NCLH Stock Price

[jules181]

Sorry, a typo on my part...$1.16bn not $1.6.

 

The AP turnover is already incorporated into the cash burn figures.  Looking at it again would be double counting it.  We're just trying to figure out how much cash can be expected to come in, and that's a function of converting AR to cash + deposits/payments received but not captured in AR.

 

The assumption is, most costs incurred are fixed and need to be paid regardless of how full the boat is. (or if it even sails).   So you can keep the burn constant (while maybe making minimal adjustments based on the creation of a variable cost model)

 

I'm suggesting trying to model out cash inflows for the next quarter or two to see exactly how long NCL can survive with the cash on hand based on a known relatively constant cash burn.

 

One wildcard in all this, is to see exactly how costly the cancelled sailings in Jan will be on the Q1 results.  From a business perspective, I think that will be one of the worst decisions that was made during the pandemic.  If people were willing to cruise, and the govt was letting people cruise, why would you wipe out your contribution margin.  Especially when you have to make debt payments, pay staff, port fees, fuel etc...

 

Just as a disclaimer, while I'm a financial analyst by training, I don't do this for a living, nor do I have anything more than superficial knowledge of exactly what goes into cruise ship operations.  

[Karaboudjan]

1 hour ago, jules181 said:

One wildcard in all this, is to see exactly how costly the cancelled sailings in Jan will be on the Q1 results.  From a business perspective, I think that will be one of the worst decisions that was made during the pandemic.  If people were willing to cruise, and the govt was letting people cruise, why would you wipe out your contribution margin.  Especially when you have to make debt payments, pay staff, port fees, fuel etc...

 

 

What if the contribution would have been negative?  Fuel would cost much more to sail than stay in port or anchor.  They must know very well what the net gain or loss will be from sailing at various occupancy levels, and there could very well be a point where it costs less to cancel and keep the ship in port.

[jules181]

16 minutes ago, Karaboudjan said:

 

What if the contribution would have been negative?  Fuel would cost much more to sail than stay in port or anchor.  They must know very well what the net gain or loss will be from sailing at various occupancy levels, and there could very well be a point where it costs less to cancel and keep the ship in port.

 

The assumption you make is that the ship is moored in port.  During the last cruise shutdown, I don't believe the ships were moored, instead they were just circling off the coast.  

 

Even keeping the lights on requires diesel.  

 

But mooring the ship in port creates another question, what's the cost of mooring the vessel vs. the diesel to keep it off the coast?  Are there port slots available for every ship?  

 

I don't usually follow cruise lines, but now you have me quite curious to go in on the Q1 earnings call to see the narrative around the shutdown and how it's justified. 

 

Remember, some ships kept sailing throughout the entire month of January/Feb. 

 

 

 

 

[Karaboudjan]

14 minutes ago, jules181 said:

 

The assumption you make is that the ship is moored in port.  During the last cruise shutdown, I don't believe the ships were moored, instead they were just circling off the coast.  

 

Even keeping the lights on requires diesel.  

 

But mooring the ship in port creates another question, what's the cost of mooring the vessel vs. the diesel to keep it off the coast?  Are there port slots available for every ship?  

 

I don't usually follow cruise lines, but now you have me quite curious to go in on the Q1 earnings call to see the narrative around the shutdown and how it's justified. 

 

Remember, some ships kept sailing throughout the entire month of January/Feb. 

 

 

 

 

 

I was basing my comments on the Escape, which I was following since I was on the first re-restart cruise.  As I recall she spent most of the time anchored off of Port Canaveral with one or two trips into the pier, and possibly one or two short loops to nowhere in particular.  That seems pretty typical for what I have seen happening during the shutdown.  On the other hand, though, on our cruise we had traveled over 2000 miles at one point and lot of that was at relatively good speed so I think it is pretty safe to conclude that the ship will consume a lot more fuel on a cruise.

[At Sea At Peace]

2 hours ago, jules181 said:

Sorry, a typo on my part...$1.16bn not $1.6.

 

The AP turnover is already incorporated into the cash burn figures.  Looking at it again would be double counting it.  We're just trying to figure out how much cash can be expected to come in, and that's a function of converting AR to cash + deposits/payments received but not captured in AR.

