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CARNIVAL CORP (CCL)·Q2 2021 Earnings Summary

Executive Summary

  • Q2 2021 revenue was $50 million with GAAP net loss of $2.072 billion and diluted EPS of $(1.83); adjusted net loss was $2.036 billion, reflecting the continued phased resumption of guest operations and minimal revenue base .
  • Liquidity remained robust: $9.3 billion of cash and short-term investments at quarter-end; customer deposits rose to $2.5 billion, signaling demand recovery despite minimal advertising .
  • Booking volumes for all future cruises increased 45% vs Q1 2021; management expects positive cash flow from the 27 ships operating in Q3, although overall Q3 and FY21 net losses are still expected .
  • Debt repricing reduced future annual interest expense by over $120 million and export credit agencies approved in principle ~$1.0 billion of principal deferrals, extending maturities; 42 ships across eight brands are planned to be back by fiscal year-end, over 50% of capacity .

What Went Well and What Went Wrong

What Went Well

  • Booking momentum accelerated: Q2 2021 future cruise bookings were 45% above Q1; cumulative 2022 advanced bookings ahead of a very strong 2019, achieved with minimal advertising .
  • Liquidity and refinancing: $9.3 billion in cash/STI; term loan repricing cuts annual interest by >$120M; ECA approvals in principle to defer ~$1.0B of principal; management focused on further refinancings to lower rates and extend maturities .
  • Strategic fleet restart and ESG: 42 ships announced by Nov 30 (over half capacity); published 2030 goals/2050 aspirations (decarbonization via LNG, batteries, fuel cells) aligning with IMO targets .
  • Quote: “We are working aggressively on our path to return our full fleet to operations by next spring… 42 ships… by fiscal year-end” .

What Went Wrong

  • Revenue collapse and losses: Revenue down 93% YoY to $50M; operating loss $(1.616)B; GAAP net loss $(2.072)B; adjusted net loss $(2.036)B as demand recovery remained early-stage and operations paused .
  • Near-term headwinds: Lower occupancy due to protocols/restrictions; restart costs and higher CapEx in H2; management continues to expect net losses in Q3 and FY21 .
  • Limited port access and dynamic protocols constrain deployment options; Asia/Australia largely closed; ramp-up will be “choppy” across regions .

Financial Results

Consolidated summary (YoY comparison)

MetricQ2 2020Q2 2021
Revenue ($USD Millions)$740 $50
Operating Income (Loss) ($USD Millions)$(4,177) $(1,616)
GAAP Net Income (Loss) ($USD Millions)$(4,374) $(2,072)
Adjusted Net Income (Loss) ($USD Millions)$(2,382) $(2,036)
Diluted EPS ($USD)$(6.07) $(1.83)

Narrative: Revenue fell 93% YoY due to ongoing pause and limited operations; operating loss improved vs Q2 2020 on cost actions during pause and lower impairment charges .

Segment breakdown

MetricQ2 2020Q2 2021
NAA Total Revenue ($USD Millions)$457 $9
NAA Operating Income (Loss) ($USD Millions)$(2,860) $(930)
EA Total Revenue ($USD Millions)$238 $33
EA Operating Income (Loss) ($USD Millions)$(1,174) $(582)

KPIs and cash metrics

KPIQ4 2020Q1 2021Q2 2021
Monthly average cash burn rate ($USD Millions)$500 $500 (Q1 actual; first-half forecast $550) $500 (first half actual)
Booking volumes vs prior quarter (%)—+90% vs Q4 2020 +45% vs Q1 2021
Customer deposits ($USD Billions)$2.2 $2.2 $2.5
Cash & Short-term Investments ($USD Billions)$9.5 $11.5 $9.3
Ships announced to resume by fiscal YE—6 brands announced resumption 42 ships across 8 brands (>50% capacity)
ALBDs planned Q3 2021 (Millions)——3.8
Interest expense guidance (FY) ($USD Billions)~$1.6 $1.7 (pre-refi), expected lower post-refi $1.6 (updated)
Annual interest savings from repricing ($USD Millions)——>$120

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Interest Expense ($USD Billions)FY 2021$1.7 $1.6 Lowered (refinancing savings)
Net Income (GAAP and adjusted)Q3 2021, FY 2021—Expect net loss Maintained conservative outlook
Monthly cash burn (avg)H1 2021~$550M forecast $500M actual Improved vs forecast
ALBDsQ3 2021—3.8M New operational metric
CapEx timingFY 2021—Weighted to H2 (dry docks) Timing clarification
Interest savings from repricingOngoing—>$120M/yr New savings detail

