Royal Caribbean Cruises Ltd. (RCL)

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From 10-Q filed 2026-10-27 (period ending 2026-09-30).

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

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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and, in particular, the risks discussed under the caption "Risk Factors" in Part I, Item 1A therein.

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, and recent developments;

•a discussion of our results of operations for the quarter and nine months ended September 30, 2026, compared to the same period in 2025; 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, 2025.

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 Earnings per Share ("Adjusted EPS") is a non-GAAP measure that represents Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. (as defined below) divided by basic 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.

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 periods presented, these items included (i) other (income) expense; (ii) restructuring charges and other initiative expenses; and (iii) equity investment impairment, (recovery) of losses and other. A reconciliation of Net Income attributable to Royal Caribbean Cruises Ltd. to Adjusted EBITDA is provided below under Results of Operations.

Adjusted EBITDA Margin is a non-GAAP measure that represents Adjusted EBITDA (as defined above) divided by total revenues.

Adjusted Gross Margin represents Gross Margin, adjusted for payroll and related, food, fuel, other operating, and depreciation and amortization expenses. Gross Margin is calculated pursuant to GAAP as total revenues less total cruise operating expenses, and depreciation and amortization expenses.

Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. is a non-GAAP measure that represents Net Income attributable to Royal Caribbean Cruises Ltd., excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis. For the periods presented, these items included (i) loss on extinguishment of debt and inducement expense; (ii) restructuring charges and other initiative expenses; (iii) the amortization of the Silversea intangible assets resulting from the Silversea acquisition; (iv) gain on sale of noncontrolling interest; and (v) equity investment impairment, (recovery) of losses, and other. A reconciliation of Net Income attributable to Royal Caribbean Cruises Ltd. to Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. 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.

Constant Currency is a significant measure for our revenues and expenses, which are denominated in currencies other than the U.S. Dollar. Because our reporting currency is the U.S. Dollar, the value of these revenues and expenses in U.S. Dollar will 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, it can be an important element. For this reason, we also monitor our revenues and expenses in "Constant Currency" - i.e., as if the current period's currency exchange rates had remained constant with the comparable prior period's rates. We calculate "Constant Currency" by applying the average of the prior period exchange rates for each of the corresponding months, so as to calculate what the results would have been had exchange rates been the same throughout both periods. We do not make predictions about future exchange rates and use current exchange rates for calculations of future periods. It should be emphasized that the use of Constant Currency is primarily used by us for comparing short-term changes and/or projections. Over the longer term, changes in guest sourcing and shifting the amount of purchases between currencies can significantly change the impact of the purely currency-based fluctuations.

EBITDA is a non-GAAP measure that represents Net Income attributable to Royal Caribbean Cruises Ltd. excluding (i) interest income; (ii) interest expense, net of interest capitalized; (iii) depreciation and amortization expenses; and (iv) provision for income taxes. We believe that this non-GAAP measure is meaningful when assessing our operating performance on a comparative basis. A reconciliation of Net Income attributable to Royal Caribbean Cruises Ltd. 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.

Gross Margin Yield represent Gross Margin per APCD.

Net Cruise Costs and Net Cruise 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 cost 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 exclude restructuring charges and other initiative expenses.

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 ("PCD") represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

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 measures, and as such, they may not be comparable to other companies within the industry.

Recent Developments:

In September 2026, we announced the signing of an agreement to acquire a 50% equity interest in Sandals and Beaches Resorts for approximately $3.0 billion. The transaction is expected to close in early 2027, subject to customary approvals and closing conditions. Additionally, we entered into a $3 billion 364 day term loan facility to be used solely to finance the acquisition upon closing. Refer to Note 6. Debt to our consolidated financial statements under Item 1. Financial Statements for further information. We expect to account for the transaction under the equity method of accounting.

Results of Operations

Summary

Net Income attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. for the third quarter of 2026 was $1.7 billion and $1.8 billion, respectively, compared to Net Income attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. of $1.6 billion, respectively, for the third quarter of 2025.

Net Income attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. for the nine months ended September 30, 2026 was $3.8 billion and $3.9 billion, respectively, compared to Net Income attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. of $3.5 billion, respectively, for the nine months ended September 30, 2025.