 

 

Sorry, but one cannot support the purported factor in the cash burn figure that only one side, payables, accruals "are already incorporated" and yet the other side, receivables and prepaids, are not.  Fuzzy interpretive non-GAAP accounting.

 

The cash burn disclosures (amounts) are from NCL and are in an SEC filing under penalties of perjury of management and annual audited financial statements.

 

If they could have made it look, sound or seem better, i.e., spin, they would have.

 

2 hours ago, jules181 said:

Just as a disclaimer, while I'm a financial analyst by training, I don't do this for a living, nor do I have anything more than superficial knowledge of exactly what goes into cruise ship operations.  

 

😲

 

[jules181]

1 hour ago, At Sea At Peace said:

 

Sorry, but one cannot support the purported factor in the cash burn figure that only one side, payables, accruals "are already incorporated" and yet the other side, receivables and prepaids, are not.  Fuzzy interpretive non-GAAP accounting.

 

The cash burn disclosures (amounts) are from NCL and are in an SEC filing under penalties of perjury of management and annual audited financial statements.

 

If they could have made it look, sound or seem better, i.e., spin, they would have.

 

 

😲

 

You're missing what I'm saying, a cash burn amount by definition takes into account the AP turnover. 

 

I agree with you 100% you need to know how AP turnover affects cash because that's part of the cash burn number.  

 

What I'm suggesting is taking that cash burn figure (provided by management) and doing the work to find out how much of the burn is covered by operating cash inflows. 

 

You have cash out (of which AP is a part of) nicely reported, however, you don't have cash in.  Because they use the indirect method of cashflow presentation where they reconcile a net income number back to a net cashflow number.  

 

As an investor, to determine the viability of the company, I want to know:

1. The difference between cash in and cash out in a given quarter
2. How many quarters can that shortfall be sustained with cash on hand
3. How many quarters before: cash in > cash out

GAAP is meaningless in this analysis.  Income statements are creatures of opinion and accounting treatment.  You can't fudge cashflow (save for deliberate negligence and fraud).  It's fact not opinion.  You either have the cash or you don't.  In this case, with these companies, the cashflow from operations is probably the most important financial statement, and I'd say, nothing else really matters.  Especially when looking at short term liquidity and going concern potential. 

 

But in order to make decisions we need to convert that indirect cashflow statement to a direct presentation.  (and OMG, I think I've just turned into my Financial Statement Analysis prof...guess I was paying attention)

[Crazy planning mom]

7 minutes ago, jules181 said:

You're missing what I'm saying, a cash burn amount by definition takes into account the AP turnover. 

 

I agree with you 100% you need to know how AP turnover affects cash because that's part of the cash burn number.  

 

What I'm suggesting is taking that cash burn figure (provided by management) and doing the work to find out how much of the burn is covered by operating cash inflows. 

 

You have cash out (of which AP is a part of) nicely reported, however, you don't have cash in.  Because they use the indirect method of cashflow presentation where they reconcile a net income number back to a net cashflow number.  

 

As an investor, to determine the viability of the company, I want to know:

1. The difference between cash in and cash out in a given quarter
2. How many quarters can that shortfall be sustained with cash on hand
3. How many quarters before: cash in > cash out

GAAP is meaningless in this analysis.  Income statements are creatures of opinion and accounting treatment.  You can't fudge cashflow (save for deliberate negligence and fraud).  It's fact not opinion.  You either have the cash or you don't.  In this case, with these companies, the cashflow from operations is probably the most important financial statement, and I'd say, nothing else really matters.  Especially when looking at short term liquidity and going concern potential. 

 

But in order to make decisions we need to convert that indirect cashflow statement to a direct presentation.  (and OMG, I think I've just turned into my Financial Statement Analysis prof...guess I was paying attention)

Ok, bottom line, do you think they will still be sailing in October?

[BermudaBound2014]

2 hours ago, Crazy planning mom said:

Ok, bottom line, do you think they will still be sailing in October?

 

You didn't ask me, but I believe they will be sailing in October. What I don't know is under what capacity.

 

At the current cash burn rate, it appears they only have a few more months.

