Q1 2020 Earnings Call
[music].
Out later, we will conduct a question and answer session and instructions for the session will follow at that time, if any which require assistance. During the conference. Please press Star then zero on your Touchtone telephone as reminder, to all participants. This conference call is being recorded I would now like to turn the conference call over to your hosts Andrea to Mark.
Senior Vice President of Investor Relations Corporate Communications and SG. This Demarco. Please proceed.
Thank you Jonathan and good morning, everyone and thank you for joining us for our first quarter 2020 earnings call.
We hosted our earnings calls from various locations, including London, New York Stock exchange, even onboard our vessel.
Never had we hope to the call with our entire team scattered in different locations.
It's one of the many ways, we're adapting to the new environment right.
Bear with us as we find us the lights on our first especially the sensor and call.
Therefore joined virtually today by Frank del Rio President and Chief Executive Officer of Norwegian Cruise line, holding and Mark combat Executive Vice President and Chief Financial Officer.
Frank will begin the call with opening commentary after which mark will follow to discuss results for the quarter beforehand in call back to frame for closing remarks.
Well then open the call for your question.
As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at Www Dot and Sealy LTV Investor Dot com.
We will also make reference to a slide presentation. During this call, which may also be found on our Investor Relations website.
The conference call and presentation will be available for replay for 30 days following today's call.
Before we discuss our results I'd like to just cover a few items.
Our press released its first quarter 2020 results was issued this morning and is available on our Investor Relations website.
This call also includes forward looking statements that may involve risks and uncertainties that could cause our actual results to differ materially from such statements.
These statements should be considered in conjunction with the cautionary statement contained in our earnings release.
Our comments May also reference non-GAAP financial measures a reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation.
And with that I'd like to turn the call over to Franco real Frank.
Thank you Andrea good morning, everyone I.
I hope everyone joining us today, along with your loved ones and colleagues very safe and healthy.
Every one of US is doing our part did come back there's 10 damaged by sheltering in place and practicing social distancing, but no. One is doing more for us than our first responders frontline workers.
And those providing essential services Saddam I'd like to extend our sincerest site on behalf of everyone in or which includes on holding for all they are doing communities around the world.
And the three months that have passed since we last spoke the entire worlds way of life has changed.
The impact from Kopec 19, global pandemic on our company into broader travel industry have been swift and severe.
And my weekly communications to our team members I consistently stress two themes.
First is to ensure that we are taking care of our guests our crew our travel partners and each other.
Second is what I consider to overcome many just uniquely challenging time in our history.
And that is to be nimble and to be ready to adapt to the fluid environment around.
And with the team at Norwegian has accomplished in the two short months since we suspended voyages is nothing short of extraordinary.
And that time, we have laid up on fire fleet.
Repatriate over half of our 28000 crew members.
The digitally pared back operating and capital expenditures improved our debt maturity profile.
Successfully completed a historic simultaneously executed quad traunch capital raise up $2.4 billion.
These actions will enable us to weather the unlikely scenario over 18 months zero revenue environment and still have enough liquidity to relaunch operations when conditions allow.
I couldn't be prouder of what our team has accomplished and now they have risen to the occasioned by continually adapting to the ever changing environment.
And it's 53 year history Norwegian has overcome a myriad of exaggerate today.
Many during the tenure of this management team.
And we haven't chess persevered. After these challenging events, we've proven our metal our resilient and we thrive.
We have done so because of the mix of the unmatched value and unique experiences that only cruising provides.
People with an exceptional management team one that has stays can overcome uncontrollable black Swan event, and a multitude of headwinds time and again.
While much remains unknown regarding the severity and duration of a global economic downturn, resulting from cobot 19.
We do know from history that the excitement factor in value proposition that cruising provides will be when the time is right a compelling driver of reviving consumer demand.
And as far as that value proposition goes.
We believe that we have an unbeatable competitor advantage with three brands that offers the most value Pat proposition any industry.
The demonstrate that advantage with a two month so sailings, we operate in the first quarter of 2020.
We generated higher net yield.
Revenue and adjusted EBITDA, then over the prior year and this despite numerous canceled sailings in Asia and the incremental customary cost.
Without corresponding revenue came from the launch of Sevenci splendor.
On slide four we provide an update on our current book position.
There continues to be demand for cruise vacations, particularly beginning in the fourth quarter of 2020 and accelerating grew 2021 with the Companys overall book position at this time and pricing for 2021 within historical ranges.
These are two examples.
One from the recent [noise].
Past and one pointing to the teacher, both of which demonstrates the underlying demand at cruising and cruising and our Brian has got in the past and will also have into future.
As I mentioned earlier the impact some cobot 19 were swept into the year end they require to respond exponentially fast doing larger than any in our recent history.
I'll direct you to slide five of our presentation, where we parse our company's response to that pandemic and be freight phases.
The first say, which I will discuss in a moment, we addressed our immediate operational concerns in the second which mark will cover in his commentary we swiftly executed on a financial action plans to reduce costs an increase liquidity.
Lastly, I'll come back to discuss where we find ourselves today.
Helping a roadmap to launch a new era cruising across our three brands.
