Royal Caribbean Cruises 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2023

OR

For the transition period from to

Commission File Number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)

1050 Caribbean Way, Miami, Florida 33132

(Address of principal executive offices) (zip code)

(305) 539-6000

(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:

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.

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 255,736,665 shares of common stock outstanding as of May 1, 2023.

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited; in thousands, except per share data)

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

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

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Cautionary Note Concerning Forward-Looking Statements

The discussion under this caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding our expectations for future periods, business and industry prospects or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. Words such as "anticipate," "believe," "considering," "could," "driving," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," "would," and similar expressions are intended to further identify any of these forward-looking statements. Forward-looking statements reflect management's current expectations, but they are based on judgments and are inherently uncertain. Furthermore, they are subject to risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the caption "Risk Factors" in Part II, Item 1A herein.

All forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date of this filing. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

The discussion and analysis of our financial condition and results of operations is organized to present the following:

• 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; and

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

Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and estimates, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year ended December 31, 2022.

Seasonality

Our revenues are seasonal based on demand for cruises. Demand has historically been strongest for cruises during the Northern Hemisphere’s summer months and holidays. In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, our brands have historically focused on deployment to the Caribbean, Asia and Australia during that period.

Financial Presentation

Description of Certain Line Items

Revenues

Our revenues are comprised of the following:

• Passenger ticket revenues, which consist of revenue recognized from the sale of passenger tickets and the sale of air transportation to and from our ships; and

• Onboard and other revenues, which consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, casino operations, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours and fees for operating certain port facilities. Onboard and other revenues also include revenues we receive from independent third-party concessionaires that pay us a percentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships, as well as revenues received for procurement and management related services we perform on behalf of our unconsolidated affiliates.

Cruise Operating Expenses

Our cruise operating expenses are comprised of the following:

• Commissions, transportation and other expenses, which consist of those costs directly associated with passenger ticket revenues, including travel advisor commissions, air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees;

• Onboard and other expenses, which consist of the direct costs associated with onboard and other revenues, including the costs of products sold onboard our ships, vacation protection insurance premiums, costs associated with pre- and post-cruise tours and related credit card fees, as well as the minimal costs associated with concession revenues, as the costs are mostly incurred by third-party concessionaires, and costs incurred for the procurement and management related services we perform on behalf of our unconsolidated affiliates;

• Payroll and related expenses, which consist of costs for shipboard personnel (costs associated with our shoreside personnel are included in Marketing, selling and administrative expenses);

*•*Food expenses, which include food costs for both guests and crew;

*•*Fuel expenses, which include fuel and related delivery, storage and emission consumable costs and the financial impact of fuel swap agreements; and

• Other operating expenses, which consist primarily of operating costs such as repairs and maintenance, port costs that do not vary with passenger head counts, vessel related insurance, entertainment and gains and/or losses related to the sale of our ships, if any.

We do not allocate payroll and related expenses, food expenses, fuel expenses or other operating expenses to the expense categories attributable to passenger ticket revenues or onboard and other revenues since they are incurred to provide the total cruise vacation experience.

Selected Operational and Financial Metrics

We utilize a variety of operational and financial metrics which are defined below to evaluate our performance and financial condition. As discussed in more detail herein, certain of these metrics are non-GAAP financial measures. These non-GAAP financial measures are provided along with the related GAAP financial measures as we believe they provide useful information to investors as a supplement to our consolidated financial statements, which are prepared and presented in accordance with GAAP. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Adjusted EBITDA is a non-GAAP measure that represents EBITDA (as defined below) excluding certain items that we believe adjusting for is meaningful when assessing our profitability on a comparative basis. For the 2023 and 2022 periods, these items included (i) other income (expense); (ii) gain on sale of controlling interest; (iii) impairment 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. 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. For the periods presented, these items included (i) loss on the extinguishment of debt; (ii) gain on sale of controlling interest; (iii) tax on the sale of PortMiami noncontrolling interest; (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.

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; (ii) interest expense, net of interest capitalized; (iii) depreciation and amortization expenses; and (iv) income tax benefit or expense. 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.

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

Net Cruise Costs and Net C**ruise Costs Excluding Fuel are non-GAAP measures that represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses and, in the case of Net Cruise Costs Excluding Fuel, fuel expenses (each of which is described above under the Description of Certain Line Items heading). In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most relevant indicators of our performance. A reconciliation of Gross Cruise Costs to Net Cruise Costs and Net Cruise Costs Excluding Fuel is provided below under Results of Operations. For the periods presented, Net Cruise Costs and Net Cruise Costs Excluding Fuel excludes (i) the gain on sale of controlling interest; (ii) impairment and credit losses (recoveries); and (iii) restructuring and other initiative expenses.