 

I have said all along (and still firmly believe) that the cruise industry has suffered a tremendous blow in terms of public perception. There are bookings now due to pent up demand and FCC,  but there is a percentage of Johnny Public that will choose other vacations over cruising due to media coverage at the start of the pandemic which (unfairly) painted a picture of cruising in a petri dish. Chapter 11 requires an investor to believe the industry will overcome this image quickly.

 

 

[At Sea At Peace]

2 hours ago, jules181 said:

 

GAAP is meaningless in this analysis.  Income statements are creatures of opinion and accounting treatment.  You can't fudge cashflow (save for deliberate negligence and fraud). 

 

Please, the balance sheet, income statement and statement of cash flows are presented on a GAAP basis and, where appropriate, reconciled to GAAP In any non-GAAP presentations.

 

GAAP is not meaningless, it is the fundamental basis of accounting and reporting as a requirement!  Generally Accepted Accounting Principles.  There is no such thing as 'except on CruiseCritic.

 

Income statements are not 'creatures of opinion'.  YIKES.

 

They have SEC reported their CASH BURN RATE (yes, cap's means out loud).  You can put all the lipstick on it you want.

 

Hopefully those relying on such aren't too deep or too long. 

Edited February 28, 2022 by At Sea At Peace

[BermudaBound2014]

Frank Del Rio is listed as #2 on the top ten overpaid CEO's. Not sure exactly how he earned this 'honor'. Let us not forget his history with the bankrupt Rennaissance Cruises. 

 

Here are 2021’s most overpaid CEOs (msn.com)

 

Edited March 2, 2022 by BermudaBound2014

[At Sea At Peace]

1 hour ago, BermudaBound2014 said:

Frank Del Rio is listed as #2 on the top ten overpaid CEO's. Not sure exactly how he earned this 'honor'. Let us not forget his history with the bankrupt Rennaissance Cruises. 

 

Here are 2021’s most overpaid CEOs (msn.com)

 

 

Yes, it is.

 

And others.

 

83% shareholders voted against it.  BOD ignored.  They could be 'clawed back' on that.

 

Not all in cash though, except for about $10M in the unique calculation of other compensation starting in 2020 (below). 

 

2021 out yet?

 

 

 

[bmwman]

On 2/28/2022 at 10:06 PM, At Sea At Peace said:

 

Please, the balance sheet, income statement and statement of cash flows are presented on a GAAP basis and, where appropriate, reconciled to GAAP In any non-GAAP presentations.

 

GAAP is not meaningless, it is the fundamental basis of accounting and reporting as a requirement!  Generally Accepted Accounting Principles.  There is no such thing as 'except on CruiseCritic.

 

Income statements are not 'creatures of opinion'.  YIKES.

 

They have SEC reported their CASH BURN RATE (yes, cap's means out loud).  You can put all the lipstick on it you want.

 

Hopefully those relying on such aren't too deep or too long. 

This is a perfect comment and makes me feel for the ordinary board. Make no mistake there are some VERY squeaky bottoms out there at investor level and the drop in share price is worrying. I am a big big fan of NCL but also a realist and I think the market is not happy at the capital costs of the Prima and Viva which I firmly believe will be the only two Leonardo ships. I have to say pushing on with these in the current market conditions is very brave and one wonders if it is FDR last vanity project.

 

If you speak to Wealth Mangers and fund managers most of clever money is keeping well away from our beloved industry.

 

I was recently on vacation at a large all inclusive hotel in the Med and met a lot of people when talking said they would never cruise again as the land based resorts are now such good value and they are fed up with all lines nickel and Diming. Of course this is a tiny sample but I wonder if we measured with  the Standard Deviations and probability that this is accurate if it would mean the end of the mega ship. 

 

I can assure you they are having real issues filling Wonder of seas over at RCCL week in week out (look at the prices for a new ship)  and I suspect prices on all lines will remain very low this year.

 

I am a cruise acholic (not Princess) but I agree the industry has suffered  lot of damage "below the water line" . 

 

I hope with all my heart NCL survive this  period (FDR needs to go I suggest) and that we have many more years sailing with them (I want to get to Ambassador level -  ha ha ) 

 

 

 

[phillygwm]

5 hours ago, bmwman said:

I hope with all my heart NCL survive this  period (FDR needs to go I suggest) and that we have many more years sailing with them (I want to get to Ambassador level -  ha ha ) 

 

I think there's a big difference between NCL's current financial condition and whether you'll be sailing with "them" for many more years.

