Q2 2020 Norwegian Cruise Line Holdings Ltd Earnings Call

[music], ladies and gentlemen, please standby your Norwegian cruise line conference will begin momentarily once again, ladies and gentlemen, thank you for your patience and please standby.

Good morning, and welcome to the Norwegian Cruise line Holdings second quarter 2020 earnings Conference call. My name is Michelle and I will be your operator at this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions for the session will follow at that time, if anyone should require systems during the conference.

Please press Star then zero on your Touchtone telephone as a reminder to all participants. This conference call is being recorded I would now like to turn the conference over to your host Ms., Andrea Andrea Demarco Senior Vice President of Investor Relations Corporate Communications and E. F. G. Mr. Michael Please proceed.

Thank you Michelle and good morning, everyone and thank you for joining us for a second quarter 2020 earnings call.

I'm joined today virtually by Frank del Rio President and Chief Executive Officer of Norwegian Cruise line Holdings, and Mark can buy 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 before handing the call back to friend for closing remarks.

We will 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 feel each LPD investor Dot com.

We will also make reference to slide presentation. During this call, which may also be found on our Investor Relations website.

Both 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 cover a few item.

Our press release with second quarter 2020 results was issued this morning and is available on our Investor Relations website.

This call includes forward looking statements that 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.

Commentary May also reference non-GAAP financial measures reconciliation to the most directly comparable GAAP financial measure and others, who see the disclosures are contained in our earnings release and presentation.

With that I'd like to turn the call over suffering so real brain.

Did we lose Frank.

I'm, sorry, I had you on mute.

I'll be in from the call.

Thank you Andrea and good morning.

I hope that everyone joining us today as well as your loved ones are healthy and states.

Similar to our earnings call in May today, we will provide a business update on the progress of our response with the cold would not be global pandemic.

I'd like to set off by putting the current no sales situation into perspective.

The last five months, our company into cruise industry at large as experienced more adversity that at any other timing or 50 plus year history.

The negative effects the cruise industry faces from Nikobar crisis Eclipse instead of 911, the great recession and any other stress testing your that one's imagination has ever model.

Bond.

Looking back and would have bid on it.

Unimaginable gross come for see that today five month. After the initial suspension of service, which was declared on March 13 that our entire 28 should fleet would still be at a complete standstill mordor anchored imports around the world waiting to set sail again.

I think we are hearing about the pandemic is unprecedented and extreme and uncertain.

And we will surely be chronicle, an extraordinary events in our storied history.

Nevertheless, I continue to remain confident they're not beat that we will once again demonstrate a resilient and adapt to the complex an ever changing cobot 19 environment.

There is always a silver lining in all hardship.

And as you know our company's nimble and innovative.

We will find ways.

To meet the needs of the current environment no matter what they maybe.

Whether that's developing and implementing new and innovative health and safety protocols.

All of the newer modified itinerary or changes to the onboard experience.

I understand your consumer trends or any other obstacle to come our way we will look back on 2020. This pandemic and once again witness the evolution. It will bring not took the crews and hospitality space, but all aspects of life and society around the world.

These times have been trying not just on the business from but on a personal front as well and I couldn't be prouder of our team under herculean efforts to rise to the occasion, while juggling so much change across both their personal and professional lines.

Our team members around the globe, especially to our shipboard crew, many who endured months waiting to get back home. Thank you for your dedication your patience and hard work as we join together to whether this crisis.

As you can see on slide three much has transpired since our last call. Despite an entire quarter with not a single revenue generating voyage.

Key events include three additional extensions of our voice suspension, resulting in a positive operations through October 31st.

Which brings our turret temporary suspension to a total of six plus months.

We took measures to extend our debt maturities and full further bolster our liquidity with our highly successful 1.5 billion dollar capital raise last month.

And we announced our collaboration Royal Caribbean Group and the formation of LP sale panel.

As we continue to navigate to fix this crisis. We have made continued progress on many fronts as you can see on slide four.

In terms of addressing operational challenges our efforts to return our crew members safely back home and United with their loved ones has been a monumental effort. The challenges we face not being able to disembark crew in various countries simply because they run a cruise ship, including travel restrictions empathy closures limitations on commercial air travel and other.

Chronic red tape complication made in already difficult mission nearly impossible.

It's traveled regulations became stricter options narrowed and we got to find you an alternative ways to returning our crew home.

We utilize both here and see as our operations team coordinate mass repatriations to over 75 country using several of our vessel to safely repatriate or Kuta, Europe, Asia, Central and South America and the Caribbean.

I'm happy to report the repatriation efforts are almost complete and we have repatriated nearly all of our crew members. Since we started this effort.

On behalf of our board of Directors and management team I like to express our sincerest. Thanks to our entire family of crew members for their patients professionalism and understanding as we work from various complex challenges during the repatriation process.

And do those team members, we may not bought our vessel.

Keeping them in top working waters, where a return to sailing we thank you for your willingness and loyalty.

As a handful of our vessels were conducting repatriation voyages, we continue to fine tune delay a process for those vessels not involved in that effort.

Hello.

I'll be vessel is a complicated endeavor, which involve balance the factors port location. For example, as important as shifts laid up in areas prone to tropical storms and hurricane such as the eastern seaboard in the United States in Hawaii must crew vessels to a level, where they can quickly say auto harms way.

Other than something which we did recently in Hawaii with Hurricane Douglas.

Ruble with hurricane Gonzalo and into Hamas Bahamas.

In Norfolk, Virginia with Hurricane assays.

Or is also have different requirement.

Regarding minimum many tying up shifts together, which dictates the number of crew needed onboard.

Balancing all these factors both in our vessel operations being worked on an extraordinary job and working through the weighing up of our vessels.

Our goal during the layer prudence to reach a minimum level of Manning and each of our ships, while complying with all regulation minimizing our cash burn rate and maintaining our vessels to be ready to re enter service in class and under short notice in terms of where we are today all vessels not involved in repatriation efforts were undergoing dry dock.

Laid up in fourth recording extra crew are expected to be at minimum banning status in the next 30 to 45 days.

Next we continue to Port go to forge ahead with our unusual action plan to adapt to a lengthy suspension of service.

Mark will discuss incremental actions, we got taken to further bolster liquidity later in the call. So I won't go into details now I do however, I want to commend our entire finance organization for successfully tapping the markets last month.

And our debt maturity profile and Opportunistically further enhance liquidity position with a triple Tron transaction that we believe will allow us to withstand a prolonged period of voice suspension.

We also took an important step in the last phase of our navigating through our cobot 19 strategy a roadmap to relaunch with the announcement of our collaboration with well Caribbean group to pull into healthy sale, Pat I will hold off on my commentary on the panel in our progress in a roadmap and we'll revisit the topic in my closing remarks.

Focusing on today's current business environment, and what we're seeing in our booking trends on slide five it's an encouraging sign that despite our reduced sales and marketing spend.

And other.

Outright suspension of other demand generating activities there continues to be strong demand for future cruise vacation.

Since March we asked insistent conscientiously, I should say pared back sales and marketing investments and other demand generation initiatives in order to conserve cash or defer the spend to a period. When these investments have a known payoff in other words until there is more certainty of when we can actually operate the sailing that we are selling.

Consumer demand, especially loyal Pascal is evident across our suite of offerings with no one sailing region, failing length brand or source market materially outpacing other in terms of performance.

Our marketing investment strategy will correspond with the gradual ramp up of sailings as we assess the situation through time.

With our sailing currently suspended through October 31, the last two months of 2020 could see a return to sailing of a very limited number of vessels likely with.

The second reduced occupancy level.

As we move into the first quarter of 2021.

Deployed capacity is expected to ramp up as more vessels gradually re into the fleet.

Based on this timeline it isn't until at least the second quarter of Twentytwenty, one that we would see our fleet return in earnest as a result, we have been de emphasizing marketing activity and the corresponding spend for 2020 and have instead focus our limited marketing investment and things in the second quarter of Twentytwenty one onwards.

Including the peak summer season, what we believe these investments will give us the highest returns.

Given the aforementioned focus on billings in Q2, 21 forward and despite lower overall overall booking volumes over the previous weeks as a result of the pen.

Today, our cumulative book load factor in pricing for Twentytwenty, one sailing and particularly for those.

Second quarter forward remain very much within historical ranges, including the impact of bookings made with future cruise critic credits, which over the last eight weeks have made up approximately 30% of all new net bookings.

I want to emphasize the while comparisons to theres have been useful up to this point.

Going forward booking comparisons will become less meaningful.

Because in a normal year at this point in time booking activity for the following year sailing really begin to accelerate however, if our 2021, new net book you volume remains at current level the delta in both positions.

We will begin to widen as we move through the year.

Our go to market strategy of market is still as opposed to discount to fill has served us well in the past is serving us well now and I'm confident we will serve us well when we fully reengage with our guests in earnest and resume crews voices.

Ill be back a little later to provide an update in our roadmap to relaunch that we're now I'd like to turn the call over to Mark.

And we'll update Mark please.

Thank you Frank.

Given the rapid and significant impact Cobot 19 has had on our business. My remarks will focus on the continued execution of our financial action plan and how we believe we have positioned our company to whether an extended period avoid suspensions.

The global pandemic has lasted longer than anticipated, resulting in the continued suspension of our crews wages, which have now been extended through October 30 Onest.

There is still much uncertainty around how the pandemic will evolve. So we will have to continue to adapt and modify our strategy and real time.

Since the start of the crisis, we have taken swift measures to aggressively reduce cost and conserve cash to lower our cash burn as well as enhance our liquidity through various capital market transactions.

Slide six illustrates some of the additional initiatives taken since our last earnings call in May which include further reducing operating expenses, including shore side general and administrative expenses.

Minimizing near term marketing investments as Frank mentioned earlier.

Refinancing our short term 675 million revolving credit facility, which extended the debt maturity from early 2022 to 2026 and Opportunistically executing on additional capital raise transactions to further bolster our liquidity profile.

Slide seven outlines the improvement of our debt maturity profile accomplished through numerous initiatives, including several market capital market transactions, the deferral of amortization payments and the extension of maturities.

We took advantage of an industry wide 12 months that holiday initiative granted to us by the export credit agencies, carmakers, and Germany, and such a in Italy.

This initiative postpones amortization and provides for financial Covenant testing relief for 12 months with all postponed amortization to be repaid evenly over the following four years in eight semi annual installments.

In addition, our commercial lenders also agreed to a 12 month that holiday for nearly all of our debt amortization payments.

The support we've received from the credit from the export credit agencies, our commercial lenders and the shipyard has been incredible and we can take them enough for partnering with us during this challenging time.

We have also been active in the capital markets and greatly appreciate the support of so many of you listening to this call.

Slide eight provides details of how we've secured additional capital since the start of the crisis.

Most recently in July we successfully executed a triple tranche capital raise of approximately 1.5 billion.

Apprised of senior secured notes exchangeable senior notes and ordinary shares.

Once again strong demand resulted in an oversubscribed book, which provided us the opportunity to upsize the transactions by approximately 25%.

Including the full exercise the greenshoe option by the underwriters for the ordinary shares and the partial exercise for the exchangeable notes.

This capital raise combined with the historic Quad trench raise in May brings our total capital raised to nearly 4 billion.

Providing us a solid liquidity foundation.

While these transactions have significantly improved our liquidity position, we recognize that they have come at a cost.

The decision to increase our leverage and issue shares was not taken lightly.

But given the extraordinary circumstances presented by the pandemic these steps were necessary.

Despite these transactions our weighted average cost of debt is approximately 5%.

And our priority once we emerge on the other side of this pandemic is to focus on improving our balance sheet as we have demonstrated and proven our ability to do so in the past.

Turning to liquidity slide nine provides an update of our targeted lay up costs and current illustrate of liquidity runway.

Our ongoing monthly cash burn is now expected to be approximately a 160 million a month on average.

[noise], which includes approximately 7 million up incremental interest expense associated with our recent July capital markets transactions and excludes cash refunds for canceled sailings and cash inflows from new and existing bookings.

This rate does not include that amortization and newbuilds related payments, which are currently deferred through March 30, Onest 2021.

The new burn rate is at the high end of our previously provided cash burn range, primarily due to a number of factors.

One maintaining at least seven ships and warm lay up due to various support and whether readiness requirements.

Increased cost associated with fluctuating travel restrictions for crew.

Additional demand generating marketing investments for future periods, which are driving new bookings and associated cash inflows.

And lastly incremental expense from the July capital raise.

We have made significant progress in reducing our controllable cash burn.

With our target representing an over 60% reduction in our combined ship operating expense and SGN a versus normalized levels.

Keep in mind that given the continued fluidity of the environment.

Cash burn can fluctuate on a monthly basis.

As Frank mentioned earlier at this point the majority of our ships are expected to be at the minimum level Manning and the next 30 to 45 days.

We continue to evaluate all additional opportunities to further reduce costs and drive our cash burn lower while adhering to various port and maritime requirements.

As for our current liquidity position, our total liquidity as of June Thirtyth was approximately 2.8 billion on a pro forma basis, which includes the July capital raise the repayment of the 675 million epic revolving credit facility and the portion of customer deposit.

Refunds that are included in accounts payable as of June Thirtyth.

As for cash outflow.

Total cash customer deposits included an advanced ticket sales are approximately.

Zero point Threebillion as of June Thirtyth.

And this illustration, we are assuming 60% cash refunds based on the cumulative behavior today.

Three would result in a cash outflow of approximately 0.2 billion, if all related sailings will cancel.

For this analysis. We have also included a preliminary place holder to account for further anticipated investments and health and safety measures.

This number may change depending on the recommendations from the healthy sales channel.

The final protocols to be implemented.

Accounting for all these factors results and available that liquidity of approximately 2.5 billion.

Leaving us well positioned to withstand an extended period avoid suspensions.

To help provide a clear picture of what a restart would look like when the appropriate time comes we expect to relaunch with a handful of Shipset first at significantly reduced occupancy.

When looking at a breakeven analysis, we utilize net revenue instead of occupancy as both price and load our variables that can be flexed as needed to achieve the revenue required to breakeven.

To cover our ship operating expenses broadly speaking our breakeven as approximately 40% of net revenue.

At the corporate level, which we believe is the most accurate way to view and holistic breakeven on an EBITDA basis, using our 2020 pre crisis budgeted shore side DNA, we would expect to breakeven at roughly 60% of our typical net revenue levels.

Shifting the focus to our financial results the second quarter was significantly impacted by the pin debit.

As a result, we recorded a net loss on a U.S. GAAP basis of 715 million or $2, a 99 cents per share.

Due to avoid suspensions, we did not record capacity days in the quarter, therefore yield and per capacity day data are not presented for 2020.

In addition, we recorded an approximately approximately 8.3 million net loss in other income related to our fuel hedge portfolio.

This is driven by a reduction in forecasted fuel consumption from canceled voyages, which resulted in the de designation of certain hedges.

Which was partially offset by gains related to previously designated hedges.

Turning to slide 10, we ended the second quarter with approximately 2.3 billion of cash and cash equivalents, which we subsequently bolstered with our July capital raise.

Our cash balance in the second quarter increased driven by the 2.3 billion of net proceeds from the May capital raise.

This was partially offset by significant customer cash refunds for cancer voyages of approximately 725 million.

Approximately 575 million of operating cash burn, including operating expenses as chair nay interest and capital expenditures.

Our cash burn improved during the quarter, but overall cash burn was higher than our ongoing expected monthly average as we continue to work through the transition of ships to lay upstate.

And that working capital outflow was approximately 100 million as we paid down a previously previous buildup of accounts payable.

Looking ahead, given the rapidly evolving impacts from the Pandemics, we expect to reported net loss on both the U.S. GAAP and adjusted basis for the quarter ending September Thirtyth 2020.

As well as the year ending December 30, Onest 2020.

Before returning the call back to frame I want to reiterate our confidence in our ability to weather the impacts of coping 19.

Our liquidity position at net and efforts to conserve cash position us well to absorb a prolonged voyage suspension, allowing the team at Norwegian cruise line Holdings, you should focus on doing what is right for our guests through travel partners team members and other key stakeholders all of which provide.

It is strong foundation for our long term success.

We strongly believe in our business model, which has demonstrated its resilience over the past 50, plus years and are confident but we'll do so again.

With that I'll hand, the call back over to Frank to discuss the next phase of our response to covert 19 and provide closing commentary.

Frank Thank you Mark.

We have taken important initial steps.

Good math to relaunch, which is illustrated on slide 11, particularly in the first phase, which is the enhancement of health and safety protocols.

Nothing is more important than the sustained restart accrues operations than the implementation of health and safety protocols that protect those onboard our vessels and provide guests with greater confidence in our ability to delivering safe and healthy vacation environment.

Our company in the cruise industry added another tool in our two box. We're developing these enhance protocols with information of the healthy sales panel a collaboration with our industry fear Royal Caribbean Group.

Well, we compete fiercely on everything having to do with bid.

We do not compete on health and safety issue.

At the end of the daily entire industry had one goal income.

That is to create an environment that mitigates the risk of cobot 19.

The panel is tasked with providing recommendations to advance our public health response, the cobot 19, and inform us on the development of a science back plan for a safe and healthy return to cruising.

We have incredible players on the panel Dr., Scott Godly, the former commission or the food and drug administration and Governor Mike Levin, former Secretary of Us health and human services.

The co chairs jointly recruited in rounded out the panel with an impressive group of globally recognized experts with diverse backgrounds, including in public health infectious disease, bio security hospitality and marine operation.

As shown on slide 12, the vast experience and breadth of knowledge of the panels members make them uniquely suited to inform us as we develop the next generation of crude health and safety standards, while at the same time, enabling us to preserve as much as possible what makes the cruise experience. So special so pop.

So successful.

Bringing aboard these respective experts.

Demonstrates our absolute commitment to the common goal of combating the spread of cobot, 19, and bringing back the cruise industry operations sooner rather than later.

In an effort to make broader contribution cook to global public health. The panels work will also be open source and can be freely adopted by any company or industry that would benefit from the groups scientific medical insights.

Given cruising is a is unique in that encompasses several experiences in one vacation that being lodging dining entertainment in of course transportation. We believe the processing structure, we've come up with could be a best in class effort and a model for how other industry can work through this public health challenge.

Panel has been hard at work developing its initial recommendations for the resumption of state cruising, which our operations team will then incorporate into specific and detailed plan to submit to the us DTC another public health and maritime agencies across the globe.

In addition to their initial recommendations the panel will continue researching other cutting edge health and safety technology that innovation.

That could further benefit the cruise industry, which make take more time to implement.

So.

Will there be changes.

Yes, there will be but as I mentioned earlier adaptability and innovation, our two characteristics in which our company in our industry itself. So while we do expect cruising to be different in the teacher at least until such time as the cobot 19 crisis is no longer a threat to public health. We are confident we'll work through these.

Changes, while being mindful as to how those changes may impact guest satisfaction.

Overall cruise experience. If you think about cruising 10, 15 20 years ago. The experience was different than it is today.

Well, how we've introduced freestyle cruising and then how much has changed that with innovations such as our groundbreaking electric go-cart race tracks and Galaxy Pavilion.

Guarantee you that five to 10 years from today things will also be difference.

A concurrent step in our roadmap is to determine port availability, both for Homeporting and purports to call conversation continue with key destinations regarding the reopening report and the resumption of called the key theme in these conversations is naturally be enhanced health and safety protocols as destinations look to cruise lines and public health.

Official to develop an approved these new procedures.

This step is critical as it will allow for destinations to prepare their reports their terminal.

Operations and other considerations for these new procedures.

In certain parts of the world of square the virus has lessened cruising has taken a critical first step in resuming operations.

Regional operators are standing both large and expedition size ships once again, albeit with reduced capacity and limited to gas from their home countries.

Recent events demonstrate that with the resumption of sailing jets as with the reopening of any other sector of the economy or of society fits and starts are to be expected.

And just like areas of economies, such as air travel hotels restaurants shopping centers and the like cruise operators will learn from these initial setback and adapt protocols to provide even a safer vacation experience.

Our industry has an unparallel history of successfully implementing regulations, which gives us the confidence that we will successfully at that so this challenge as well.

The third step in our roadmap is ramping up of our marketing engine.

My earlier commentary outlined our current strategy in terms of the quantum and direction of our marketing investments.

There is certainty around the timing or the resumption of sailings a milestone that is entirely dependent on obtaining the approval to sale from government agencies, such as the CDC, we can augment our marketing and demand generation investment and do well we do.

Execute on our go to market strategy of migrating to fill which leads to our industry leading yields.

Lastly, the gradual fit relaunch of our ships first with the launch of a handful of vessel likely at some reduced occupancy level.

Nobody gradual edition of the rest of our fleet, which we continue to estimate will take at least six months to complete.

During the call over to Q1 and I'd like to leave you with a few key takeaways that are shown on slide 13.

We continue to execute on our financial action plans to reduce expenses conserve cash and Opportunistically tap the capital markets to further strengthen our financial position and enhance our liquidity runway.

We continue to observe strong demand for cruising across all source in sealing regions and brands in the medium to longer term.

And lastly, we are focused on our roadmap to relaunch as we work alongside a healthy sale and when global public health authorities to resume sailing and with that Michelle. Please open the call two questions.

Thank you.

Thank you Mr. don't really if you have a question at this time. Please press Star then the number one on your touched on telephone.

In order to get as many people through the Q. Please limit your time to one question. If your question has been answered I wish to limit yourself in the queue. Please press the pound cake.

Our first question comes from the line of Steve Klinsky with Stifel. Your line is open. Please go ahead.

Hey, good morning, guys.

So mark I want to go back and I don't I don't know if I picked this up right, but when you talked about the ship operating expenses in what you need to in terms of revenue to cover those.

Did I hear this right. So an individual ship, you're basically saying that 40% of net revenue and then to cover your corporate overhead it would be 50% of typical net.

Revenue levels is that kind of based on what I missed is that kind of pre covert levels of that 2019, that's what I'm a little bit confused about.

Yes, Hi, Steve Good morning, Yes, you're absolutely right. So when you look at the at the ships from just the ship operating expenses.

Based on our art, let's call. It 2019, or 2020 planned levels, we would need about 40% of our typical revenue to cover the offer the vessel operating expenses when you layer on your corporate overhead.

In to that that goes up to about 60%. So keep in mind that say, that's an average that's a blend obviously certain ships it might be lower than that and certain ships. It may be higher than that but generally speaking, it's about that 40 and 60%.

Okay Gotcha.

And then Frank probably a bigger picture question for you. It's really about the long term health of your distribution network and what I mean by that as it seems there's.

A lot of smaller or mom and pop agencies might be are going to be forced to kind of shut their doors are they havent already so I guess the question is how do you see the travel agent network in a really looking over the next five or 10 years and could this potentially forced the that the hand of customers to start booking a little bit more direct with you guys.

Hi, Steve look it could happen we seen.

Smaller mom and pop types travel agents already holding your tense.

Even larger travel agent distributors.

Furloughing employees no different than the cruise lines are furloughing employees.

You have to adjust to the current volume.

We have seen an uptick in our direct business more business coming into our website.

And other out a direct channels.

We think that might be.

Exaggerated given time given the the.

At least partially closure of the of the travel agency distribution system, but I I believe that travel agents.

We will survive. This just like we will there will always be casualties has been casualty so far in acoustics.

So I think on the margins over the over at least the short term when sailing Brazil, you might see a disproportionate of business coming through direct channels.

Versus where we were seeing a prior to the.

Due to to the crisis, but I think over the long term the travel agents I've shown there resilience over the years they've adapted to technology.

You know wasn't too long ago that many people predicts that the demise of travel agents and if anything over the years they've done stronger.

So.

Maybe around the margins at the at the beginning at the outset of the restart, but I think longer term, you're not going to see much change.

Okay can I squeeze one more quick went in for you for your Franken.

You, obviously have the youngest fleet in the industry and I think you only have a handful of ships over 20 years old, but as you've seen some of your competitors start.

Retire scrap ships and do you start thinking about taking similar actions or do you just continue to believe.

You need more capacity overtime and as you really remain underrepresented in certain markets.

Yes, Steve you answered the question beautifully how can we have right. We have a young fleet in fact, the oldest vessel we have.

Prior to the pandemic, we completed the work in mid February we invested $150 million in the Norwegian spirits, So that ship is better than new.

We love our capacity we are the smallest of the big three so we're always wanting more although I think you've heard me say the during this pandemic I'm glad I am the smallest because there's less market feed so to speak but look we not only have the youngest fleet, but we also have nine incredible vessels on order, which allows us to have the.

The fastest growing fleet.

And so now we absolutely have no no plans to divest of of any of our vessels.

Okay. Thanks, guys. Appreciate it best of luck think thing.

Thanks, Dave.

Thank you and our next question comes from the line of Felicia Hendrix with Barclays. Your line is open. Please go ahead.

Oh, Thank you so much and good morning.

Thank you Mark you've given us tremendous information with limited stuff, what we know right now.

Frank just wondering what what inning do you think you are only couple CDC in terms of having the protocols in place for both crew and passengers to sell safely and.

You know there is unfortunately been several lines recently that I've tried to sell and have had issues with Colgate So key data.

That bank at all.

Yes.

Look.

There's no way to spin the.

The the initial.

Reemergence of koby them onboard vessels.

But it's like I said in my prepared remarks, it's a it's an opportunity to learn from them.

This this fires teaches us something every day.

And so while it's disappointing.

I'm glad that the ports that the cruise company that suffered a setback that handle the situation very very well, we havent had a repeat of what happened earlier during the pandemic crisis.

And in terms of where we stand with the CDC look I think the next 60 to 90 days are going to be very very key as you know the CDC requested an RFP request for information is due September 21.

I'm told that.

There are thousands of comments I have already been received by the CDC around the same time, our panel is going to be.

Completing a leased or first.

Initial set of recommendations, which we along with Royal we'll.

Look to implement in our returned to a return to sale protocols that we will submit about the bought the same time as the ROI and so the CDC will have a lot of information to.

Two combed through and Digest and opine on let's say beginning in Q4.

And so we'll see how they react to it we're confident that are the black the panel is going to come up with.

Key signs base recommendations that the cruise industry can implement that should be impressive to the cruise industry to the CDC and then where there is the hope that during the same time the prevalence of the pandemic will will subside two more manageable levels and as the combination of the two will lead to.

As a speedy returned to service.

[music].

Thank you for and just Mark.

On your balance sheet. This can you remind us.

Do you have any more capacity or do you have any secured debt capacity among are there any practical limitations on how much unsecured convertible that you could issue.

Yes from a secured standpoint, Felicia, we we are pretty we are at our capacity.

Given some of the negative covenants, we have on our 3.6% notes, but we do believe there is we do have additional capacity on an unsecured basis and as well as through couldn't additional convertibles uncommon and so we are we're in active discussions with with our various investment banks and always look.

Looking at additional options should we need to do so but we do have we do have additional options available should we need it but given where given where we stand today, we feel like we're in a good position, but it's really going to be about time and time as time as the enemy here in this case, but we will continue to evaluate all options.

We have.

Okay, great thanks to the color.

Thank you in our next question comes from the line of Pentland Toyed with JP Morgan. Your line is open. Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions.

Just going back to Frank's comments, the delta widening between the booking pace in the cumulative book position.

That makes sense does I think it's it's just math, but I guess.

If if you are able to turn marketing back on and you were able to start drumming up demand can you give us a sense for if your sailing in earnest in the two Q at what point would we start to see that delta the into close again.

As begins to close once we.

Discharge, our full arsenal of marketing initiatives in marketing spend.

Our base the market philosophy is.

Market to spend no ticking along with other thing and so we don't like discounting.

We have not discounting in the good news is that I think your analysis as indicated for the most part the industry wide is not been.

The FCC adjusted basis, our yields.

The 21 are relatively flat to where they were for 2020.

And as you know 2020 was tracking to be a record every for the pandemic hits on a pricing side.

We're holding our own very well.

And again.

Given the limited marketing spend.

Im astonished, how well bookings are coming in given the fact that the industry is suspended there is not.

A lot of positive news flow.

And.

And going forward.

Cruise lines now have now.

Suspended sailing through October 31, or in some cases through through the end of the year. So I do believe that we in the cruise industry enjoy a very loyal.

Customer base.

Our across our three brands.

Over 50% of our destiny given crews are repeaters, we're going to lean on them heavily they're going to lean on us they want to crews again.

Depending on when you think the restart is there's going to be 15, 20 million people, who will not allow to this year and there is lot of pent up demand. There. So I can't give you a specific date when we think that the you know the booking.

Window.

To normal.

It will take some time, but.

We've seen one of the basic business tenants of the cruise industry is you salespeople and you do what you have to do it is helpful. In our case, we market so.

And we think Thats the best strategy its proven its time, it's metal time and time again, it's putting itself now so can give you a specific.

Date, but I don't think it will take that long.

Thank you for that Frank and I appreciate that that the adjusted net yield and pricing a bit of information you gave us there as you look to other industry participants as we start to get into the prime booking season for two Qs 21 to be out are you seeing anyone else get more promotional.

With pricing.

Really having as I said, there's always pocket is always a sailing here or there, but I'm very happy to see the discipline that the industry is shown across the board.

And this pandemic I think logic tells you that.

Businesses, soffe, not because of business fundamental business and soft because you cannot.

And in spite of that.

Business is relatively strong if you had told me that we're going to be facing the set of circumstances and your question is Frank will would you be taking any bookings I would have lapped that you're sort of course, not who would book crazy.

But people are booking people are confident that we're going to come back people do want to crude they miss.

Welcome a heck of a vacation experience a heck of a vacation value.

And so this is temporary the question is how temporary is temporary but it is temporary and and.

No, who those who have the where with all.

The financial wherewithal to sustain the game will reap the rewards later on.

Thank you for that best of luck.

Yeah. Thank you.

Thank you and our next question comes from the line of Vince to tell with Cleveland Research. Your line is open. Please go ahead.

Great. Thanks, I wanted to focus a little bit on kind of your exposure to us source and as you think about starting up sailings in key markets for you what have you seen over time in terms of gas willingness maybe switch over itineraries that you're not rolling the whole fleet out at once you're going to hand Polish.

Ups by month, what do you assume overtime about how willing guys sorry to switch chips.

[noise] well it all depends on on the extreme.

On how the switch occurs it for example, we're talking about.

Q1 in which the vast majority of the fleet is Caribbean centric and you stand up.

A handful of ships in the Caribbean, but not all moving.

From a ship that is not.

Being stand up to those that are it's a relatively easy phenomena.

More complicated if you're asking someone who booked a four day crews to the Bahamas, two to take a 12 day crude to Europe. So a lot depends on on their start dates what we're talking about.

For example in Alaska, we have four vessels in Alaska.

And so it's again relatively easy to move people within a region within on actuary from let's say Norwegian Joy to Norwegian Bliss that they are both operating seven day cruises in Alaska. The only difference is one.

Pardon on Saturday, and one Department Sunday.

But it but over time, we've seen that that customers are willing to make those kind.

Of changes you may have to sweeten, the pot with a shipboard creditor or a cabin upgrade or something like that to induce them, but generally speaking not nada not an overwhelming.

Obstacle.

Great and then I wanted to circle back on the 60% in the breakeven.

Not to the tune believed to be as you mentioned that that will cover the pre crisis 2020 overhead and heavy made changes to that as you flex down costs, some of which I think would maybe continue into 2021 and then on top of that you've talked about the chance pricing is holding up well because.

Demand has been exceeding supply is available sailings for next year in the potential for that the potential for not having the market as much. So in your analysis have you have you factored that into kind of the margin on the breakeven levels.

Yeah, Vince this is mark so.

What we tried to do is 2020 as your is fluctuating so much and you're absolutely right that we have lowered our cost base.

In fact, we've lowered our operating expenses, a little more than 60%, but what we tried to do to give everybody a solid foundation on which to to measure that was really provided on either a 2019 or 2020 expectations.

Just to give it a consistent base. So but you are absolutely right as we continue to flex down that should improve.

With our lower cost structure, but keep in mind. This is a relatively fixed costs business for the most part.

So there will be some opportunities, but that was really the basis for providing it on those on those levels.

Thanks.

Thank you and our next question comes from online I haven't seen that Chris financial Your line is open. Please go ahead.

Hi, Thank you for taking my questions.

First in the bookings that you're getting are you seeing any surprise trends for example, you're seeing more large families booking multiple cabins or.

Any certain trends that pop up from ZIP codes are more people, who are booking coming from drivable locations to the ports or are they flying is there anything that's a.

Positively surprising you and then second our.

Do you or are you able to work with airlines to create some kind of package promotion to take advantage of an opportunity there.

So in terms of the airline.

They've lowered their rates.

No substantially from their normal level so.

So the good pricing and hopefully consumers will take advantage of it.

Your first question is I think more important one and I mentioned that in my script, we've not seen any major shift in consumer behavior.

We have not altered IR itinerary. So the same itineraries that were available for purchase before the pandemic for 2021 for example, our I still available today. So.

That means by definition that.

Both.

If they are showing favoritism too close to home cruising or not cruising to Asia or avoiding Europe.

We're not seeing it because our synergies have not changed as.

As our booking volumes are still relatively strong.

Given the marketing spend in the pricing is strong.

We believe that itineraries are still attractive to our customers. We were very proud of our itineraries.

As you heard me say before itineraries is a number one.

The driver of yields.

We lead the industry in yields by a very wide margin, which tells me that are itineraries are very well received.

And so as you know there our travel restrictions just about everywhere today.

Until those.

To begin to get lifted.

We really won't see whether customers favor one versus another.

Okay. Thank you stay safe and well.

Thank you to you to Ivan.

Thank you another reminder, ladies and gentlemen, please limit yourself to one question. Our next question does come from the line.

Tim Conder with Wells Fargo Securities. Your line is open. Please go ahead.

Well, Frank Mark and everyone first of all congrats on doing basically everything you can and an ongoing a fluid difficult situation.

Yes to circle back.

Two.

Kind of the state of what may be a new normal could be and again I know this is probably you know very highly speculative even on your part.

What type of occupancy is do you think would be reasonable, let's just say it'd be the end of Q2 before you get the fleet back in full service what type of occupancy would you guestimate may be reasonable.

Either at that point or for 21 as a whole and then also.

Returning to the structural cost question.

How should we once we get back to the new normal how much of the costs both on a on a on the ship side and then on the shore side would you anticipate at this point to be more structural.

In terms of a load factors.

To be so many variables and I know you presses your question with its highly speculative and you're right.

But I might my instinct and I have no more than my instinct. My my 25 plus years in this business.

Peppered with a little bit of.

Really perhaps reading between the lines of.

The government.

Authorities.

Somewhere in the 75 range for full year.

Sailing and my guess is it will be gradual like everything else at my started 50, 60% I think some of the cruise companies that have already begun cruising.

Hello, and it will create.

With the with the limitation being more.

Concern for the spread of covidien not than than than constraints on consumer demand I think consumer demand will be there I think we're all sick and tired of being being cooked up in the house and we want to get out and as long as weekend.

We can ascertain that cruising is a safe Bible vacation alternative you that line customers coming back and growth.

With that I'll leave it to mark on the cost.

Yes, Tim So I think when you look at that at the cost structure, we certainly our learnings learning as we go along that maybe there is levers we can look at so from a ship sizes endpoint I wouldn't anticipate any significant changes in our ship operating expenses, yeah might may we have some some incremental cost here in there as a result of.

New health or safety measures, but I think the on the margin that's going to be cream minimal when we look at when we look at our overhead structure one of the interesting things. We've we've learned as Frank mentioned as we've really cut back our marketing spend and yet we continue to see relatively strong bookings. So we're going to learn from that.

And we're going to figure out is there a better way to get to spend more and get more for that dollar.

That said our strategy is market. The shell. So we will we will continue along that strategy, but if we can find ways to become more efficient, we certainly will do that and as we start sailing and as as as the business starts to ramp back up we're going a bit we're going to be prudent in terms of adding back to our overhead we.

We.

I have always run a relatively lean organization, but we will continue to try and air on the side of being lean until we get back to two to a normalized levels. So.

Okay, and just to clarify Frank years, though just to make sure I heard you write use guesstimate.

That 75% that would tend to be an exit run rate for 21 or the back half a 21, and then and then mark to your point.

Would we benchmark off of 18, 19 being lower than those levels sort of like on a on a per per diem basis.

Yeah, I think mark.

Go ahead, Mark I'm sorry.

Yeah, I think when you look at 18 or 19.

Off those levels you know the one piece, you're really going to have to look at as you know what what we'll do that we spend in marketing in those years because look we've always said.

On on a net cruise cost basis, our cost are pretty normal and when we do have fluctuations in our net cruise. We've always said it typically comes from marketing and when we've spent that marketing. We've also we've also garnered that significant yields uplift as well. So it's been accretive to the bottom line. So I think when you're looking at that try to figure out how to Isis.

Late that in the background, but I think 18 or 19 levels is reasonable when you take out some of the hurricane and storm noise from those years and Cuba is well don't forget we had some increased cost and 19.

Hi.

Operator, we have time for one more question.

All right. Our last question comes from the line of Great panels caveat with Wolfe Research. Your line is open. Please go ahead.

Hey, guys. Good morning, it's actually Fred Whiteman on from Greg last quarter. So so back in mid May you talked about being in a positive working capital position within 30 to 60 days, we've obviously seen the restart state pushed back a few times. Since then just wondering if you could give an update on where that stands today and if it's really just a matter of getting.

Shifts back into the water, if there's something else we should be tracking.

Hi, Fred it's Mark So yeah, you know I you know I will say on our last call I think we were a little bit more hopeful then then it panned out a couple of things number one at that point voyages were only suspended through June thirtyth.

And now we've added our we've now we're now suspended through October 30, Onest. So thats, obviously put more pressure on our advanced ticket sale refunds that had been in the queue. So we did not we did not we were not working capital positive in the quarter. Although when you look at the numbers, we were only roughly 100.

In deficit I think as we go forward.

The biggest piece of our working capital is that Ats and from an outflow standpoint, there's really not much more that we from a cash standpoint.

That we would have to refund we have about 1.1 or 1.2 billion of Ats on the books as the quarter and roughly 800 million of that is in the form of future. Chris certificates. So when you think about that theres not a lot of cash outflow and.

So from the inflow standpoint, we continue to take new bookings, we continue to collect a deposit and final payments from customers.

All the customers, though that we've referenced that are booking in 2021. They continue to deposit funding. So we would anticipate you know looking toward the tail end of the third quarter fourth quarter being you know a breakeven or positive on a working capital standpoint.

Great. Thanks, so much.

Okay. Thank you everyone for joining us this morning.

Tough environment.

Okay.

Yes.

Liquidity runway to see this through.

And are hopeful that.

Things will begin to improve both on the prevalence of the koby case, and our ability to put together a.

Comprehensive and robust set of protocols that gets us back in service.

Quick so we look forward is speaking to you again.

I guess in late October early November.

And please stay healthy inside all the best Bye Bye. Thank you bye bye.

This concludes today's conference call you may now disconnect.

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Good morning, and welcome to the Norwegian Cruise line Holdings second quarter 2020 earnings Conference call. My name is Michelle and I will be your operator at this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions for the session will follow at that time, it's in a watch require.

This does during the conference. Please press Star then zero on you touched on telephone.

Minor to all participants this conference call is being recorded I would now like to turn the conference over to your host Ms., Andrea Andrea Demarco Senior Vice President of Investor Relations Corporate Communications and E. F. G. Mr. Michael Please proceed.

Thank you Michelle and good morning, everyone and thank you for joining us for a second quarter 2020 earnings call.

I'm joined today virtually by Frank Delrio, President and Chief Executive Officer, Norwegian Cruise line molding, and Mark Campsite Executive Vice President and Chief Financial Officer.

Well be in the call with opening commentary after which mark will follow to discuss results for the quarter before handing the call Dr. Frank 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 NCL, each L.P.D. and that's your dot com.

We will also make reference to 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 just got the results I'd like to cover a few item.

Our press release with second quarter 2020 results was issued this morning and is available on our Investor Relations website.

This call includes forward looking statements that involve risks and uncertainties that could cause our actual results could differ materially from such statements. These statements should be considered in conjunction with the cautionary statements contained in our earnings release.

Our commentary May also reference non-GAAP financial measures reconciliation to the most directly comparable GAAP financial measure and other with your disclosure are contained in our earnings release and presentation.

With that I'd like to turn the call over to free so real Frank.

Did we lose Frank.

Oh, I'm, sorry, I got you want me.

Ali.

Oh.

Thank you Andrea and good morning.

I hope that everyone joining us today as well like your loved ones are healthy and state.

Similar to our <unk> earnings call in me today, we will provide an update on the progress of our response to cope with Nike Global pandemic.

I like to start off by putting the current no sale situation into perspective.

The last five months our company in the cruise industry at large his experience more adversities that it any color on me not 50 plus year history.

The negative effect the cruise industry faces from the cobot crisis.

Instead of 911, the great recession, and any other stress [laughter] your that one's imagination has ever model combined.

Looking back I would have been on it.

On imaginable, we're off to or see that's today five months. After the initial suspension of service, which was declared at March 30 that are in card 28 ship fleet would still be I didn't complete standstill mordor anchored imports around the world waiting to said still again.

[laughter] thing we are there anything about the pandemic is unprecedented and extreme and uncertain.

And will surely be chronicle extraordinary events in our stores.

Nevertheless, I can see I remain confident they're not beat that we will once again demonstrate a resilient and adapt to the complex an ever changing cobot 19 bar.

As always a silver lining in all hardship.

And as you know our company's nimble and innovative.

We will find ways.

Did meet the needs of the current environment no matter what they maybe.

What did ask developing and implementing new and innovative health and safety protocols.

All of the newer modified I seem to agree or changes to the encore experience.

I understand that consumer trends or any other obstacle that come our way we will look back on 2020 in this kind of dynamic and once again witnessed the evolution. It will bring not just of the crews and off without these state, but all aspects of like and society around the world.

Hey, Scott has that been trying.

Just on the business from but on a personal front as well and I couldn't be prouder of our team under herculean efforts to rise to the Asian, while juggling somewhat change across both their personal and professional lines.

Do you all our team members around the globe, especially to our shipboard crew, many who wouldn't do wouldn't months waiting to get back home. Thank you for your dedication your patience and hard work as we join together to what do these crisis.

As you can see on slide three much has transpired since our last call. Despite an entire quarter with not a single revenue generating voyage. These key events include three additional extensions of our board suspension, resulting in a block of operations through October 31st.

This brings our turret temporary suspension, what total of six plus months.

We took measures to extend our debt maturities and fall further bolster our liquidity with our highly successful $1.5 billion capital raise last month.

And we announced our collaboration Royal Caribbean Group and the formation of healthy sale panel.

As we continue to navigate through the this crisis. We have made continued progress on many fronts as you can see on slide four.

In terms of addressing operational challenges our efforts to return our crew members safely back home and United with a lot. One has been a monumental effort the challenges we face not being able to disembark through in various countries simply because they run a cruise ship, including travel restrictions empathy closures limitations on commercial air travel and other Bureau.

Chronic rotate complication made an already typical mission nearly impossible.

It's traveled regulations became stricter options narrowed and we got to find new an alternative ways to return our crew Oh.

We utilized both here and see as our operations team coordinate mask repatriations to over 75 country using several of our so to safely repatriate, our COO to Europe, Asia, Central and South America and the Caribbean.

Im happy to report the repatriation efforts are almost complete and we have repatriated nearly all of our crew members. Since we started this effort.

On behalf of our board of Directors and management team I'd like to express our sincerest, thanks to our entire family a crew members for their patients professionalism and understanding as we work from various complex challenges during the repatriation process.

And do those team members, we may not bought our vessel.

Keeping them in top working order, where we turn to sailing we thank you for your willingness and loyalty.

As a handful of our vessels were conducting repatriation boy did we continue to fine tune the lay a process for those vessels not involved in that effort.

Well.

I'll be vessel is a complicated endeavor, which involve balance the factors port location. For example, as important as shifts light up in areas prompted tropical storms and hurricane such as the eastern Seaboard in the United States in Hawaii must crew vessels to a level, where they can quickly say auto arms way.

Sure that something which we did recently in Hawaii with Hurricane Douglas.

Robot with Hurricane Gonzalo and into Hamas Bahama.

Norfolk, Virginia with Hurricane assays.

Or is also have different requirements.

Regarding minimum many tying up shifts together, which dictates the number of crew needed onboard.

One thing all these factors both in our best of operations being worked on an extraordinary job and working through the weighing up of our vessels.

Our goal during the lay up crude is to reach a minimum level of manning and each of our ships, while complying with all regulation minimizing our cash burn rate and maintaining our vessels to be ready to re enter service in class and under short notice in terms of where we are today all vessel not involved in repatriation efforts were undergoing dry dock.

We are laid up in fourth recording expert group are expected to be at minimum adding status in the next 30 to 45 days.

Next we continue to Port Forge ahead, with our financial action plan to adapt way lengthy suspension of service.

Mark will discuss incremental actions, we got taken for further bolster liquidity later in the call. So I won't go into details now I do however, I want to commend our entire finance organization for successfully tapping the market last month.

Then our debt maturity profile and Opportunistically further enhances our liquidity position with a triple drawn transaction that we believe will allow us to withstand a prolonged period of voice suspension.

We also took an important step in the last phase of our navigating through our coping 19 strategy a roadmap re launch with the announcement of our collaboration with well Caribbean group deployment of healthy sales.

I will hold off on my commentary on the panel and our progress in a roadmap and we'll revisit the topic in my closing remarks.

Focusing on today's current business environment, and what we're seeing in our booking trends on slide five it's an encouraging sign that despite our reduced sales and marketing spend.

And.

Other.

Outright suspension of other demand generating activities there continues to be strong demand for future cruise vacation.

Since March we have consistent conscientiously, I should say pared back sales and marketing investments and other demand generation initiatives in order to conserve cash or defer the spend to a period. When these investments have a non pay off in other words until there is more certainty when we can actually operate the sailing that we are selling.

Consumer demand, especially loyal Pascal is evident across our suite of offerings with no one sailing region sailing length brand or source market materially outpacing other in terms of performance.

Our marketing investment strategy will correspond with the gradual ramp up of sailings as we assess the situation through time.

Our sailing currently suspended through October 31, the last two months of 20 point could see a return to sailing up a very limited number of vessels likely with it as they get reduced occupancy level.

As we move into the first quarter of 2021.

The deployed capacity is expected to ramp up at more vessels gradually re into the fleet.

Based on this timeline it isn't until at least the second quarter of 2021 that we would see our fleet return in earnest as a result, we have been deemphasizing marketing activities and the corresponding spend for 2020, and having said focused our limited marketing investment banks in the second quarter of Twentytwenty one onwards.

Including the peak summer season, what we believe these investments will give us the highest returns.

Given the aforementioned focus on billings in Q2, 21 forward and despite lower overall overall booking volumes over the previous weeks as a result of the pen.

Today, our cumulative book load factor in pricing for Twentytwenty, once daily and particularly for those.

Second quarter forward remained very much within historical ranges, including the impact of bookings made with future cruise critic credits, which over the last eight weeks that made up approximately 30% above you net bookings.

I want to emphasize that while comparisons to theres have been useful up to this point.

Going forward booking as soon as will become less meaningful.

Net because in a normal year at this point in time booking activity for the following year sailing really begin to accelerate.

However, if our 2021, new net booking volume remains at current level the Delta in book positions.

I will begin to widen as we moved through the year.

Our go to market strategy of market that bill as opposed to discount to fill has served us well on the path.

Is serving us well now and I'm confident we will serve us well when we fully reengage with our guests in earnest and resume crudes voice.

I'll be back a little later to provide an update on our roadmap to relaunch, but for now I'd like to turn the call over to Mark.

Financial updates Mark please.

Thank you Frank.

Given the rapid and significant impact Cobot 19 has had on our business. My remarks will focus on the continued execution of our financial action plan and how we believe we have positioned our company to whether an extended period avoid suspensions.

The global pandemic has lasted longer than anticipated, resulting in the continued suspension of our crews wages, which has now been extended through October 31.

There is still much uncertainty around how the pandemic will evolve. So we will have to continue to adapt and modify our strategy in real time.

Since the start of the crisis, we have taken swift measures to aggressively reduced costs.

Conserve cash to lower our cash burn.

As well as enhance our liquidity through various capital market transactions.

Slide six illustrates some of the additional initiatives taken since our last earnings call in May which include further reducing operating expenses, including shore side general and administrative expenses.

Minimizing near term marketing investments as Frank mentioned earlier.

Refinancing our short term 675 million revolving credit facility, which extended the debt maturity from early 2020 to 2026 and Opportunistically executing on additional capital raise transactions to further bolster our liquidity profile.

Slide seven outlines the improvement of our debt maturity profile accomplished through numerous initiatives, including several market capital market transactions, the deferral of amortization payments and the extension of maturities.

We took advantage of an industry wide 12 month that holiday initiative granted to us by the export credit agencies.

Remains in Germany, and Scott shaken, Italy.

This initiative postpones amortization and provides for financial Covenant testing relief for 12 months with all postponed amortization to be repaid evenly over the following four years in eight semi annual installments.

In addition, our commercial lender is also agreed to a 12 month that holiday for nearly all of our debt amortization payments.

The support we've received some credit from the export credit agencies, our commercial lenders and the shipyard has been incredible.

We can't thank them enough for partnering with us during this challenging time.

We have also been active in the capital markets and greatly appreciate the support of so many of you listening to this call.

Slide eight provides details of how we secured additional capital since the start of the crisis.

Most recently in July we successfully executed a triple tranche capital rates of approximately 1.5 billion.

Apprised of senior secured notes exchangeable senior notes and ordinary shares.

Once again strong demand resulted in an oversubscribed book, which provided us the opportunity to upsize the transactions by approximately 25%.

Including the full exercise the greenshoe option by the underwriters for the ordinary shares and the partial exercise for the exchangeable notes.

This capital raise combined with the historic Quad tranche raised in May brings our total capital raised to nearly 4 billion, providing us a solid liquidity foundation.

While these transactions have significantly improved our liquidity position, we recognize that they have come at a cost.

The decision to increase our leverage and issue shares was not taken lightly.

But given the extraordinary circumstances presented by the pandemic these steps where necessary.

Despite these transactions our weighted average cost of debt is approximately 5%.

And our priority once we emerge on the other side of this pandemic is to focus on improving our balance sheet as we have demonstrated and proven our ability to do so in the past.

Turning to liquidity slide nine provides an update of our targeted lay up costs and current illustrated liquidity runway.

Our ongoing monthly cash burn is now expected to be approximately 160 million a month on average.

Which includes approximately 7 million up incremental interest expense associated with our recent July capital markets transactions and excludes cash refunds for canceled sailings and cash inflows from new and existing bookings.

This rate does not include DAC amortization and Newbuilds related payments, which are currently deferred through March 31st 2021.

The new burn rate is at the high end of our previously provided cash burn range, primarily due to a number of factors.

One maintaining at least seven ships and warm lay up due to various port and whether readiness requirements.

Increased costs associated with fluctuating travel restrictions for crew.

Additional demand generating marketing investments for future periods, which are driving new bookings and associated cash inflows.

And lastly incremental expense from the July capital raise.

We have made significant progress in reducing our controllable cash burn.

With our target representing an over 60% reduction in our combined ship operating expense and SGN a versus normalized levels.

Keep in mind that given the continued fluidity of the environment.

Cash burn can fluctuate on a monthly basis.