Phase one began by quickly addressing concerns over at Cobiz 19, with the virus is mainly impacting Asia and we proactively cancel automotive by 40 voyages in the region across our three brands.
Despite the viruses initial impact predominately affecting greater Asia, we began adapting and enhancing our embarkation incentivization protocols worldwide, which you can see on slide six across our 28 chip. Please.
As a leader in one of the most consumer facing industries in the world that health and safety of I guess in crew is always our top priority and we are accustomed to implementing new procedures quickly and efficiently.
As the Dennis pandemic progress.
We continue to adapt and increase the rigor and frequency of our protocols.
When Gatzke pain has it tends to travel we introduced we like cancellation policies to alleviate many of our guests concerns by providing them peace of mind regarding their cruise vacation.
Our most decisive action came on March 13.
When we announce what we thought was a temporary 30 day suspension of voyages across all our brand.
Never had a company halted sailings across an entire fleet and suspended them for an extended period of time, but it was necessary for us to play our part in combating the spread of covert 19th.
With gorgeous suspended our next challenge with safely disembarking I guess as soon as possible and securing safe Harbor for our 28 vessels.
Offices in crude across our fleet, along with our short side being displayed an extraordinary amount of urgency professionalism and compassion.
In the face of this monumental task.
Today, all vessels remain in Safe Harbor, and we continue to work with the CDC and other regulatory bodies to repatriate crew back to their home country.
Our guest impacted by the Council savings were offered value added future crews, but it's worth 125% of the crews were paid to compensate them for the disruption and disappointment of council vacation.
There's a hands off or which has proven to be popular what's provides got in new York cash refunds and can be used on future voyages all the way through the end up twentytwenty too.
Lastly, our entire short that operation was moved to work remotely and endeavor that involve shifting is higher global workforce. The worked virtually in a matter of days.
What I commend, our IP and human resources being for flawlessly executing on this initiative in such a condensed timeframe.
Then currently as you can see on slide seven weeks quickly developed and launched our financial action plans to but rather company for a prolonged bought suspension.
Mark and his team were instrumental in spearheading this phase of our response, so I like it during the call over to him now to discuss our action plan in more details provided deeper dive into our liquidity position and discuss our results for the core.
Mark.
Thank you Frank.
Good morning, everyone.
Given the Swift and significant impact Cobot 19 has had on our business my remarks today will not be typical foreign earnings call.
I will not focused on yield growth or net cruise costs has today these metrics simply aren't relevant.
Instead, I will focus on the quick development and execution of our financial action plan.
And how we believe we we've positioned our company to withstand an unlikely scenario of over 18 months in a zero revenue environment.
Slide seven illustrates our four point action plan, which we quickly implemented to conserve and increase cash to protect the business.
The four key areas of focus include reducing operating expenses, reducing capital expenditures, improving our debt maturity profile and securing additional capital.
First let's focus on operating expenses on slide eight.
We deployed several levers to reduce reduce both shortsighted shipboard operating expenses SGN a savings included the significant reduction or deferment of near term marketing expenses. The introduction of a shortened work week with a commensurate 20% salary reduction per team members and they furlough of approximately.
So 20% of shortsighted employees through July 30 Onest.
These actions affecting our team members were especially difficult. However, unlike layoffs. The furlough process allows impacted team members to remain employees of the company while continuing to receive benefits. In addition, we committed to covering our team members share of medical insurance premiums during the.
Her low period.
With the least we could do to support our impacted team until we can welcome them back.
As per ship Port operating expenses as you can see on slide nine with crews Voyager suspended through June thirtyth.
We meaningfully reduced expenses, such as crew payroll fuel food import charges.
As we reduce our manning levels and transition the majority of our ships the cold lay up.
We continue to repatriate crew back to their home countries working through challenges around global travel restrictions.
On slide 10, we've provided details around ongoing monthly ship and administrative operating expenses under two scenarios, a warm lay up and a cold lay up.
The primary difference between the two scenarios is that a cold lay up as a prolonged lay up with further reduction of staffing to a skeleton crew and further savings to fuel expense repairs and maintenance and other operating costs.
All of the cost saving measures implemented have significantly reduced operating expense to approximately 70 million per month with all of our ships in a cold lay up scenario and approximately 110 billion per month, and a warm lay up scenario.
With the majority of our ships transitioning to cold lay up we're moving towards the lower end of that range.
Shifting to capital expenditures on slide 11, we identified approximately 515 million in reductions non new build capital expenditures for the remainder of 2020 were reduced by approximately 65% for almost 350 million.
We're also finalizing documentation to deeper approximately 170 million of Newbuilds capex related payments due through March 30, Onest 2021.
Total capex for 2020, including both Newbuilds and non Newbuilds is now expected to be approximately 805 million.
Of which approximately 195 million will be spent throughout the remainder of the year.
First quarter Capex was elevated due to the delivery of seven seas splendor and the whole revitalization of Norwegian spirit.
As we look forward, we're also benefiting from lower near term capex commitments, resulting from moderate capacity growth.
With no new capacity addition, scheduled for delivery until mid 2022.
Which could be delayed given extending closures that shipyards.
Given the continued uncertainty we are not providing capex guidance for 2021 and 2022 at this time.