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

Net Yields represent Adjusted Gross Margin per APCD. We utilize Adjusted Gross Margin and Net Yields to manage our business on a day-to-day basis as we believe that they are the most relevant measures of our pricing performance because they reflect the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses, and onboard and other expenses.

Occupancy ("Load Factor"), in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days (as defined below) by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

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 have 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. In addition, we are unable to determine the future impact of non-core business related gains and losses which may result from strategic initiatives. These items are uncertain and could be material to our results of operations in accordance with U.S GAAP. Due to this uncertainty, we do not believe that reconciling information for such projected figures would be meaningful.

Results of Operations

Summary

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.

• 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.

• In February 2023, we issued $700 million aggregate principal amount of 7.25% Priority Guaranteed Notes. Upon closing, we terminated our commitment for the $700 million 364-day term loan facility. In addition, the remaining $350 million backstop committed financing was also terminated upon closing.

• Effective March 31, 2023, we closed on the previously announced partnership with iCON. 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. Virgin Islands. Refer to Note 5*. Investments and Other Assets* in our consolidated financial statements for further information on the transaction.

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):

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

(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.

(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. Refer to Note 5*. Investments and Other Assets* to our consolidated financial statements for further information on the transaction.

(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*.*

(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.

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

Selected statistical information is shown in the following table:

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

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

(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.

(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.

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):

`

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

(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

(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.

Revenues

Total revenues for 2023 increased $1.8 billion to $2.9 billion from $1.1 billion in 2022.

Passenger ticket revenues comprised 65.7% of our 2023 total revenues. Passenger ticket revenues for 2023 increased by $1.2 billion, or 190.9% to $1.9 billion from $0.7 billion in 2022.

The remaining 34.3% of 2023 total revenues was comprised of Onboard and other revenues, which increased $0.6 billion, or 142.7% to $1.0 billion in 2023 from $407.4 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. Occupancy in 2023 was 102.1% compared to 57.4% in 2022.

Onboard and other revenues included concession revenues of $104.0 million in 2023 and $48.4 million in 2022.

Cruise Operating Expenses

Total Cruise operating expenses for 2023 increased $0.6 billion to $1.8 billion from $1.2 billion in 2022. The increase was primarily due to:

• a $252.6 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; and

*•*a $84.2 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.

Marketing, Sellin**g and Administrative Expenses

Marketing, selling and administrative expenses for 2023 increased $66.8 million, or 17.0%, to $460.9 million from $394.0 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.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2023 increased $20.3 million, or 6.0%, to $359.8 million from $339.5 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.

Other (Expense) Income

Interest expense, net of interest capitalized for 2023 increased $81.7 million, or 29.4%, to $359.4 million from $277.7 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.

Equity investment income for 2023 was $20.5 million compared to Equity investment loss of $31.1 million in 2022. The increase in income was primarily due to income from TUI Cruises, one of our equity investments, in 2022 compared to losses in 2022.

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.

Future Application of Accounting Standards

Refer to Note 2*. Summary of Significant Accounting Policies* to our consolidated financial statements.

Liquidity and Capital Resources

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. The change of $3.0 billion was primarily attributable to a decrease of $1.6 billion in debt proceeds in 2023 compared to the same period in 2022, and an increase in repayments of debt of $1.7 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.

Future Capital Commitments

Capital Expenditures

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:

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.

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. Refer to Note 8. Commitments and Contingencies and Note 11*. 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. 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):

(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.

(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.

(3) Amounts are based on contractual installment and delivery dates for our ships on order. Included in these figures are $5.8 billion in final contractual installments, which have committed financing covering 80% of the cost of the ships on order for our Global Brands, almost all of which include sovereign financing guarantees. Amounts do not include potential obligations which remain subject to cancellation at our sole discretion or any agreements entered for ships on order that remain contingent upon completion of conditions precedent.

Refer to Note 6*. Debt* for maturities related to debt.

Refer to Note 7*. Leases* for maturities related to lease liabilities.

Refer to Funding Needs and Sources for discussion on the planned funding of the above material cash requirements.

