

The increase was primarily due to refinancing transactions after the first quarter of 2022, as well as the impact of higher rates on floating-rate debt.

The increase was primarily due to loss on extinguishment of debt of $30.2 million, higher rates on refinancing transactions during the second half of 2022, as well as the impact of higher rates on floating-rate debt.

Equity investment income was $42.0 million for 2023 compared to Equity investment loss of $13.2 million in 2022.

The increase in income was primarily due to income from TUI Cruises, one of our equity investments, in 2023 compared to losses in 2022.

Other Comprehensive Income (Loss)

Other comprehensive (loss) was $(2.1) million in 2023 compared to $(56.6) million for the same period in 2022 .

The decrease in loss of $54.6 million, or 96.4% was primarily due to a Gain on cash flow derivative hedges in 2023 of $5.0 million compared to a Loss on cash flow derivative hedges in 2022 of $(84.5) million, mostly as a result of a significant decrease in fair value of our fuel swaps in 2023 compared to 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

In this section, references to 2023 refer to the six months ended June 30, 2023 and references to 2022 refer to the six months ended June 30, 2022

Total revenues for 2023 increased $3.2 billion to $6.4 billion from $3.2 billion in 2022.

Passenger ticket revenues comprised 67.7% of our 2023 total revenues.

Passenger ticket revenues for 2023 increased by $2.3 billion to $4.3 billion from $2.1 billion in 2022.

The increase was primarily due to increase in ticket prices, 44.9% higher occupancy, and higher capacity of 27.5% compared to the same period in 2022.

The remaini ng 32.3% of 2023 total revenues was comprised of Onboard and other revenues , which increased $0.9 billion to $2.1 billion in 2023 from $1.2 billion in 2022.

The increase was primarily due to an increase in occupancy and higher capacity as noted above, in 2023 compared to the same period in 2022.

The increase in revenues reflect our full operations in 2023, compared to a partial return to operations during the same period in 2022.

Occupancy in 2023 was 103.6% compared to 71.5% in 2022.

Onboard and other revenues included concession revenues of $221.5 million in 2023 and $128.9 million in 2022.

Cruise Operating Expenses

Total Cruise operating expenses for 2023 increased $0.9 billion to $3.7 billion from $2.9 billion in 2022.

The increase was primarily due to:

• a $438.7 million increase in Commissions, transportation and other expenses;

• a $148.9 million increase in Onboard and other expenses;

• a $146.7 million increase in Food expense;

• a $113.8 million increase in Fuel expense.

The increase in operating expenses noted above reflects our to full operations in 2023;

including additional capacity and higher occupancy compared to the same period in 2022, as well as inflationary pressures on food expense.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2023 increased $130.2 million, or 17.0%, to $0.9 billion from $0.8 billion in 2022.

The increase was primarily due to an increase in payroll due to the additional capacity and higher occupancy, and to higher benefits expense related to our performance share awards driven by higher stock prices in 2023 compared to the same period in 2022.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2023 increased $30.4 million, or 4.4%, compared to 2022.

The increase was primarily due to depreciation expenses for the Celebrity Beyond which entered service in the second quarter of 2022, and Silver Endeavour which was not part of our fleet during the same period in 2022.

Other (Expense) Income

Interest expense, net of interest capitalized for 2023 increased $134.5 million, or 23.2%, to $714.9 million from $580.4 million in 2022.

The increase was primarily due to higher rates on refinancing transactions during the first half of 2023, as well as the impact of higher rates on floating-rate debt, and loss on extinguishment of debt of $43.5 million during the first half of 2023.

Equity investment Income for 2023 was $62.5 million compared to Equity investment loss of $(44.2) million in 2022.

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Other Comprehensive (Loss) Income

Other comprehensive (loss) was $(34.7) million in 2023 compared to Other comprehensive income of $216.3 million in 2022 .

The decrease of $251.0 million, or 116.1% was primarily due to Losses on cash flow derivative hedges in 2023 of $31.7 million compared to a Gain on cash flow derivative hedges in 2022 of $195.9 million, mostly as a result of a significant decrease in fair value of our fuel swaps in 2023 compared to 2022.