Significant items for the quarter and nine months ended September 30, 2026 include:

•Total revenues increased $452 million and $1.2 billion for the quarter and nine months ended September 30, 2026 as compared to the same period in 2025. The increase was primarily due to an increase in capacity and higher pricing in 2026 compared to the same period in 2025.

•Total cruise operating expenses increased $232 million and $665 million for the quarter and nine months ended September 30, 2026 as compared to the same period in 2025. The increase was primarily due to an increase in capacity in 2026 compared to the same period in 2025.

•In February 2026, we issued $1.25 billion of senior notes due in 2033 and $1.25 billion of senior notes due in 2038 for net proceeds of approximately $2.5 billion.

•In June 2026, we took delivery of Legend of the Seas.

•In June 2026, TUI Cruises, our 50% joint venture, took delivery of Mein Schiff Flow.

•In August 2026, we issued $1.25 billion of senior notes due in 2034 for net proceeds of approximately $1.24 billion.

For further information regarding the debt transactions discussed above, refer to Note 6. Debt to our consolidated financial statements under Item 1. Financial Statements.

Operating results for the quarters and nine months ended September 30, 2026 compared to the same period in 2025 are shown in the following tables (in millions, except per share data):

	Quarter Ended September 30,
	2026				2025
			% of Total Revenues				% of Total Revenues
Passenger ticket revenues	$	3,885	69.5	%	$	3,637	70.8	%
Onboard and other revenues	1,706		30.5	%	1,502		29.2	%
Total revenues	5,591		100.0	%	5,139		100.0	%
Cruise operating expenses:
Commissions, transportation and other	735		13.1	%	696		13.5	%
Onboard and other	338		6.0	%	312		6.1	%
Payroll and related	399		7.1	%	342		6.7	%
Food	287		5.1	%	264		5.1	%
Fuel	347		6.2	%	297		5.8	%
Other operating	606		10.8	%	569		11.1	%
Total cruise operating expenses	2,711		48.5	%	2,479		48.2	%
Marketing, selling and administrative expenses	519		9.3	%	522		10.2	%
Depreciation and amortization expenses	490		8.8	%	435		8.5	%
Operating Income	1,871		33.5	%	1,702		33.1	%
Other income (expense):
Interest income	5		0.1	%	3		0.1	%
Interest expense, net of interest capitalized	(291)		(5.2)	%	(248)		(4.8)	%
Equity investment income	176		3.1	%	158		3.1	%
Other income (expense)	1		—	%	(2)		—	%
Income before income taxes	1,762		31.5	%	1,612		31.4	%
Provision for income taxes	(27)		(0.5)	%	(34)		(0.7)	%
Net Income	1,735		31.0	%	1,579		30.7	%
Less: Net Income attributable to noncontrolling interest	7		0.1	%	4		0.1	%
Net Income attributable to Royal Caribbean Cruises Ltd.	$	1,728	30.9	%	$	1,575	30.6	%

	Nine Months Ended September 30,
	2026				2025
			% of Total Revenues				% of Total Revenues
Passenger ticket revenues	$	10,250	68.9	%	$	9,579	70.0	%
Onboard and other revenues	4,625		31.1	%	4,097		30.0	%
Total revenues	14,876		100.0	%	13,676		100.0	%
Cruise operating expenses:
Commissions, transportation and other	1,921		12.9	%	1,823		13.3	%
Onboard and other	838		5.6	%	775		5.7	%
Payroll and related	1,204		8.1	%	1,010		7.4	%
Food	813		5.5	%	750		5.5	%
Fuel	966		6.5	%	854		6.2	%
Other operating	1,763		11.9	%	1,630		11.9	%
Total cruise operating expenses	7,506		50.5	%	6,841		50.0	%
Marketing, selling and administrative expenses	1,615		10.9	%	1,593		11.6	%
Depreciation and amortization expenses	1,415		9.5	%	1,265		9.2	%
Operating Income	4,340		29.2	%	3,977		29.1	%
Other income (expense):
Interest income	15		0.1	%	17		0.1	%
Interest expense, net of interest capitalized	(805)		(5.4)	%	(725)		(5.3)	%
Equity investment income	328		2.2	%	313		2.3	%
Other income	10		0.1	%	13		0.1	%
Income before income taxes	3,887		26.1	%	3,596		26.3	%
Provision for income taxes	(66)		(0.4)	%	(67)		(0.5)	%
Net Income	3,821		25.7	%	3,529		25.8	%
Less: Net Income attributable to noncontrolling interest	23		0.2	%	15		0.1	%
Net Income attributable to Royal Caribbean Cruises Ltd.	$	3,798	25.5	%	$	3,514	25.7	%

