Norwegian Cruise Line Holdings Ltd. [NCLH] Filings

10-Q 1 nclh-20210930x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35784

NORWEGIAN CRUISE LINE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)


Bermuda		98-0691007
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7665 Corporate Center Drive, Miami, Florida 33126		33126
(Address of principal executive offices)		(zip code)

(305) 436-4000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary shares, par value $0.001 per share		NCLH		The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ⌧	Accelerated filer ◻
Non-accelerated filer ◻	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 370,033,061 ordinary shares outstanding as of October 31, 2021.

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TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 6.	Exhibits	50

SIGNATURES		53

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue
Passenger ticket	$	86,127	$	4,667	$	87,877	$	859,293
Onboard and other		66,954		1,851		72,672		411,036
Total revenue		153,081		6,518		160,549		1,270,329
Cruise operating expense
Commissions, transportation and other		32,338		4,038		47,935		371,007
Onboard and other		19,306		4,728		21,841		82,889
Payroll and related		154,440		65,571		323,225		441,462
Fuel		79,238		48,224		175,931		222,240
Food		16,672		3,426		27,314		59,639
Other		137,762		64,170		294,092		308,832
Total cruise operating expense		439,756		190,157		890,338		1,486,069
Other operating expense
Marketing, general and administrative		229,142		156,656		617,820		558,781
Depreciation and amortization		173,289		177,488		517,867		554,937
Impairment loss		—		—		—		1,607,797
Total other operating expense		402,431		334,144		1,135,687		2,721,515
Operating loss		(689,106)		(517,783)		(1,865,476)		(2,937,255)
Non-operating income (expense)
Interest expense, net		(161,205)		(139,664)		(1,122,905)		(323,108)
Other income (expense), net		4,720		(23,680)		57,464		(32,275)
Total non-operating income (expense)		(156,485)		(163,344)		(1,065,441)		(355,383)
Net loss before income taxes		(845,591)		(681,127)		(2,930,917)		(3,292,638)
Income tax benefit (expense)		(294)		3,761		(2,949)		19,057
Net loss	$	(845,885)	$	(677,366)	$	(2,933,866)	$	(3,273,581)
Weighted-average shares outstanding
Basic		370,016,479		271,435,350		356,591,143		241,578,995
Diluted		370,016,479		271,435,350		356,591,143		241,578,995
Loss per share
Basic	$	(2.29)	$	(2.50)	$	(8.23)	$	(13.55)
Diluted	$	(2.29)	$	(2.50)	$	(8.23)	$	(13.55)

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net loss	$	(845,885)	$	(677,366)	$	(2,933,866)	$	(3,273,581)
Other comprehensive income (loss):
Shipboard Retirement Plan		98		101		295		305
Cash flow hedges:
Net unrealized gain (loss)		(45,134)		87,710		(73,497)		(163,672)
Amount realized and reclassified into earnings		12,948		36,072		48,328		86,853
Total other comprehensive income (loss)		(32,088)		123,883		(24,874)		(76,514)
Total comprehensive loss	$	(877,973)	$	(553,483)	$	(2,958,740)	$	(3,350,095)

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)


	September 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	1,934,816	$	3,300,482
Accounts receivable, net		990,384		20,578
Inventories		108,177		82,381
Prepaid expenses and other assets		247,824		154,103
Total current assets		3,281,201		3,557,544
Property and equipment, net		13,480,120		13,411,226
Goodwill		98,134		98,134
Trade names		500,525		500,525
Other long-term assets		1,370,047		831,888
Total assets	$	18,730,027	$	18,399,317
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt	$	543,739	$	124,885
Accounts payable		94,951		83,136
Accrued expenses and other liabilities		860,864		596,056
Advance ticket sales		1,440,294		1,109,826
Total current liabilities		2,939,848		1,913,903
Long-term debt		11,864,794		11,681,234
Other long-term liabilities		1,042,146		450,075
Total liabilities		15,846,788		14,045,212
Commitments and contingencies (Note 10)
Shareholders’ equity:
Ordinary shares, $0.001 par value; 980,000,000 shares authorized, 370,032,455 shares issued and outstanding at September 30, 2021 and 490,000,000 shares authorized, 315,636,032 shares issued and outstanding at December 31, 2020		370		316
Additional paid-in capital		6,371,545		4,889,355
Accumulated other comprehensive income (loss)		(264,991)		(240,117)
Retained earnings (deficit)		(3,223,685)		(295,449)
Total shareholders’ equity		2,883,239		4,354,105
Total liabilities and shareholders’ equity	$	18,730,027	$	18,399,317