Another key focus in our action plan was improving our debt maturity profile through the deferral of amortization payments and the extension of maturities.
As you can see on slide 12, we took advantage of an industry wide 12 month that holiday initiative granted by export credit agencies, and we expect to be able to the for approximately 540 million of total debt amortization payments through March 30, Onest 2021.
Approximately $385 million of this has already been finalized with Hermes.
The export credit agency in Germany, and we are currently finalizing documentation for the balance with our other you see a lenders.
This initiative also provides for financial Covenant testing relief for 12 months.
With all postponed amortization to be repaid evenly over the following for years and eight semi annual installments.
In addition, our commercial lenders also agreed to a 12 month that holiday for approximately 150 million of amortization payments, bringing our total aggregate deferrals of payments to approximately 700 million.
We also extended our debt maturity profile meaningfully by exercising its contractual option to extend our 230 million Pride of America term loan maturity by one year to January 2022.
As well as extending our new 675 million revolving credit facility maturity by one year to March 2022.
These actions coupled with the amortization deferrals leave us with no significant debt maturities through 2021.
On slide 13, we outlined the multiple measures we took to secure over 3 billion of new capital and liquidity in response to cope with 19.
In March we quickly secured a new 675 million revolver and subsequently drew down on both that and our existing untapped 875 million Reoffer.
Just last week, we completed a series of highly successful capital market transactions led by Goldman Sachs.
Significant demand for this capital raise resulted in the transaction being oversubscribed many times over.
Not only did we have excess demand across the three offerings. The greenshoe options will also fully executed for both the ordinary shares and exchangeable notes.
As a result, the transaction was upsized from 2 billion to approximately 2.4 billion of gross proceeds.
Significantly strengthening our financial position and extending our liquidity runway.
We're extremely pleased with the result of this transaction and our proud of the teams adapt adaptability to act to execute this extremely complex capital raise while sheltering in place.
Turning to slide 14, we have provided an illustrative liquidity runway that shows how we believe we are well positioned to withstand an unlikely scenario of over 18 months in a zero revenue environment.
Our pro forma liquidity post the capital market transactions is approximately 3.7 billion as of quarter ends.
At the end of the first quarter, we had just under 1.2 billion of advanced ticket sales related to the remainder of 2020, including approximately 800 million for voyage cancellations through June Thirtyth, where guests can choose to accept a value add future crews credit or a full cash refunds.
To date slightly over half of guests have requested a cash refunds.
For the remainder of 2020, we have approximately 370 million of advanced ticket sales on the books.
Our net liquidity is approximately 3.1 billion, assuming roughly half of the customer deposits for all sailings in 2020 are refunded.
Our cost reduction in cash conservation measures have resulted in a significant decrease to our monthly cash burn rate, which is now expected to be in the range of 120 to 160 million per month.
This includes additional cash financing expense associated with debt refinancings, and new financing secured last week, which is expected to be approximately 12 million per month over the next 12 months.
This burn rate excludes cash refunds and cash inflows from both new and existing bookings.
As you can see we believe we have significantly extended our liquidity runway to over 18 months and a prolonged is your revenue environment scenario, which we do not expect.
The recent capital raise and the significant measures taken to reduce costs and conserve cash in alleviated management's concern about the company's ability to continue as a going concern for the next 12 months.
Which is simply a technical accounting reporting requirement that is.
That receive some slightly out of context media attention last week.
Shifting the focus to our financial results.
The first quarter was significantly impacted by cope ignite team not only did we feel the impact from cancelled and modified crews voyages. We also recorded a 1.6 billion noncash impairment loss related to goodwill and trade names.
In addition, the reduction fuel consumption driven by canceled voyages resulted in an approximately 14 million loss related to a portion of our fuel hedge portfolio due to a reduction in forecasted fuel consumption and close through the other income line.
As a result, we recorded a net loss on a U.S. GAAP basis of 1.9 billion or $8 on 80 cents per share.
Looking ahead, given the rapidly evolving impacts from the pandemic, we cannot estimate the impact on our business for the longer term financial and operational results with certainty and therefore will not be providing second quarter or full year guidance.
While we're not providing traditional guidance, we do expect to reported net loss on both a us GAAP and adjusted basis for the quarter ending June Thirtyth and the year ending December 30, Onest 2020.
Before returning to call back to Frank I want to reiterate our confidence in our ability to weather the impacts of cobot 19, and emerge stronger on the other side.
Our strong liquidity position gives us ample resources to absorb a prolonged voice suspension, allowing the team at Norwegian cruise line holdings to focus on doing what is right for our guests crew travel partners team members and other stakeholders, while protecting the equity of our brands for the long term.
Lastly, we believe in our business model, which has demonstrated its resilience repeatedly in the past and are confident it will do so again.
With that I'll hand, the call back over to Frank to discuss our next phase of response to covert 19 and provide some closing commentary.
Couldn't find the mute button mark Thank you.
With our ships in safe Harbor, and an enhanced liquidity position posts are extremely successful capital raise we now shift our focus to the third phase of our response as seen on slide 15.
Executing on our roadmap for our new era of cruising.
This phase is critical.
Very critical and will be predicated on two main factors first receiving approval to safely resume operations from governments around the world, including the CDC.