Other comprehensive (loss) for 2023 was $(36.8) million compared to Other comprehensive income of $159.6 million in 2022.

The change was primarily due to a Loss on cash flow derivative hedges in 2023 of $(26.7) million compared to a Gain on cash flow derivative hedges in 2022 of $111.4 million, which was mostly as a result of a significant decrease in fair value of our fuel swaps in 2023 compared to 2022.

Future Application of Accounting Standards

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Sources and Uses of Cash

Net cash provided by (used in) operating activities increased $1.8 billion to cash provided by of $1.3 billion for the three months ended March 31, 2023 compared to cash used of $0.5 billion for the same period in 2022.

The increase was primarily attributable to our return to full operations in 2023, compared to a partial return to operations during the same period in 2022, and an increase in proceeds from customer deposits in 2023 compared to the same period in 2022.

Net cash used in investing activities decreased $1.2 billion to cash used of $234.1 million for the three months ended March 31, 2023, compared to cash used of $1.4 billion for the same period in 2022.

The decrease was primarily attributable to a decrease in capital expenditures of $1.1 billion during 2023, compared to the same period in 2022, due to the delivery of Wonder of the Seas in 2022 compared to no ship deliveries during the same period in 2023.

Net cash used in financing activities was $1.8 billion for the three months ended March 31, 2023, compared to cash provided by financing activities of $1.2 billion for the same period in 2022.

Net cash provided by operating activities was $2.7 billion for the six months ended June 30, 2023, compared to cash used of $0.1 billion for the same period in 2022.

The increase of $2.8 billion was primarily attributable to higher bookings, and occupancy in 2023 compared to the same period in 2022.

Net cash used in investing activities decreased $1.5 billion to cash used of $1.0 billion for the six months ended June 30, 2023, compared to cash used of $2.5 billion for the same period in 2022.

The decrease was primarily attributable to a decrease in capital expenditures of $1.3 billion during 2023, compared to the same period in 2022, due to the delivery of Wonder of the Seas and Celebrity Beyond in 2022 compared to the delivery of Silver Nova during the same period in 2023, and a decrease in cash paid on the settlement of derivative financial instruments of $251.1 million during 2023, compared to the same period in 2022.

Net cash used in financing activities was $2.9 billion for the six months ended June 30, 2023, compared to cash provided by financing activities of $2.0 billion for the same period in 2022.

The change of $4.9 billion was primarily attributable to a decrease of $2.6 billion in debt proceeds in 2023 compared to the same period in 2022, and an increase in repayments of debt of $2.5 billion in 2023 compared to the same period in 2022.

The change is partially offset by proceeds received of $209.3 million for the sale of noncontrolling interest of PortMiami during the quarter ended March 31, 2023.

The change is partially offset by proceeds received of $209.3 million for the sale of noncontrolling interest of PortMiami during the six months ended June 30, 2023.

Future Capital Commitments

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Our future capital commitments consist primarily of new ship orders.

As of March 31, 2023, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

As of June 30, 2023, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

Ship Shipyard Expected delivery Approximate

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Celebrity Ascent Chantiers de l'Atlantique 4th Quarter 2023 3,250

Unnamed Chantiers de l'Atlantique 4th Quarter 2025 3,250

Silversea Cruises

Evolution Class:

Silver Nova Meyer Werft 2nd Quarter 2023 730

Silver Ray Meyer Werft 2nd Quarter 2024 730

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Total Berths 40,830

In addition, as of March 31, 2023, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship with capacity of approximately 3,250 berths, estimated for delivery in 2025, which is contingent upon completion of conditions precedent and financing.

During the quarter ended June 30, 2023, we received commitments for the unsecured financing of the fifth Edge-class ship, estimated for delivery in 2025.

Our future capital commitments consist primarily of new ship orders.

As of March 31, 2023, the aggregate expected cost of our ships on order presented in the table above, excluding any ships on order by our Partner Brands, was $10.2 billion, of which we had deposited $0.9 billion.

Approximately 49.2% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at March 31, 2023.