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended
	September 30,
	2021		2020
Cash flows from operating activities
Net loss	$	(2,933,866)	$	(3,273,581)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		560,972		565,208
Impairment loss		—		1,607,797
Deferred income taxes, net		79		(17,852)
(Gain) loss on derivatives		(23,560)		12,195
Loss on extinguishment of debt		601,539		10,480
Provision for bad debts and inventory obsolescence		14,118		16,293
Gain on involuntary conversion of assets		(7,706)		(1,340)
Share-based compensation expense		88,974		81,009
Net foreign currency adjustments		(7,238)		3,746
Changes in operating assets and liabilities:
Accounts receivable, net		(979,890)		(12,103)
Inventories		(26,676)		12,757
Prepaid expenses and other assets		(65,876)		79,915
Accounts payable		15,014		11,536
Accrued expenses and other liabilities		142,170		(180,126)
Advance ticket sales		469,595		(834,560)
Net cash used in operating activities		(2,152,351)		(1,918,626)
Cash flows from investing activities
Additions to property and equipment, net		(539,530)		(873,142)
Cash paid on settlement of derivatives		(14,465)		(31,520)
Other		11,024		3,047
Net cash used in investing activities		(542,971)		(901,615)
Cash flows from financing activities
Repayments of long-term debt		(889,206)		(888,800)
Proceeds from long-term debt		1,345,041		5,225,090
Common share issuance proceeds, net		1,558,396		719,094
Proceeds from employee related plans		3,141		5,557
Net share settlement of restricted share units		(16,672)		(15,334)
Early redemption premium		(611,164)		(1,376)
Deferred financing fees		(59,880)		(117,388)
Net cash provided by financing activities		1,329,656		4,926,843
Effect of exchange rates on cash and cash equivalents		—		(3,267)
Net increase (decrease) in cash and cash equivalents		(1,365,666)		2,103,335
Cash and cash equivalents at beginning of period		3,300,482		252,876
Cash and cash equivalents at end of period	$	1,934,816	$	2,356,211

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2021
					Accumulated
			Additional		Other		Retained				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Treasury		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Shares		Equity
Balance, June 30, 2021	$	370	$	6,329,585	$	(232,903)	$	(2,377,800)	$	—	$	3,719,252
Share-based compensation		—		39,922		—		—		—		39,922
Issuance of shares under employee related plans		—		2,052		—		—		—		2,052
Net share settlement of restricted share units		—		(14)		—		—		—		(14)
Other comprehensive loss, net		—		—		(32,088)		—		—		(32,088)
Net loss		—		—		—		(845,885)		—		(845,885)
Balance, September 30, 2021	$	370	$	6,371,545	$	(264,991)	$	(3,223,685)	$	—	$	2,883,239

	Nine Months Ended September 30, 2021
					Accumulated
			Additional		Other		Retained				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Treasury		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Shares		Equity
Balance, December 31, 2020	$	316	$	4,889,355	$	(240,117)	$	(295,449)	$	—	$	4,354,105
Share-based compensation		—		88,974		—		—		—		88,974
Issuance of shares under employee related plans		—		3,141		—		—		—		3,141
Common share issuance proceeds, net		54		1,558,342		—		—		—		1,558,396
Net share settlement of restricted share units		—		(16,672)		—		—		—		(16,672)
Cumulative change in accounting policy		—		(131,240)		—		5,630		—		(125,610)
Other		—		(20,355)		—		—		—		(20,355)
Other comprehensive loss, net		—		—		(24,874)		—		—		(24,874)
Net loss		—		—		—		(2,933,866)		—		(2,933,866)
Balance, September 30, 2021	$	370	$	6,371,545	$	(264,991)	$	(3,223,685)	$	—	$	2,883,239

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)


	Three Months Ended September 30, 2020
					Accumulated
			Additional		Other		Retained				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Treasury		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Shares		Equity
Balance, June 30, 2020	$	281	$	4,851,781	$	(495,887)	$	1,234,776	$	(1,253,926)	$	4,337,025
Share-based compensation		—		25,862		—		—		—		25,862
Issuance of shares under employee related plans		—		1,457		—		—		—		1,457
Common share issuance proceeds, net		19		276,902		—		—		—		276,921
Net share settlement of restricted share units		—		(16)		—		—		—		(16)
Other comprehensive income, net		—		—		123,883		—		—		123,883
Net loss		—		—		—		(677,366)		—		(677,366)
Balance, September 30, 2020	$	300	$	5,155,986	$	(372,004)	$	557,410	$	(1,253,926)	$	4,087,766

	Nine Months Ended September 30, 2020
					Accumulated
			Additional		Other		Retained				Total
	Ordinary		Paid-in		Comprehensive		Earnings		Treasury		Shareholders’
	Shares		Capital		Income (Loss)		(Deficit)		Shares		Equity
Balance, December 31, 2019	$	237	$	4,235,690	$	(295,490)	$	3,829,068	$	(1,253,926)	$	6,515,579
Share-based compensation		—		81,009		—		—		—		81,009
Issuance of shares under employee related plans		2		5,555		—		—		—		5,557
Common share issuance proceeds, net		61		717,826		—		—		—		717,887
Net share settlement of restricted share units		—		(15,334)		—		—		—		(15,334)
Beneficial conversion feature		—		131,240		—		—		—		131,240
Cumulative change in accounting policy		—		—		—		1,923		—		1,923
Other comprehensive loss, net		—		—		(76,514)		—		—		(76,514)
Net loss		—		—		—		(3,273,581)		—		(3,273,581)
Balance, September 30, 2020	$	300	$	5,155,986	$	(372,004)	$	557,410	$	(1,253,926)	$	4,087,766

The accompanying notes are an integral part of these consolidated financial statements.

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Norwegian Cruise Line Holdings Ltd.

Notes to Consolidated Financial Statements

(Unaudited)

Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries (including Prestige (as defined below), (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, and (v) “Prestige” refers to Prestige Cruises International S. de R.L. (formerly Prestige Cruises International, Inc.), together with its consolidated subsidiaries, including Prestige Cruise Holdings S. de R.L. (formerly Prestige Cruise Holdings, Inc.), Prestige’s direct wholly-owned subsidiary, which in turn is the parent of Oceania Cruises S. de R.L. (formerly Oceania Cruises, Inc.) (“Oceania Cruises”) and Seven Seas Cruises S. de R.L. (“Regent”) (Oceania Cruises also refers to the brand by the same name and Regent also refers to the brand Regent Seven Seas Cruises).

References to the “U.S.” are to the United States of America, and “dollar(s)” or “$” are to U.S. dollars, the “U.K.” are to the United Kingdom and “euro(s)” or “€” are to the official currency of the Eurozone. We refer you to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations— Terminology” for the capitalized terms used and not otherwise defined throughout these notes to consolidated financial statements.

1. Description of Business and Organization

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of September 30, 2021, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027. Due to the novel coronavirus (“COVID-19”), we temporarily suspended all global cruise voyages from March 2020 until July 2021, when we resumed cruise voyages on a limited basis. We refer you to Note 2 – “Summary of Significant Accounting Policies” for further information.

We have one Explorer Class Ship on order for delivery in 2023. We have two Allura Class Ships on order for delivery in 2023 and 2025. Project Leonardo will introduce an additional six ships with expected delivery dates from 2022 through 2027. These additions to our fleet will increase our total Berths to approximately 83,000, which includes additional Berths we plan to add to our Project Leonardo ships, subject to certain conditions. The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19 could result in additional delays in ship deliveries in the future, which may be prolonged.

2. Summary of Significant Accounting Policies

Liquidity and Management’s Plan

Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across its three brands. As of the date hereof, 11 of our ships were operating with guests on board as part of our phased return to service. Significant events affecting travel, including COVID-19, typically have an impact on demand for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions. We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of the pandemic.

In January 2021, we amended our Senior Secured Credit Facility to further defer certain amortization payments due prior to June 30, 2022 and to waive certain financial and other covenants through December 31, 2022. In February 2021, we amended certain of our export-credit backed facilities to further defer amortization payments through March 31, 2022, and we amended all of our export-credit backed facilities to suspend certain financial covenants through December 31, 2022. In connection with such amendments of our Senior Secured Credit Facility and our export-credit backed facilities, our minimum liquidity requirement was increased to $200 million and such requirement applies through December 31, 2022. In March 2021, the Company received additional financing through various debt financings and an equity offering,

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collectively totaling approximately $2.7 billion in gross proceeds. From the proceeds, approximately $1.5 billion was used to extinguish debt. In November 2021, the Company executed a $1 billion commitment through August 15, 2022 that provides additional liquidity to the Company. Refer to Note 7 – “Long-Term Debt” for further details of the above transactions.

In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with our ships initially operating at reduced occupancy levels. The Company continues to execute on the phased relaunch plans for its 28-ship fleet. The Company expects to have approximately 75% of capacity operating by December 31, 2021 with the full fleet expected to be back in operation by April 1, 2022. The timing for bringing our ships back to service, the level of occupancy on our ships and the percentage of our fleet in service will depend on a number of factors including, but not limited to, the duration and extent of the COVID-19 pandemic, further resurgences and new more contagious and/or vaccine-resistant variants of COVID-19, the availability, distribution, rate of public acceptance and efficacy of vaccines and therapeutics for COVID-19, our ability to comply with governmental regulations, port availability, travel restrictions, bans and advisories, and our ability to re-staff our ships and implement new health and safety protocols.

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

●

Expected gradual phased return to service at reduced occupancy levels, increasing over time until we reach historical occupancy levels;

●

Forecasted cash collections primarily upon completion of future voyages and the payment of cash refunds for any further cancellations, in accordance with the terms of our credit card processing agreements (see Note 10 - “Commitments and Contingencies”); and

●

Expected incremental expenses for resumption of cruise voyages, including the maintenance of and compliance with additional health and safety protocols.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and unpredictable nature of the pandemic, including its magnitude and duration. Accordingly, the full effect of the COVID-19 pandemic on our financial performance and financial condition cannot be quantified at this time. We have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be material changes to those estimates in future periods. We will report a net loss for the three months and year ending December 31, 2021 and expect to report a net loss until we are able to resume regular voyages. We have taken actions to improve our liquidity, including completing various capital market transactions and making capital expenditure and operating expense reductions, and we expect to continue to pursue other opportunities to improve our liquidity and to refinance our debt to reduce interest expense and extend maturities.

Based on these actions and assumptions regarding the impact of COVID-19, and considering our available liquidity, including cash and cash equivalents of $1.9 billion as of September 30, 2021, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months.

Basis of Presentation

The accompanying consolidated financial statements are unaudited and, in our opinion, contain all normal recurring adjustments necessary for a fair statement of the results for the periods presented.

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has 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 will be phased in gradually as described under “—Liquidity and Management’s Plan” above. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 26, 2021.

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Loss Per Share

A reconciliation between basic and diluted loss per share was as follows (in thousands, except share and per share data):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net loss	$	(845,885)	$	(677,366)	$	(2,933,866)	$	(3,273,581)
Basic weighted-average shares outstanding		370,016,479		271,435,350		356,591,143		241,578,995
Dilutive effect of share awards		—		—		—		—
Diluted weighted-average shares outstanding		370,016,479		271,435,350		356,591,143		241,578,995
Basic loss per share	$	(2.29)	$	(2.50)	$	(8.23)	$	(13.55)
Diluted loss per share	$	(2.29)	$	(2.50)	$	(8.23)	$	(13.55)

For the three months ended September 30, 2021 and 2020, a total of 98.9 million and 124.0 million, respectively, and for the nine months ended September 30, 2021 and 2020, a total of 106.3 million and 63.4 million, respectively, shares have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. Gains or losses resulting from transactions denominated in other currencies are recognized in our consolidated statements of operations within other income (expense), net. We recognized a gain of $9.9 million and a loss of $12.3 million for the three months ended September 30, 2021 and 2020, respectively, and a gain of $14.9 million and a loss of $2.6 million for the nine months ended September 30, 2021 and 2020, respectively, related to transactions denominated in other currencies.

Depreciation and Amortization Expense

The amortization of deferred financing fees is included in depreciation and amortization expense in the consolidated statements of cash flows; however, for purposes of the consolidated statements of operations they are included in interest expense, net.