As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships or the purchase of existing ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

Off-Balance Sheet Arrangements

Refer to Note 5*. Investments and Other Assets* for ownership restrictions related to TUI Cruises.

Refer to Note 3*. Revenues* for credit card processor agreements for export credit agency guarantees.

Refer to Note 8*. 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.

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. 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. If needed, actions to raise capital may include issuances of debt, convertible debt or equity in private or public transactions or entering into new or extended credit facilities.

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. 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. Refer to Note 6*. Debt and* Note 9*. Shareholders' Equity* to our consolidated financial statements for further information.

If any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of our board of directors is no longer comprised of individuals who were members of our board of directors on the first day of such period, we may be obligated to prepay indebtedness outstanding under our credit facilities, which we may be unable to replace on similar terms. Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.

Based on our assumptions and estimates and our financial condition, we believe that we have sufficient financial resources to fund our obligations for at least the next twelve months from the issuance of these financial statements. However, there is no assurance that our assumptions and estimates are accurate as there is inherent uncertainty in our ability to predict future liquidity requirements. Refer to Note 1*. General,* to our consolidated financial statements under Part I. Item 1. Financial Statements for further information.

Debt Covenants

Our export credit facilities and our non-export credit facilities, and certain of our credit card processing agreements contain covenants that require us, among other things, to maintain a fixed charge coverage ratio, limit our net debt-to-capital ratio, and maintain a minimum liquidity, and under certain facilities, to maintain a minimum level of shareholders' equity. Our minimum stockholders' equity and maximum net debt-to-capital calculations exclude the impact of Accumulated other comprehensive loss on Total shareholders’ equity. 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.

Dividends

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. In the event we declare a dividend or engage in share repurchases, we will need to repay the amounts deferred under our export credit facilities. Accordingly, we have not declared a dividend since the first quarter of 2020.

For a discussion of our market risks, refer to Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to our exposure to market risks since the date of our 2022 Annual Report.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that those controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission (the "SEC").

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As previously reported, a lawsuit was filed against us in August 2019 in the U.S. District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal, which was expropriated by the Cuban government. The complaint further alleges that we trafficked in the terminal by embarking and disembarking passengers at these facilities. The plaintiff seeks all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.

The Court entered final judgment in December 2022 in favor of the plaintiff and awarded damages and attorneys' fees to the plaintiff in the aggregate amount of approximately $112 million. We have appealed the judgment to the United States Court of Appeals for the 11th Circuit and the plaintiff has cross-appealed with regards to the interest calculation used for purposes of determining damages. We believe we have meritorious grounds for and intend to vigorously pursue our appeal. During the fourth quarter of 2022, we recorded a charge of approximately $130.0 million to Other income (expense) within our consolidated statements of comprehensive loss related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.

In addition, we are routinely involved in claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.

The risk factors set forth below and elsewhere in this Quarterly Report on Form 10-Q are important factors that could cause actual results to differ from expected or historical results. It is not possible to predict or identify all such risks. There may be additional risks that we consider not to be material, or which are not known, and any of these risks could affect our operations. The ordering of the risk factors set forth below is not intended to reflect a risk's potential likelihood or magnitude. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a cautionary note regarding forward-looking statements.

Macroeconomic, Business, Market and Operational Risks

Adverse economic or other conditions could reduce the demand for cruises and passenger spending, adversely impacting our operating results, cash flows and financial condition including impairing the value of our goodwill, ships, trademarks and other assets and potentially affecting other critical accounting estimates where the impact may be material to our operating results.

Demand for cruises is affected by international, national, and local economic conditions. Weak or uncertain economic conditions may impact consumer confidence and pose a risk as vacationers postpone or reduce discretionary spending. This, in turn, may result in cruise booking slowdowns, decreased cruise prices and lower onboard revenues. Given the global nature of our business, we are exposed to many different economies, and our business could be negatively impacted by challenging conditions in any of the markets in which we operate, and/or related reactions by our competitors in such markets.

Our operating costs could increase due to market forces and economic or geopolitical factors beyond our control.

Our operating costs, including fuel, food, payroll and benefits, airfare, taxes, insurance, and security costs, can be and have been subject to increases due to market forces and economic or geopolitical conditions or other factors beyond our control, including global inflationary pressures, which have increased our operating costs. Increases in these operating costs have affected, and may continue to adversely affect, our future profitability.

In particular, increases in fuel prices have and could continue to materially and adversely affect our business as fuel prices impact not only our fuel costs, but also some of our other expenses, such as crew travel, freight, and commodity prices. Mandatory fuel restrictions may also create uncertainty related to the price and availability of certain fuel types potentially impacting operating costs.