As of June 30, 2023, the aggregate expected cost of our ships on order presented in the table above, excluding any ships on order by our Partner Brands, was $11.0 billion, of which we had deposited $1.0 billion.

Approximately 42.3% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at June 30, 2023.

Refer to Note 8.

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Fair Value Measurements and Derivative Instruments to our consolidated financial statement .

As of March 31, 2023, we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately $4.2 billion for 2023.

As of June 30, 2023, we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately $4.2 billion for 2023.

This amount does not include any ships on order by our Partner Brands.

Material Cash Requirements

As of March 31, 2023, our material cash requirements were as follows (in thousands):

As of June 30, 2023, our material cash requirements were as follows (in thousands):

2023 2024 2025 2026 2027 Thereafter Total

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(1) Long-term debt obligations mature at various dates through fiscal year 2037 and bear interest at fixed and variable rates.

Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements, using the applicable rate at March 31, 2023.

Debt denominated in other currencies is calculated based on the applicable exchange rate at March 31, 2023.

Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements, using the applicable rate at June 30, 2023.

Debt denominated in other currencies is calculated based on the applicable exchange rate at June 30, 2023.

(2) Amounts primarily represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.

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Commitments and Contingencies for other agreements.

As of March 31, 2023, other than the items referenced above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

As of June 30, 2023, other than the items referenced above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

Funding Needs and Sources

Historically, we have relied on a combination of cash flows provided by operations, draw-downs under our available credit facilities, the incurrence of additional debt and/or the refinancing of our existing debt and the issuance of additional shares of equity securities to fund our obligations.

As a result of the global pandemic impact of COVID-19, we paused our guest cruise operations in March 2020 and began resuming guest cruise operations in 2021, with our full fleet in service by June 2022.

The Company continually identifies and evaluates actions to maintain adequate liquidity.

These include, and are not limited to:

further reductions in capital expenditures, operating expenses and administrative costs and additional financings.

reductions in capital expenditures, operating expenses and administrative costs and additional financings.

Additionally, we will continue to pursue various opportunities to raise capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities.

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We have significant contractual obligations of which our debt service obligations and the capital expenditures associated with our ship purchases represent our largest funding needs.

As of March 31, 2023, we had $7.8 billion of committed financing for our ships on order.

As of March 31, 2023, our obligations due through March 31, 2024 primarily consisted of $2.1 billion related to debt maturities, $1.3 billion related to interest on debt and $2.7 billion related to progress payments on our ship orders and, based on the expected delivery date, the final installment payable due upon the delivery of Silver Nova, Icon of the Seas, and Celebrity Ascent .

As of March 31, 2023, we had liquidity of $3.9 billion, including cash and cash equivalents of $1.2 billion, and $2.6 billion of undrawn revolving credit facility capacity.

Our revolving credit facilities were partially utilized through a combination of amounts drawn and letters of credit issued under the facilities as of March 31, 2023.

As of June 30, 2023, we had $8.3 billion of committed financing for our ships on order.

As of June 30, 2023, our obligations due through June 30, 2024 primarily consisted of $1.7 billion related to debt maturities, $1.3 billion related to interest on debt and $4.1 billion related to progress payments on our ship orders and, based on the expected delivery date, the final installment payable due upon the delivery of Icon of the Seas, Celebrity Ascent, Utopia of the Seas, and Silver Ray .

As of June 30, 2023, we had liquidity of $3.7 billion, including cash and cash equivalents of $0.7 billion, and $3.0 billion of undrawn revolving credit facility capacity.

We have agreed with certain of our lenders not to pay dividends or engage in stock repurchases unless we repay the remaining principal payments that were deferred under our export credit facilities in 2020 and 2021.

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In 2021 and 2022, the financial covenant levels were modified for 2023 and 2024.

As of March 31, 2023, we were in compliance with our financial covenants and we estimate that we will be in compliance for at least the next twelve months.

As of June 30, 2023, we were in compliance with our financial covenants and we estimate that we will be in compliance for at least the next twelve months.

The declaration of dividends shall at all times be subject to the final determination of our board of directors that a dividend is prudent at that time in consideration of the needs of the business.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis