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Cruise line operator Viking to go public as it looks to cash in on baby boomer buzz

Viking Holdings (VIK) is expected to price its IPO next week and begin to trade. The ocean and river cruise company is planning to sell 44M shares priced between $21 and $25 per share in the initial public offering, which would raise just over $1B at the mid-point of the range and value the company at around $10B.
The company disclosed in an SEC filing that in 2023 it reported a loss of $1.85B on $4.7B in revenue as cruise operating expenses increased by 33% to $2.85B. Adjusted EBITDA loss widened to $1.09B from $367M in 2022 and the adjusted EBITDA margin expanded to 35.5% from 18.4% the year prior. As of December 31, Viking (VIK) had $1.3B in cash, $11.4B in total liabilities, and free cash flow of -$673 for the preceding 12-month period. Viking (VIK) started in 1997 with just 4 river cruise ships but has expanded to 84 ships in operation with 650K passengers in 2023.
The IPO is generating some positive buzz from investors due to the niche aspect of the company’s business. Notably, Viking (VIK) caters to older cruise line customers looking for a quieter, high-end experience. Viking cruises do not allow children under 18 and have no casinos. Instead of promoting a party atmosphere, Viking proclaims to be a global leader in experiential travel by exploring all seven continents, all five oceans, and more than 20 iconic rivers. Crucially, Viking said its single-brand focus has helped with customer retention.
“We also leverage our strong brand loyalty for future product launches, with over 60% of bookings for each of the inaugural seasons for Viking Ocean, Viking Expedition and Viking Mississippi made by past guests. Our guests know they can expect a consistent, excellent experience on each voyage they take with us, which has allowed us to expand our travel platform successfully with new destinations and experiences. Our repeat guest percentage has steadily increased over time from 27% for the 2015 season to 51% for the 2023 season.”
In Viking’s F-1 SEC filing, the company also noted that demographics are working in its favor.
“The U.S. population aged 55 years and older comprises 30% of the total population, has the largest spending power of any demographic based on annual expenditures and holds over 70% of U.S. wealth as measured by the U.S. Federal Reserve. The U.S. population aged 55 years and older is also the fastest growing segment of the population, with expected growth from 98 million people in 2020 to 110 million people in 2030, according to the Congressional Budget Office.”
The cruise line sector in general has struggled in its post-pandemic recovery, with only Royal Caribbean (RCL) breaking away to show investors a strong return.
In general, strong revenue growth and positive booking trends have not been enough to allay fears of high debt loads and elevated interest rates. However, Royal Caribbean’s conference call update on the exceptional demand during the Wave Season could serve as a rising tide for its peers Carnival (CCL), Norwegian Cruise Line (NCLH), and Lindblad Expeditions (LIND).

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