Accounts Receivable, Net

Accounts receivable, net includes $964.7 million due from credit card processors as of September 30, 2021, which is expected to be collected within the next 12 months. Prior to the resumption of cruise operations, these amounts were classified in other long-term assets as a result of the uncertainty surrounding the timing of their collection.

Recently Issued Accounting Guidance

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. As of September 30, 2021, we have not adopted any expedients and exceptions under ASU 2020-04. We will continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements.

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3. Revenue Recognition

Disaggregation of Revenue

Revenue and cash flows are affected by economic factors in various geographical regions. Revenues by destination were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
North America	$	77,418	$	1,967	$	80,562	$	956,389
Europe		75,474		2,195		78,316		25,231
Asia-Pacific		74		362		1,061		151,283
South America		115		471		610		76,777
Other		—		1,523		—		60,649
Total revenue	$	153,081	$	6,518	$	160,549	$	1,270,329

North America includes the U.S., the Caribbean, Canada and Mexico. Europe includes the Baltic region, Canary Islands and Mediterranean. Asia-Pacific includes Australia, New Zealand and Asia. Other includes all other international territories.

Segment Reporting

We have concluded that our business has a single reportable segment. Each brand, Norwegian, Oceania Cruises and Regent, constitutes a business for which discrete financial information is available and management regularly reviews the brand level operating results and, therefore, each brand is considered an operating segment. Our operating segments have similar economic and qualitative characteristics, including similar long-term margins and similar products and services; therefore, we aggregate all of the operating segments into one reportable segment.

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations in the U.S. Revenue attributable to U.S.-sourced guests has historically approximated 75-85% of total revenue. No other individual country’s revenues exceed 10% in any given period.

Contract Balances

Receivables from customers are included within accounts receivable, net. As of September 30, 2021 and December 31, 2020, our receivables from customers were $7.8 million and $1.0 million, respectively.

Beginning in March 2020, our brands launched new cancellation policies to permit our guests to cancel cruises which are not part of the Company’s temporary suspension of voyages up to 15 days prior to departure. These programs were in place for cruises booked through specific time periods specified by brand, and for cruises scheduled to embark through October 31, 2021. Certain cruises booked for certain periods will be permitted a 60-day cancellation window for refunds. Future cruise credits that have been issued are valid for any sailing through December 31, 2022, and we may extend this offer. The future cruise credits are not contracts, and therefore, guests who elected this option are excluded from our contract liability balance; however, the credit for the original amount paid is included in advance ticket sales or other long-term liabilities as applicable.

Our contract liabilities are included within advance ticket sales. As of September 30, 2021 and December 31, 2020, our contract liabilities were $234.0 million and $23.1 million, respectively. Of the amounts included within contract liabilities, approximately 25% were refundable in accordance with our cancellation policies. Of the deposits included within advance ticket sales, the vast majority are refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds. Refunds payable to guests are included in accounts payable. For the nine months ended September 30, 2021, no revenue recognized was included in the contract liability balance at the

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beginning of the period. The revenue recognized in the nine months ended September 30, 2020 that was included in contract liabilities as of the beginning of the period was $0.9 billion.

For cruise vacations that had been cancelled by us due to COVID-19, during the three months ended September 30, 2021 and 2020, approximately $0.9 million and $15.5 million, respectively, and during the nine months ended September 30, 2021 and 2020, approximately $26.9 million and $160.4 million, respectively, in costs to obtain these contracts, consisting of protected commissions, including those paid to employees, and credit card fees, were recognized in earnings.

Norwegian Cruise Line Holdings Ltd. [NCLH] Filings
10-Q	[2021-11-09]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-02-26]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-05-15]
10-K	[2020-02-27]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-10]
10-K	[2019-02-27]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-07]
10-K	[2018-02-27]
10-Q	[2017-11-09]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-02-27]
10-Q	[2016-11-09]
10-Q	[2016-08-09]
10-Q	[2016-05-10]
10-K	[2016-02-29]
10-Q	[2015-11-04]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-02-27]
10-Q	[2014-10-31]
10-Q	[2014-07-31]
10-Q	[2014-05-01]
10-K	[2014-02-21]
S-1	[2013-11-20]
10-Q	[2013-10-31]
S-1	[2013-07-30]
10-Q	[2013-07-30]
10-Q	[2013-05-08]
10-K	[2013-02-20]