Price increases for commercial airline services for our guests or major changes or reduction in commercial airline services and/or availability could adversely impact the demand for cruises and undermine our ability to provide reasonably priced vacation packages to our guests.

Many of our guests depend on scheduled commercial airline services to transport them to or from the ports where our cruises embark or disembark. Increases in the price of airfare would increase the overall price of the cruise vacation to our guests, which may adversely impact demand for our cruises. In addition, changes in the availability and/or regulations governing commercial airline services could adversely affect our guests’ ability to obtain air travel, as well as our ability to transfer our guests to or from our cruise ships, which could adversely affect our results of operations.

Terrorist attacks, war, and other similar events could have a material adverse impact on our business and results of operations.

We are susceptible to a wide range of adverse events, including terrorist attacks, war, conflicts, civil unrest and other hostilities. The occurrence of these events or an escalation in the frequency or severity of them, and the resulting political instability, travel restrictions and advisories and concerns over safety and security aspects of traveling or the fear of any of the foregoing, have had, and could have in the future, a significant adverse impact on demand and pricing in the travel and vacation industry. These events could also result in additional security measures taken by local authorities which have, and may in the future, impact access to ports and/or destinations. In addition, such events have led, and could lead, to disruptions, instability and volatility in global markets, supply chains and industries, increased operating costs, such as fuel and food, and disruptions affecting our newbuild construction and fleet modernization efforts, any of which could materially and adversely impact our business and results of operations. Further, such events could have the effect of heightening the other risks we have described in this report, any of which also could materially and adversely affect our business and results of operations.

Disease outbreaks and an increase in concern about the risk of illness could adversely impact our business and results of operations, and may cause significant disruptions, create new risks, and exacerbate existing risks.

Disease outbreaks and increased concern related to illness when traveling to, from, and on our ships such as COVID-19 could cause a drop in demand for cruises, guest cancellations, travel restrictions, an unavailability of ports and/or destinations, cruise cancellations, ship redeployments and an inability to source our crew, provisions or supplies from certain places. In addition, we may be subject to increased concerns that cruises are more susceptible than other vacation alternatives to the spread of infectious diseases. For example, the unprecedented responses by governments and other authorities to control and contain the COVID-19 outbreak, including related variants, led to our voluntary suspension of our global cruise operations starting in March 2020. While we have resumed our global cruise operations, there is no assurance that our cruise operations will continue uninterrupted. In response to disease outbreaks, our industry, including our passengers and crew, may be subject to enhanced health and safety requirements in the future which may be costly and take a significant amount of time to implement across our fleet. For example, local governments may establish their own set of rules for self-quarantines and/or require proof of individuals' health status or vaccination prior to or upon visiting. Based on our assessment of these requirements and recommendations, or for other reasons, we may determine it necessary to cancel or modify certain of our Global Brands’ cruise sailings. The impact of any of these factors could have a material adverse effect on our business and results of operations. In addition, any operating or health protocols that we may develop or that may be required by law in the future in response to infectious diseases may be costly to develop and implement and may be less effective than we expected in reducing the risk of infection and spread of such disease on our cruise ships, all of which will negatively impact our operations and expose us to reputational and legal risks.

Incidents on ships, at port facilities, land destinations and/or affecting the cruise vacation industry in general, and the associated negative media coverage and publicity, have affected and could continue to affect our reputation and impact our sales and results of operations.

Cruise ships, private destinations, port facilities and shore excursions operated and/or offered by us and third parties may be susceptible to the risk of accidents, illnesses, mechanical failures, environmental incidents and other incidents which could bring into question safety, health, security and vacation satisfaction and negatively impact our sales, operations and reputation. Incidents involving cruise ships, and, in particular the safety, health and security of guests

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Interactive Data File

101 The following financial statements of Royal Caribbean Cruises Ltd. for the period ended March 31, 2023, formatted in iXBRL (Inline extensible Reporting Language) are filed herewith:

(i) the Consolidated Statements of Comprehensive Loss for the quarters and three months ended March 31, 2023 and 2022;

(ii) the Consolidated Balance Sheets at March 31, 2023 and December 31, 2022;

(iii) the Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022; and

(iv) the Notes to the Consolidated Financial Statements, tagged in summary and detail.

104 Cover page interactive data file (the cover page XBRL tags are embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.