Adjusted Net Income attributable to Royal Caribbean Cruises Ltd., and Adjusted Earnings per Share are calculated as follows (in millions, except per share data. Certain amounts may not add or calculate due to the use of rounded numbers):

	Quarter Ended September 30,				Nine Months Ended September 30,
	2026		2025		2026		2025
Net Income attributable to Royal Caribbean Cruises Ltd.	$	1,728	$	1,575	$	3,798	$	3,514
Loss on extinguishment of debt and inducement expense (1)	21		—		50		10
Restructuring charges and other initiative expenses (2)	9		1		11		7
Amortization of Silversea intangible assets resulting from the Silversea acquisition	2		2		5		5
Gain on sale of noncontrolling interest (3)	—		—		—		(11)
Equity investment impairment, (recovery) of losses and other	—		—		—		(1)
Adjusted Net Income attributable to Royal Caribbean Cruises Ltd.	$	1,760	$	1,577	$	3,865	$	3,523
Basic
Earnings per Share	$	6.46	$	5.79	$	14.15	$	12.97
Adjusted Earnings per Share	$	6.58	$	5.80	$	14.40	$	13.01
Diluted:
Earnings per Share (4)	$	6.45	$	5.74	$	14.12	$	12.83
Adjusted Earnings per Share (5)	$	6.57	$	5.75	$	14.36	$	12.83
Weighted-Average Shares Outstanding:
Basic	267		272		268		271
Diluted	268		274		269		275

(1)For 2026, includes the loss on extinguishment of debt associated with the February and August redemptions of debt. Refer to Note 6. Debt to our consolidated financial statements under Item 1. Financial Statements for further information. For 2025, includes $10 million of inducement expense related to the settlements of the 2025 6.00% convertible notes. These amounts are included in Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss).

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

(3)For 2025, represents gain on sale of noncontrolling interest of Floating Docks and Grand Bahama Shipyard. These amounts are included in Other income within our consolidated statements of comprehensive income (loss).

(4)For 2025, diluted EPS includes the add-back of dilutive inducement and interest expense related to our convertible notes of $16 million for the nine months ended September 30, 2025. Refer to Note 4. Earnings Per Share to our consolidated financial statements under Item 1. Financial Statements for further information.

(5)For 2025, Adjusted Diluted EPS includes the add-back of dilutive interest expense related to our convertible notes of $6 million for the nine months ended September 30, 2025.

Selected statistical information is shown in the following table:

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Holder	Type	ETF	MF	Position ($)	% of holder	Δ % of holder	Holder AUM

Next expected filings

~2027-02-10 10-K expected by 2027-02-17 (in 105 days)
~2027-04-29 10-Q expected by 2027-05-11 (in 183 days)
~2027-07-27 10-Q expected by 2027-08-08 (in 272 days)
~2027-10-26 10-Q expected by 2027-11-07 (in 363 days)

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Recent SEC filings

2026-10-27 8-K Earnings Release; Financial Statements and Exhibits
2026-10-27 10-Q Quarterly Report
2026-09-23 8-K Other Events; Financial Statements and Exhibits
2026-08-20 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
2026-08-10 424B5 Prospectus Supplement
2026-08-07 8-K Material Agreement Entered; Financial Statements and Exhibits
2026-07-28 8-K Earnings Release; Financial Statements and Exhibits
2026-07-28 10-Q Quarterly Report
2026-07-20 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
2026-04-30 8-K Earnings Release; Financial Statements and Exhibits
2026-04-30 10-Q Quarterly Report
2026-04-17 DEF 14A Proxy Statement
2026-02-27 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
2026-02-17 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
2026-02-13 8-K Material Agreement Entered; Financial Statements and Exhibits

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