Earnings Call Themes & Trends

TopicQ4 2020 (Jan 11)Q1 2021 (Apr 7)Q2 2021 (Jun 24)Trend
Pricing & demand2H21/1H22 bookings within/above historical ranges; pricing down ~1% ex-FCC/bundles Pricing for 2022 up ex-bundles/FCC; bookings +90% QoQ 2022 booking volumes strong; FCC impact to reduce over time; pricing environment “very strong” Improving pricing and volumes; FCC dilution fades
Liquidity & refinancing$9.5B cash; plan to optimize capital structure $11.5B cash; $4.4B raised; focus on refinancing $9.3B cash; repriced term loan; >$120M interest savings; ECA principal deferral ~$1.0B Liquidity adequate; refinancing lowering costs
Fleet restartAIDA/Costa limited; gradual ramp 6 brands resuming; staggered ramp; 60–90 day crew ramp 42 ships by fiscal YE; full fleet targeted by spring 2022 Accelerating restart
Occupancy & protocolsWarm lay-up; protocols cost; resume with limited capacity Initial <50% occupancy then ramp; 30–50% occupancy breakeven per ship Vaccinated voyages without distancing; other itineraries constrained; aiming for higher occupancy over time Constraints easing; occupancy ramps
ESG & technologyLNG, shore power, AAQS; carbon reduction progress Expansion of LNG fleet; net-zero ambition (batteries, fuel cells) 2030/2050 goals; LNG to ~20% capacity; cost/fuel efficiencies Deepening ESG commitments
Regulatory/legalCDC conditional sail order; ongoing engagement Working to resume from U.S.; vaccine policy evolving Florida policy questions; legal dynamics; continued agility Progress with regulators, evolving policies

Management Commentary

  • “We are working aggressively on our path to return our full fleet to operations by next spring… 42 ships… over half of our capacity… by fiscal year end.”
  • “Booking volumes… were 45% ahead of… the first quarter… cumulative advanced book position for full-year 2022 is ahead of a very strong 2019.”
  • “We ended the second quarter with $9.3 billion of cash and short-term investments… reduce interest expense by over $120 million per year… approval in principle to defer approximately $1.0 billion of principal payments.”
  • “We see the potential for improved EBITDA in 2023 compared to 2019… richer mix of premium cabins and structurally lower costs.”

Q&A Highlights

  • Pricing and FCC impact: FCCs represent a meaningful short-term mix in 2022 bookings; management expects only a “few percentage points” dilution in ultimate yield as new bookings dominate; pricing environment “very strong” .
  • Occupancy and vaccinated cruises: Vaccinated voyages have no distancing/capacity limits; other itineraries constrained; ships reached ~50%+ occupancy by end of Q2 for limited restarts; occupancy expected to rise over time .
  • Liquidity and breakeven: Sufficient liquidity to return to full operations; positive EBITDA anticipated as fleet returns and seasonality helps (summer historically drives ~2/3 of EBITDA in 4 months), but exact breakeven timing not guided .
  • Interest expense and CapEx: FY21 interest expense updated to ~$1.6B (from $1.7B prior); CapEx heavier in H2 due to dry docks; restart-related expenses accelerating .
  • Regulatory/Florida: Ongoing dialogue with Governor’s office and CDC; proceeding with primarily vaccinated cruises and restart across U.S. ports .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2021 revenue and EPS was unavailable due to data access limits during this analysis window; as a result, we cannot provide a definitive beat/miss comparison for Q2 2021 against SPGI consensus [GetEstimates errors].
  • Given management’s guidance for continued net losses in Q3 and FY21 and restart-related costs, we expect estimate revisions to focus on cash burn cadence, occupancy ramps, and interest cost reductions .

Key Takeaways for Investors

  • Demand recovery is real: 45% QoQ booking volume increase and rising customer deposits indicate pent-up demand; pricing commentary for 2022 is constructive even after FCC dilution .
  • Balance sheet resiliency improving: >$120M annual interest savings, $1.0B principal deferrals, and $9.3B cash support the multi-quarter restart; watch for further liability management .
  • Near-term P&L remains loss-making: Minimal revenue base and restart costs drive continued net losses; occupancy constraints and higher H2 CapEx weigh on margins until fleet ramps .
  • Operational catalysts: 42 ships (50%+ capacity) back by fiscal YE; full fleet targeted by spring 2022; vaccinated itineraries enable higher load factors sooner .
  • ESG positioning strengthens long-term ROIC: LNG fleet expansion and cost efficiencies (unit cost and fuel consumption reductions) underpin margin recovery into 2023 as demand normalizes .
  • Trading lens: Near-term stock reaction likely tied to restart execution milestones (ship count, occupancy, ALBDs) and financing actions; medium-term thesis hinges on yield recovery vs 2019 and structural cost advantages .
  • Monitor U.S. regulatory developments: Policy changes (e.g., Florida) and CDC guidance can affect mix of vaccinated cruises and occupancy ramps; management remains agile across jurisdictions .