 

Let's assume the worst, that the corporation files for bankruptcy.  Simplifying things somewhat, they can restructure (Chapter 11) or liquidate (Chapter 7.) 

 

In a Chapter 11, shareholders would be wiped out but NCL would survive, basically under new ownership.  Think of many of the airlines which went belly-up a while back.  You can still book a flight on Delta, American, etc.  Your frequent flyer programs remained, though they've been tweaked.  No matter what happens, the company needs its "hard core" cruisers to keep sailing, regardless of who the equity is, so they're very unlikely to totally blow-up Latitudes Rewards.

 

In a Chapter 7, the assets of the company are auctioned to the highest bidders.  That's a last resort and I don't really see it happening but it could result in a few different outcomes.   Even then, it's probable that some other line picks up the marketing book and does some sort of program to bring in the Latitudes members.

[BermudaBound2014]

6 hours ago, phillygwm said:

In a Chapter 11, shareholders would be wiped out but NCL would survive, basically under new ownership.  Think of many of the airlines which went belly-up a while back. 

I’ve thought chapter 11 was most likely since the onset of the pandemic, but as things continue to spiral downward on the financial front I’m starting to think we maybe passing a point of no return.

 

Airlines were bailed out by the feds. It is unlikely cruise lines will receive such grace. That leaves private equity and hedge funds. I believe NCL has already leveraged both islands and a few cruise ships and their fleet is tiny in comparison. I see more dilution as inevitable, and who is going to invest?
 

The fact that NCL couldn’t hold the $18 bottom is troublesome, and losing more than 40% in a year (the great comeback year no less) should have everyone taking a pause. None of the cruise lines look pretty, but ncl might just be too small of a fish in the pond. 
 

 

 

[Crazy planning mom]

If they sold some ships or even one of their 2 luxury lines, would that buy them some time?

Edited March 5, 2022 by Crazy planning mom

[At Sea At Peace]

39 minutes ago, Crazy planning mom said:

If they sold some ships or even one of their 2 luxury lines, would that buy them some time?

 

That's a good question. 

 

We'd need to know which ships or which luxury line could be sold, and, could such be sold "net of related debt" to even make a tinker's dam.  They've leveraged everything, purportedly, before the islands, etc.  

 

IMO, and sadly, it appears they'll be the first to have to walk the plank.  Equity evaporates, debt priorities take control (panic with suppliers, vendors, contractors, etc.) that are all unsecured, and a 'to be determined' liquidity lifeline of customer deposits up in the air.

 

It's not an indictment on NCL, it is about everything that they couldn't control.  Everyone can sing 'bookings are up' but it really doesn't matter as actual cruising demand (evidenced by the ship (including some of the newest and best) passengers counts across CruiseCritic) is 'not adding up' to the robust level needed to stop the massive monthly cash burn (bleeding).

 

The pandemic became a two-year gut punch and resumption has burned more dollars and losses than total shutdown.  Economic and geopolitical destabilization thrust forth, fuel costs doubled (and rising), and soon expirations of fuel swap hedges have all 'piled on' the cruise industry. 

 

Yikes.  Yes, the ships will survive.

[Crazy planning mom]

22 minutes ago, At Sea At Peace said:

 

That's a good question. 

 

We'd need to know which ships or which luxury line could be sold, and, could such be sold "net of related debt" to even make a tinker's dam.  They've leveraged everything, purportedly, before the islands, etc.  

 

IMO, and sadly, it appears they'll be the first to have to walk the plank.  Equity evaporates, debt priorities take control (panic with suppliers, vendors, contractors, etc.) that are all unsecured, and a 'to be determined' liquidity lifeline of customer deposits up in the air.

 

It's not an indictment on NCL, it is about everything that they couldn't control.  Everyone can sing 'bookings are up' but it really doesn't matter as actual cruising demand (evidenced by the ship (including some of the newest and best) passengers counts across CruiseCritic) is 'not adding up' to the robust level needed to stop the massive monthly cash burn (bleeding).