And second and most important.
Providing.
Consumers with absolute confidence in our there will be sold through deliberate safe and healthy vacation environment through new and enhance health and safety protocols utilizing the latest state of the our technologies and testing methodology.
Nothing will be more critical.
Two resuming sustain and profitable long term operation.
And making cruising the safe safest option in the travel and leisure space.
Providing our guest with the peace of mind around the good health, while vacation aboard our vessel.
This will require a multi pronged multi disciplinary and multi agency in global strategy that will involve strong collaboration between cruise line industry associations national and local government.
Public health agencies and ports around the world.
Our goal is to preserve the traditional elements of the cruise experience the great value. The multiple destinations visited the wide array of dining entertainment offerings modified as necessary.
Acid in many changes we are becoming accustomed to in our daily lives.
Another area of focus is working with our party agent then operators around the globe to understand and coordinate plans for reopening.
Endeavor will undoubtedly involve fits and starts as destinations decide when to reopen crews sports.
Overlaying these plans with possible new consumer demand trends will guide the early days of our gradual relaunch, including which itineraries will first come online.
Having assets with waters and propellers is a unique advantage to our industry as they can be extremely nimble and reposition our ships as needed.
While our operations teams focused on protocols and destination.
Our brand presidents will focus on reactivating accelerating as sales and marketing machine that is at the heart of our market fulfill philosophy.
Our brands have done a fantastic job fostering demand and engaging gas in travel partners in this challenging operating environment with our shifts sitting idle.
As we prepare for selling through him we will have to adapt our marketing strategy to focus on health and safety measures. While at the same time keeping site on the overall thrilling experience of cruising and what makes it such a unique vacation experience in the travel industry.
With new protocols in place coordination with courts and demand engines churning what follows will be a phase relaunch of voyages.
We expect sailings to restart with a handful of vessel phasing in others over a period of five to six months before we have our full fleet back in operation.
As I said earlier as with many new endeavors, there will be fits and starts.
It will require the quick implementation of new protocols, which we will continue to adapt as we learn what works and as newer more efficient and more cost effective technologies involved and become readily available.
Before turning to Q and I'd like to leave you with a few key takeaways from slide 16.
First we have significantly strengthen our financial position to withstand a prolonged suspension of voyages by significantly reducing operational and capital expenses and executing several liquidity enhancing measures, including the successful capital raise of $2.4 billion.
Second there continues to be demand for cruise vacation, despite limited marketing in demand generating investment.
And lastly, we're intently focused on developing and executing the next level of health and safety protocols for a new era cruising led by a seasoned management team that has proven its ability to navigate through uncertain and challenging time.
And with that Jonathan let's open up the call for questions. Please.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one and you touched on telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound key our first question comes from a line of Thomas Allen from Morgan Stanley. Your question. Please.
I think that demand overall demand certainly will be impacted it'll be weaker as we as we roll out as the economy takes its toll as people need to regain competence in the in the cruise industry in their our ability to keep them healthy.
But if we were if we if we had the highest fields coming into this I think we'll have the highest feels during it and highest fields coming out of it part of it is because of our brands part of it is because of our fleet.
Part of it is because I go to market strategy is you know, it's not to discount facility to market themselves. So we're very anxious to getting back to do what do what we do best switches marketing and as you know we have literally shut down the marketing machine to sales and marketing machine over the last 10 weeks or so and despite that shut down as you.
Scene and our disclosures today.
We're still taking booking.
I guess, there's a lot of encouragement that despite everything that's going on.
People's go on a cruise and I think that's.
The best indication, we have that there is a future in the future will be great.
Okay.
The the for.
There were some encouraging comments on the prepared remarks round, the overall, but position and pricing for 20 or 21 with being where then historical ranges.
How much of that is new money being go fishing boats versus rebooking the existing worried isn't how how should we think about that thank you.
Yeah, the the vast majority.
Vast majority of.
The book position today.
<unk> within her Stoelker ranges.
And historic Arrangers Bras means 17 18 1920.
The last three four years.
Oh, the vast majority is good old cash book.
Overtime as people finalize their their future plans.
We hope that they didn't take advantage of those recruit certificates, which has you know I go through the end of 2022. So they got plenty of time, but today. The vast majority of those failings of those bookings I should say.
Are.
Just normal cash booking.
Okay. Thank you.
Q weren't next question comes from a line of Stephen Gramley from Goldman Sachs. Your question. Please.
Thanks for taking the questions I guess I know, there's a lot of unknowns, but how do you think about them free cash flow generation at the ship level at various occupancy levels.
Start seeing some go back on the water and they're still different social distancing measures that could be in place.
Don't don't think of it adds a load factors think of it as total revenue is you know yield total revenues made up of three variables load factor ticket revenue when I'm bored revenue.
And so there is a a relatively low.
Total revenue.
Threshold before that particular sailing.
His cash positive.
I look the the the number one factor as we <unk>.
Relaunch operations is not the.
Necessarily the revenue for a particular sailing or the if a dollar for particular sailing it's.
Regaining the competence of the consumer so that consumer can continue to the book under you know under the normal.
Booking curve remember this is a forward looking business.
The the cash flows that comes from customer deposits in the advance payments.