 

The pandemic became a two-year gut punch and resumption has burned more dollars and losses than total shutdown.  Economic and geopolitical destabilization thrust forth, fuel costs doubled (and rising), and soon expirations of fuel swap hedges have all 'piled on' the cruise industry. 

 

Yikes.  Yes, the ships will survive.

I am sorry but are you saying NCL will go bankrupt but the ships will sail under new ownership at NCL or they will be sold to other lines?

[mscdivina2016]

2 minutes ago, Crazy planning mom said:

I am sorry but are you saying NCL will go bankrupt but the ships will sail under new ownership at NCL or they will be sold to other lines?

In a nut shell thats what it could mean. Or to answer your question, yes to both.

All shareholders and those who are booked get screwed if they go reorganize way.

 

Question is who would want the ships? Who has the money to buy them? At what price? 

[Crazy planning mom]

55 minutes ago, mscdivina2016 said:

In a nut shell thats what it could mean. Or to answer your question, yes to both.

All shareholders and those who are booked get screwed if they go reorganize way.

 

Question is who would want the ships? Who has the money to buy them? At what price? 

I am just trying to figure if I should hold on to my October sailing.  I really want to go.

[oteixeira]

43 minutes ago, Crazy planning mom said:

I am just trying to figure if I should hold on to my October sailing.  I really want to go.

At the end of the day that is up to you but many many people are also predicting they will come out of this fine and rebound to their original stock price if not more.  Also, a stock price while important does not mean a company is going out of business, that is all about money in and money out and being able to pay your bills and employees.  

[phillygwm]

2 hours ago, Crazy planning mom said:

I am just trying to figure if I should hold on to my October sailing.  I really want to go.

Sure, why not?  Final payment on an October cruise would be in June.  But let's look at the worst case scenario:  In September, NCL goes under in a liquidation (I personally think this is unlikely but let's go with it.)  You've paid for the cruise, presumably, on a credit card so you would file a claim for reimbursement.  Yes, it's all a big hassle but you should be made mostly whole.  You might be out airfare to the port if you couldn't schedule a similar cruise on a different line.  And, of course, if you have trip insurance I believe that's one of the things that would be covered.

[At Sea At Peace]

13 hours ago, Crazy planning mom said:

I am sorry but are you saying NCL will go bankrupt but the ships will sail under new ownership at NCL or they will be sold to other lines?

 

For those not involved with Governance (NCL Board of Directors) or CEO, CFO and Executive team of insiders, or those investors who hold combined positions of control in $12B of debt, the assessments of the rest of us are truly guesses (some more detailed and fact-based than others, but all the same).

 

IMO, the question asked by @mscdivina2016 below "who would want them" is THE question at this time.  If they are hemorrhaging almost $400M a month (pretty close to operating GAAP net losses and actual CASH burn rates; both per SEC filings) I would add to "who would want them" "now, or when?"

 

With regards to "who has the money to buy them" is likely those who already control the $12B of debt.  This is theoretically as opposed to and outside purchaser of (1) the company or (2) the assets.

 

In both options, taking control of NCL through a pre-arranged reorganization would be the most preferential, keeping the entity intact (it costs a lot of money to establish a public company and title to ownership of ships, port agreements and leases, etc. and create a new SEC public platform if it were to remain public).  The control debt holders make a deal that cannot be overcome by more junior and unsecured debt holders and creditors in the eyes of the 'reorganization jurisdiction court' that is appropriate.

 

13 hours ago, mscdivina2016 said:

In a nut shell thats what it could mean. Or to answer your question, yes to both.

All shareholders and those who are booked get screwed if they go reorganize way.

 

Question is who would want the ships? Who has the money to buy them? At what price? 

 

Good questions.

 

Others have also made points regarding the benefit potential of credit card bank possibly allowing for higher chance of claw back.  I don't know, but it certainly doesn't hurt to send an email to customer service (i.e., documentation).

 

One reference in the 2021 earnings release, which seems to purport that credit card companies that "advance cash" on behalf of customers currently or potentially demand collateral for such advances (which is another dilemma for the cruise line) via pledging other assets (securities, etc.) ~

 

"and to work with credit card processors to satisfy current or potential future demands for collateral on cash advanced from customers relating to future cruises"

 

 

https://last10k.com/sec-filings/nclh

 

 

[BermudaBound2014]

18 hours ago, Crazy planning mom said:

I am just trying to figure if I should hold on to my October sailing.  I really want to go.

 

As mentioned, everyone here is speculating. I believe the May financial release may be very telling. As long as you only have a deposit down, I wouldn't worry, but only you know your financial position and what you can afford to lose if things go sour quickly.

 

I tend to be fiscally conservative and would not allow NCL to hold a substantial amount of my funds at this time. I don't believe we are automatically protected by our credit card as some would suggest and we should all know that we are not protected for insolvency by all travel insurance policies. That's why I cringe every-time I see someone suggest purchasing insurance directly from NCL. It's more important than ever to read the policy in detail.

 

15 hours ago, phillygwm said:

And, of course, if you have trip insurance I believe that's one of the things that would be covered.

 

Unfortunately, this is not true. Even when the insurance policy does cover any form of insolvency (and some do), the terms of the policy are not consumer friendly. I can't stress enough how important it is to read the actual policy. Insurance is in the business to maximize profit and often that means consumers are left holding the bag.

 

In addition, some credit card  companies have added clauses which do not cover travel insolvency. This is from the chase sapphire card list of what is NOT covered. 

Trip Cancellation/Trip Interruption Insurance (chase.com)

What’s Not Covered

This is not an exhaustive list. Examples include:

• Travel arrangements canceled or changed by a common carrier, tour operator, or any travel agency unless the cancellation is the result of severe weather or an organized strike affecting public transportation
• Change in plans or financial circumstances
• A pre-existing condition
• Traveling against the advice of a physician
• A declared or undeclared war
• Trips that exceed 60 days in duration are not covered
• Financial insolvency of the Cardholder’s travel agency, tour operator, or travel supplier

 

 

[littlelulu01]

This rhetoric about NCL and Frank Del Rio sounds very familiar to what I read about Bob Chapek and Disney. You read the same speculations in forums that Disney is going under …. All just wild speculation from strangers on an Internet forum.  
 

There’s a particular pessimism on these forums that no matter what, seems convinced the cruise industry is doomed.  They’ve had a terrible couple years but their future as well as travel in general is poised to really take off this year.
 

Most of my friends are booked on cruises, trips to Hawaii, vacations in Italy… people are sick of hunkering down, sick of all the pessimism and are done with COVID.  I’m betting ncl does just fine. 

[phillygwm]

3 hours ago, BermudaBound2014 said:

Unfortunately, this is not true. Even when the insurance policy does cover any form of insolvency (and some do), the terms of the policy are not consumer friendly. I can't stress enough how important it is to read the actual policy. Insurance is in the business to maximize profit and often that means consumers are left holding the bag.

 

In addition, some credit card  companies have added clauses which do not cover travel insolvency. This is from the chase sapphire card list of what is NOT covered. 

Trip Cancellation/Trip Interruption Insurance (chase.com)

What’s Not Covered

This is not an exhaustive list. Examples include:

• Travel arrangements canceled or changed by a common carrier, tour operator, or any travel agency unless the cancellation is the result of severe weather or an organized strike affecting public transportation
• Change in plans or financial circumstances
• A pre-existing condition
• Traveling against the advice of a physician
• A declared or undeclared war
• Trips that exceed 60 days in duration are not covered
• Financial insolvency of the Cardholder’s travel agency, tour operator, or travel supplier

You're correct that the trip interruption/cancellation benefit on the Chase Sapphire Reserve and Amex Platinum cards doesn't cover insolvency.  I'm not sure about others but would assume the same.  However, that doesn't absolve the card issuer from the Fair Credit Billing Act.  So if NCL went belly-up within 60 days of your payment, you can file a dispute (you can file after that point as well but the outcome is not guaranteed.)

 

Obviously, there's a potential risk if your payment was outside of the window, which is why you would opt for travel insurance that WOULD cover such an eventuality, if you were really concerned about it.  Personally, my out-of-pocket for cruise fares isn't that great because I'm CAS, so I'm willing to take the risk.  But others' mileage may vary.