What feels this industry and what has been draining out of everybody's treasury over the last 10 weeks or so as we either councils sailings or people counseled her own the their own gorgeous for a very Marietta reasons. So as we start operations, we got to regain momentum Steven.
This is an industry a company that was running a thousand miles an hour and overnight would shut down just screeching halt and we've got to get that momentum back and so I am less concerned about what the <unk>.
But the revenue maybe have a particular sailing, especially in the first 30 or 60 to 90 days, but I'm more concerned about getting back normal operations getting back to the sales and marketing machine, you know, turning up which which do which turns out of the cash flow necessary to to read.
Build our advance ticket sales because the the in the important part is knowing that people book seven eight months in advance, let's not forget that and so I I'm concerned about cash in clothes in the in the short term as we resume operations and we'll be looking at what revenue in it but that will be.
678 months after that in the normal course of of what the booking curves are.
Hmm, that's helpful and and as a related follow up can you just remind us what percentage of foreign bookings typically come on board the ships and any other color. It sounds like you're you're kind of going down this path, but around when working capital.
Would potentially flat as we think about different booking curves and ships coming back out in the water.
I'm not sure I understand the question C.
Yeah, Steven I think I I think that this is mark sorry, there's two pieces to that I think you were asking how much how many customers book while on board is that correct.
<unk>.
Yeah. So I don't I don't think we've we've disclosed that but obviously, we have very solid programs under our crews next program, where we were we are able to secure forward buttons, but we don't it's like <unk>.
Give a publicly those numbers in terms of the working capital you know the the way the way worth thinking about it as a you know what we've one of the positive signs that we've seen as we've seen a significant and the flow of new new bookings and new cash, but as well as customers with existing bookings.
And while we are now in the process. So obviously, a refunding quite quite a few customers their <unk> their advanced bookings, we believe that in the you know the next 30 to 60 days, we are going to be you know working capital positive positive as a result of the new and existing cash that's coming.
And from those bucking. So you will see it you know there is there is going to be a little bit of a little bit of L.A. I slow ramp up to that but again in the next 30 to 60 days, we see a positive working capital from that.
Well.
Thanks, so much.
Thank you aren't next question comes from a line of Harry Curtis from Instinet. Your question. Please.
When everybody.
Wanted to go back to the.
That you made a frank about.
<unk> customer confidence you've recently brought on Scott constantly bad say as a consultant can you walk us through.
Some of the new protocols that what they might look like to improve that that confidence as as a potential customers consider cruising again, and this and and the safety aspect.
Yeah. The morning, Harry look I don't Wanna front run what we're going to be developing that is up to all the experts that we have put together, we think we put together a very strong team.
So it's the first things first the the the number one game consideration today is to get the C.D.C. to lift and no sale or that's job one can't go very far without that so we we have to introduce a theory.
I would referred to as robust and comprehensive theories of protocols that gives the C.D.C. competent that the environment and bought a a cruise ship is healthy.
Then once we do that.
We have to communicate or whatever those protocols, maybe to the traveling public and bring and give them. The same competence that we were able to instill in the C.D.C.
So it's it's a multi <unk> wrong process similar similar that missions to the C.D.C. will likely have to also take place around the world.
The the U.S. isn't the only country concern with the spread of covert 19. They all are we've seen some recent cracks in the in the opening if you will have what what's happening in the U.
They have a a more unified plan in place to gradually re open borders and therefore tourism.
So that's a very hopeful and encouraging.
But this will take some time, we want to do this ride Harry this is not an exercise with optic.
Not an exercise, let's get away with a minimum required I want to do everything humanly possible within the bounds of what technology offers us today.
Be able to look my own family in the eye and say you are safe to go on board are two ships.
And until we do that reflective of what the C.D.C. or anybody else might say, we're not going to operate.
We we want to make sure that we.
We we we preserve and enhance the equity value of our three brands and you're not going to do that if you have.
Outbreaks of a of disease onboard so.
It's still too early to talk about specific.
But no that everything is on the table and make sure that we we can provide that help.
Security incompetent.
Among all stakeholders.
Thank you for that maybe of quick follow up on the on the commit that Mark just made a about working capital positive can you talk about your the expectations of how when you get.
When you begin to market again, when you get two or three ships in the water is that likely to lift the velocity Brookings as customers actually feel confident that they can set itineraries.
And maybe you can comment on on how you get to India 30 to 660 day get a narrowing of the of that working capital gap and whether or not just just by setting those I I temporaries is really the primary.
Catalyst to that.
Yeah, I think so so first you know let me be clear that you know.
Since we've shut down and and and and all reference the month of April.
We have we have taken in a significant amount of new cash bookings and collected a significant amount in advance of advance ticket sales and that is during a period, where we had a horrific news flow and we had essentially zero marketing in the in the in the market.
And that continues through <unk> and it continues to increase so I I think you're absolutely right to the extent when we can actually get.
Wages on sale and we actually start to really spend a little bit more and marketing dollars I think you're going to see that that's why we'll you know spend even quicker, but even without that and and again that's what that's what's important in why we're we're we're so confident here is that we continue to take it a significant amount of cash.
Today.
And so so it is not are working capital my working capital comments are not dependent on us.
We have two now can I <unk> in one month or two months or three months.
That will help and that will help accelerate but it's it's not depending upon that so again. It just step continues to demonstrate with the new cash come again, the resiliency of this industry and and you know consumers are are are smart they understand that there will be solutions.
You know we're we're we are seeing we are seeing customers come back there bucking, obviously not to the volumes that we would like to see any normal environment, but consumers noticed products going to be there and at that they have confidence in it. So bottom line is that will help but it is definitely not dependent.
Well, let's say a that's a positive statement relative to the negative press that that that that you see in a in the media. These these days 'cause good luck with that things. Thank thank you.
Thank you aren't next question comes from a line of Felicia Hendrix from Barclays. Your question. Please.
Oh, Thanks, Good morning, I'm thinking for other helpful. Information. This is probably for both things like an unmarked just question sauce clarification on your on your booking commentary because it it seems to have moved around over the past few weeks, we've just been getting a lot of questions on that so.
You know when you files your okay on April 27th and that they you know with ads in April 17th December 2022 conditions like meaningfully lower with prices down, let's think I'll take it and then that changed enough. Following okay. You said that Brookings as a port 24, where meaningfully lower bike pricing with now.
Down mixing huh.
And then.
21, the price and kinda carried any change pick the booking commentary. It still has a 417 your position was flat and then it's for 24, it was slightly lower bookcases pricing grunting down there.
This release, there wasn't really a lot of color on the booking commentary. So just trying to get an idea over all you know baffled trends because.
It seems like they're getting worse like also like is that even meaningful right like how much of an invitation do you think it really gives asked her pricing in Brooklyn, once cruising actually opens up.
Oh Felicia as.
As as time goes on remember, we we started.
The the year in a incredibly you know better book position or any other time, we had a huge lead.
We had a huge fleet at the end of February.
And as the covert 19 pandemic as work this way through.
The booking brought that <unk>.
<unk>, taking less bookings than we were this time last year, we're still taking bookings is mark said.
It's encouraging to see how much bookings, we're taking given that the entire.
Marketing apparatus is shut down there were working virtually the travel agents would still make up the majority of our business is not at full strength either.
But as time goes on.
And we take on less bookings into current period or period.
Then prior year, you're going to see a a deficit being built.
Over time as as as we continue to be shut down and not until we we reopen all the sales and marketing activities in the travel agents, we open for business et cetera.
You see yeah, you know 888 pivotal acceleration of new business that hopefully get us back to rate that allows us to sail full.
Over time, if things continue the way they are today over time.
The commentary will be that we are falling behind to where we were this time last year, because we are taking less bookings today.
Then we did a year ago.
Okay that makes it makes sense and then just to clarify something you said earlier because you say that there is <unk> just don't you know because when you're talking about the historical bucking patterns or 21, and you were saying I'm not going to start with you know how much is broken 20.
Line in in the high teams, but I think he said 17 18, 19% did I hear that right.
I think I don't think I used a rep. No I think that was a reference to say when we look at our historical trends that was based on calendar years 17 through 20.
Yeah, no okada per se, but if we look at.
If we look at normal historical fucking patterns, you know just for the industry in general I think this time. This year you know the following year is somewhere around 20, 25%, but there was that the metric when you're standing in line with historical patterns.
We won't comment as to your you know high teams, 25% because we typically don't comment on where our book position is for the.
For the following year at this early stage, but we are comparing.
Where we are right now for 21.
Pair to where we were right now a year ago, or 20 and compared to what we call. The historical rain, which includes 2017 18 19.
Okay. Thanks, a clarification and then just on your comment that Duffle fleet could return in in five to six months I'm. Just wondering if that's based on customer surveys are doing now and the booking curve and do you think you'll be selling it as historical occupancy levels. There just aren't really depend on kind of some of the regular.
<unk> that'll be in in place.
Yeah. The they returned to service of a phased approach.
Roughly five vessels per month.
It is what we believe we operationally could handle in terms of bringing back the ship from cold layup, including recruiting the vessel.
<unk>.
And so that given that we have 28 vessels have you bring back an average of you know five vessel a month is going to take about six months to get all ships back operate.
Now that assumes that the itineraries that these ships would operate.
Are are available for operation.
So it could be that if ship number 19 is operating a certain itinerary and that I can vary is not open or certain key port and that I can never got not open it may be that that that so have to.
Stayed ah they laid up a lot longer periods of time, so the six month ramp up a ceiling was more than anything else our operational capability.
To ramp up.
And that the sports are open has nothing to do with consumer demand because we believe consumer demand.
And and the bookings that follow are based on our our ability to market travel agents being back open again, the whole industry being back in operation as opposed to you know sitting idle.
Et cetera.
On on the occupant decided you think L.D. sailing at no regular occupancy forever.
No I don't think so one bit I think it'll take time to to ramp up.
Loads, we we don't know for example, whether government agencies will require us to initially sale at less than 100%, even if there was demand to fill 100 per cent.
Just remember the it's it's very easy and it could very quickly.
To dismantle the whole apparatus.
And that it takes time to to refill the apparatus. So if the booking curve on average is seven to eight months.
It's going to take at least that long.
Without taking consideration you know economic that factors of how it may have affected the consumer to get the pipeline back to a pool or near Bull.
Environment.
And so this is just going to take time.
Oh, we can do now is you know you some level of reasonable projections.
But until we get back into game and recognize that being back in the game could be different than it was before for the reasons I noted for for what are the protocols that we will have to operate by what chords are open et cetera. Those are the biggest skating factors not necessarily consumer demand.
I believe that consumer demand this industry and this these three brands of hours are very apt at.
Marketing travel agents are well behind us, there's pent up demand, let's not forget that.
Ah you know people only talk about the negative but the fact that the industry has been shut down now over four months there'll be pent up demand people will want to cruise again and so all those are positive factors, but nothing takes the place of time.
And we have to be conscious of that.
Thank you so much are very helpful.
[noise] fake you as a reminder, ladies and gentlemen, if you have a question at this time. Please press start within one on your touch tone telephone.
In the interest of time, we'd like to ask the please each individual just limit yourself to one question. H.R. next question comes from a line of I would find stuff from Tigers financial your question. Please.
I've been you might have your your phone on mute.
Sorry about that.
Thanks for taking my question work just too quick questions were you able to take advantage of the dropping oil that we saw in April.
And the appendix shows oil prices just at the end of March and the other question is the people who are booking are they booking.
Are you getting bookings from people, who are within driving distance to other ship, they're booking on or are you still are you seeing people who are booking also going to fly to get to the port.
<unk>.
I'll take your second question and Marshall answer your question about feel.
I.
I thought somebody would ask these this type of question so I looked into it.
For the O.C.N.N. region, Brian.
Their number one itinerary in terms of demand for you one early q. too.
Is Japan.
It's due by several of the the World Cruise segment. So therefore, you you have to fly there.
And so.
You know this this notion that people aren't going to want to cruise too far away places or exotic destinations. What we're seeing a is defined that.
So we're not seeing any particular area of strength other than the.
Japanese I <unk> World cruise segments that are sold out literally.
No no particular destination is is is is <unk>.
I mean, particularly well are particularly bad people are booking and people are cancelling sailings in the future at the pro rata rates that we have those I can always available light.
I, let my answer the question about field.
Hi, good morning, I've been so yeah. We did we didn't take advantage of some of the recent fuel prices and opportunistically layered on some hedges for 22 in 23.
We didn't do anything for the remainder of 2020, obviously, because we're already 68% hedged for the back half of the year and really the Big question is is when are we going to be able to restart. So we didn't want to do anything there and we continue to look at 2021. So we've now that we have our capital raise behind US we will continue to focus on focus on that.
And again from an opportunistic standpoint, where it makes sense, we will we will enter that market.
One of a quick question in the fact that some of your in the region cruises include.
Tickets and you have had promotions in the past that include Airfare do you think there's an opportunity to work with the airlines too. Unfortunately like your industry have been you know unfairly hurt by this to get a deal on plane tickets that you could help market.
In the future too people, who want to who cruise, but don't live close to the ports.
We definitely believed that airfares in the near too you know and then next six to 12 months will be lower than usual so it'll be a.
I'll tell went to cost and we'll look to do more and more promotions, including err on itineraries that that require that yeah.
Alright, thank you.
Thank you aren't next question comes from the line of <unk> J.P. Morgan Your question. Please.
Good morning, everyone. Thanks for taking my my question just one for me based on you know the internal scenarios that you're running for for load and for price now assuming you can start sailing in August roughly how much of your fleet do you think needs to be any being the water to break even on either.
Basis.
Yeah, you. So good morning, Brent. This was March so again, you know I think the there's two ways to think about this right in terms of Ah you know if you look at our historical even a margins there about 30%. So that kind of gives you you know upwards of 30% that kind of gives you how much.
Whether it's a revenue or or or combination of costs, we can reduce and you could translate that into a percentage of fleet, but then it depends on on whether or not the ships are for operating it reduce load, but as Frank et cetera earlier are concerned right. Now is not are we operating and they positive.
Yeah, but outward a negative either though.
We are we we we need to gain momentum we need to get ships in the water to accelerate the the product awareness and get that H.P.S.A.T.S., a cash flywheel going again and that's what we're focused on for the next day six to eight months.
So you know there's not a magic number of number of ships because there's just too many dynamics between the pricing in the load and then what the <unk> what to spend this so so I will tell you that we you know obviously, we don't want to run the business any loss, but we will have to run the business study lost for the next few months, but it's more importantly about getting that cash fly will going again.
So.
Understood. Thanks, a lot that's good luck.
They give you aren't next question comes from a line of Steve wasn't ski from Stiefel. Your question. Please.
Yeah, you guys good morning.
<unk>, let me ask the the the working capital question, a little bit differently and I hope. This makes sense, but you know you guys have indicated this morning that you know what I I I don't remember <unk>, you use but a good bit of the 2021 bookings, our new or unique booking <unk>. So after the first wave of refunds that have already occurred as it is it fair to say that for.
Every dollar you were your refunding now you're bringing in a new dollar for an advanced booking or is that ratio still tilted <unk> way more toward a a net cash outflow.
Yeah, I I would say looking at it today to still still definitely weighted toward a net cash out flow and what I was referring to earlier is that you know when we look over the course of the next 60 days by the end about 60 day period, we believe that ratio would flip to a positive.
And not just a matter of timing and and again, giving the the amount of refunds that we've that we are are <unk> are implementing as a result of the cancel boy so again nuts.
I would I would we anticipate in the next 60 days that that is a positive ratio, but I will tell you like again, it's very encouraging that we are substantially offsetting those refunds with that new cash come again, and that's where where we definitely see some of the green shoots at this industry.
Okay Gotcha and then the second question I I think it might be for Frank or you Mark, but I you know I assume you guys have run all kinds of scenarios as to what the business looks like it comes back on line and [noise].
Can you kind of help us think about the timeline you guys are kind of projecting are expecting that we might be looking at in order for you guys to return to some kind of profitably level, whether that's a 2019 level or whether that's a 2018 level anything that would be pretty helpful as well.
You know well, let's start with 2020 2020 is.
A wasted year.
At a minimum the industry is going to go the entire Q2 without a penny of revenue.
Possible to overcome.
Depending on how.
Quickly we can reopen.
And whether in our case for example can we execute in the plan that I laid out where we we bring back to flee gradually over a six month period.
So pick a date.
Let's just for argument's sake.
October persons the first start growing I'm only pick October 1st don't thumb.
Much more into it except that it.
Beginning of a quarter.
And you figure that we won't be fully operational until the end up to one of 21 and.
And during that time, you are ramping up your marketing.
Travel agent hopefully around the world, especially in the U.S. coming back to work.
Booking curved traditionally is seven eight months.
You put all those factors to work.
And what you end up with is a a very challenging.
Period of time through you one.
Getting bettering you to every subsequent you know sequential quarter is better whether you get back to you know full operation full load factor for pricing.
You know some time in 22 I I personally don't believe I think the runway will be longer but you know 21 will be a transition year.
And then you can you can start rebuilding our you know in in in earnest.
About this.
It's almost like a relaunching a company from scratch when you have your entire fleet shut down and you don't know when are you going to be able to start again, because it's not up to you. It's up to you know public health officials and governments around the world, it's very difficult to to.
To to predict where certain T., you know revenue and if it is that I said before it's a building block.
You know.
In the building blocks starts with when can we start to operate.
When can we start marketing you know marketing is the speed of cash.
Hash comes in 678 months later that cash and Lee recognizes revenue and and therefore, then epidemic. So we got to have patience.
Decades to build this industry.
And in a matter of weeks, we dismantle that.
And it's going to take not decades to build it up again, but it's going to take a little time.
And and we just have to be patient.
No one is more impatient than me, but I recognize that.
This is going to be a a a recovery effort that's going to take you know multiple quarters, perhaps multiple years to get back to the good old days of 29 thing.
[noise], that's great. Thanks, Frank Gray color.
We have time, operator or Jonathan for one more question.
Certainly our final question then for today comes from the line of and see people from Cleveland Research. Your question. Please.
Yeah affects so it sounds like your plan is if things go right, maybe five to six months reactivation and.
Activating the full hundred percent of your fleet and there you have a bit relatively younger age and you're asleep versus the industry, but could you come in what percent. If at all you think the industry may lay up there was a tire or scrap through this this pandemic.
Yeah, I can't speak for the.
Pretty indiscreet, it largely with any kind of.
Specific as you pointed out we have a very young please so none of our battles every moment.
You know eligible as you will for for scrapping or or anything else.
I do believe and I'm macro environment, given what we are facing that you're going to you're going to find that that will be retired battles that might have been marginal performers in good time.
May not be Ah Ah worth the go to see.
<unk> service. So you you might see that.
You My team delivery, you know I remember, you'll all you guys being so worried about capacity increases it over the last couple of years that it was five or 6% and it was a couple of points higher than the than the historical average and you know all my God, Oh, My God and use it.
It was able to easily digest you capacity coming on line and we all had you know the best years of our of our history, but I do believe that certain vessels that may be schedule for delivery in the next 12 to 18 months, maybe delayed and that'll help the capacity situation.
And and you know different companies will have different plans and how to bring back.
There. Please you know one of the things that I've been I've been telling folks that I, usually don't say is that I'm glad I only have 28 chips.
Usually I want more ships, that's why we have nine vessels on order because when you have what you have and they're all full and you're making lots of money with them you want more vessels, but in this environment I'm glad I have lots about.
So.
Well you know like like.
In many industries that are facing the kind of challenges, where we're facing there's gonna be survivors and there's gonna be some that don't survive and.
That's going to be success stories and failures.
We think we're in very very good position given our liquidity profiled given.
The quality of our of our assets.
Our go to market strategy, our management team. So we we feel like we will be one of the success stories.
We'll write that history books uncovered 19.
We'll see where the chips walk where everybody else.
Thank you operator, I look forward to our next caller 90 days or so.
Things will I'm sure will be very very different.
I hope, they're different put the Bath and I mean time I hope you all stay healthy.
And.
Fighting the good fight.
Thank you very much thanks.
Thank you very much everybody.
Thank you ladies and gentlemen, if your participation today's conference. This does include the program you may now disconnect good day.
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