As Frank mentioned earlier at this point the majority of our ships are expected to be at the minimum level Manning and the next 30 to 45 days.

We continue to evaluate all additional opportunities.

Further reduce costs and drive our cash burn lower while adhering to various port and maritime requirements.

As for our current liquidity position, our total liquidity as of June Thirtyth was approximately 2.8 billion on a pro forma basis, which includes the July capital raise the repayment of the 675 million epic revolving credit facility and the portion of customer deposit.

Refunds that are included in accounts payable as of June Thirtyth.

As for cash outflow.

Total cash customer deposits included an advance ticket sales are approximately.

Zero point Threebillion as of June Thirtyth.

And this illustration, we are assuming 60% cash refunds based on the cumulative behavior today.

Which would result in a cash outflow of approximately 0.2 billion.

All related sailings will cancel.

For this analysis. We have also included a preliminary place holder to account for further anticipated investments and health and safety measures.

This number may change depending on the recommendations from the healthy sales channel.

And the final protocols to be implemented.

Accounting for all these factors results in available liquidity of approximately 2.5 billion.

Leaving us well positioned to withstand an extended period avoid suspensions.

To help provide a clear picture of what a restart would look like when the appropriate time comes we expect to relaunch with a handful of Shipset first at significantly reduced occupancy.

When looking at a breakeven analysis, we utilize net revenue instead of occupancy as both price and load our variables that can be flexed as needed to achieve the revenue required to breakeven.

To cover our ship operating expenses broadly speaking our breakeven as approximately 40% of net revenue.

At the corporate level, which we believe is the most accurate way to view animalistic breakeven on an EBITDA basis, using our 2020 Precrisis budgeted shore side DNA, we would expect to breakeven at roughly 60% of our typical net revenue levels.

Shifting the focus to our financial results the second quarter was significantly impacted by the pin debit.

As a result, we recorded a net loss on a U.S. GAAP basis have 715 million or $2, a 99 cents per share.

Due to avoid suspensions, we did not record capacity days in the quarter, therefore yield and per capacity day data are not presented for 2020.

In addition, we recorded an approximately approximately 8.3 million net loss in other income related to our fuel hedge portfolio.

This is driven by a reduction in forecasted fuel consumption from canceled voyages, which resulted in the de designation of certain hedges.

Which was partially offset by gains related to previously designated hedges.

Turning to slide 10, we ended the second quarter with approximately 2.3 billion of cash and cash equivalents, which we subsequently bolstered with our July capital raise.

Our cash balance in the second quarter increased driven by the $2.3 billion of net proceeds from the May capital raise.

This was partially offset by significant customer cash refunds for cancer voyages of approximately 725 million.

Approximately 575 million of operating cash burn, including operating expenses SGN, a interest and capital expenditures.

Our cash burn improved during the quarter, but overall cash burn was higher than our ongoing expected monthly average as we continue to work through the transition of ships to lay upstate.

And that working capital outflow was approximately 100 million as we paid down a previously previous buildup of accounts payable.

Looking ahead, given the rapidly evolving impacts from the pandemic, we expect to reported net loss on both the U.S. GAAP and adjusted basis for the quarter ending September Thirtyth 2020.

As well as the year ending December 30, Onest 2020.

Before returning the call back to frame I want to reiterate our confidence in our ability to weather the impacts of coping 19.

Our liquidity position that net and efforts to conserve cash position us well to absorb a prolonged voyage suspension.

Allowing the team at Norwegian Cruise line Holdings should focus on doing what is right for our guests through travel partners team members and other key stakeholders all of which provides a strong foundation for our long term success.

We strongly believe in our business model, which has demonstrated its resilience over the past 50, plus years and are confident but we'll do so again.

With that I'll hand, the call back over to Frank to discuss the next phase of our response to cobot 19 and provide closing commentary.

Great.

Thank you Mark.

We have taken important initial steps.

Good map to relaunch, which is illustrated on slide 11, particularly in the first phase, which is the enhancement health and safety protocols.

Nothing is more important than that sustained the start of crews operations than the implementation of health and safety protocols that protect those onboard our vessel and provide guests with greater confidence in our ability delivering safe and healthy vacation environment.

Our company in the cruise industry add another tool in our two blocks developing these enhance protocols with information of the healthy sale panel a collaboration with our industry peer Royal Caribbean Group.

While we compete fiercely on everything having to do with bid.

We do not compete on health and safety issue.

The other day the entire industry guys one goal income.

That is to create an environment that mitigates the risk of cobot 19.

The panel is tasked with providing recommendations to advance our public health response, the cobot 19, and inform US development of a science back plan for a safe and healthy returns recruiting.

We have incredible players on the panel Dr. Scott godly, the former commissioner of the food and drug administration and Governor Mike Levin, former Secretary of health and human services.

The co chairs jointly recruited in rounded out the panel with an impressive group of globally recognized experts with diverse backgrounds, including in public health infectious disease, bio security hospitality and marine operations.

As shown on slide 12, the vast experience in breadth of knowledge of the panels members make them uniquely suited to inform us as we develop the next generation of crude health and safety standards, while at the same time, enabling us to preserve as much as possible what makes the cruise experience. So special so pop.

So successful.

Bringing onboard these respective experts.

Demonstrates our absolute commitment to the common goal of combating the spread of cobot, 19, and bringing back the cruise industry operations sooner rather than later.

In an effort to make broader contribution cook to global public health. The panels work will also be open source and can be freely adopted by any company or industry that would benefit from the groups scientific medical insight.

Given cruising is a is unique in that encompasses several experiences in one vacation that being lodging dining entertainment and of course transportation. We believe the process and structure, we've come up with could be a best in class effort and a model for our other industry can work through this public health challenge.

Panel has been hard at work developing its initial recommendations for the resumption of state cruising, which our operations team will then incorporate into specific and detailed plan to submit to the us BDC another public health and maritime agencies across the globe.

In addition to their initial recommendations the panel will continue researching other cutting edge health and safety technology that innovation.

That could further benefit the cruise industry, which make take more time to implement.

So.

Whether it be changes.

Yes, there will be but as I mentioned earlier adaptability and innovation, our two characteristics in which our company in our industry itself. So while we do expect cruising to be different in the future at least until such time as the cobot 19 crisis is no longer.

Two public health, we are confident we'll work through these changes while being mindful as to how those changes may impact guest satisfaction.

Overall cruise experience. If you think about cruising 10, 15 20 years ago. The experience was different than it is today legal how we've introduced freestyle cruising and then how much has changed that with innovations such as our groundbreaking electric go-cart race tracks and Galaxy Pavilion.

Guarantee you that five to 10 years from today things will also be difference.

Hey, concurrent step in our roadmap is to determine court availability both for home porting and reports of call conversation continue with key destinations regarding the reopening report and the resumption of call. The key theme in these conversations is naturally be enhance health and safety protocol as destinations look to cruise lines on public.

Official to develop an approved these new procedures.

This step is critical as it will allow for destinations to prepare the reports their terminal.

Operations and other considerations for these new procedures.

In certain parts of the world to spread the virus has less than proving has taken a critical first step in resuming operations.

Regional operators are standing both large and expedition size ships once again, albeit with reduced capacity and limited to gas from their home countries.

Recent events demonstrate that with the resumption of sailing just as with the reopening of any other sector of the economy or of society fits and starts are to be expected.

And just like areas of economies, such as air travel hotels restaurants shopping centers and the like cruise operators will learn from these initial setbacks and adapt protocols to provide even sabre vacation experience.

Our industry as an unparallel history of successfully implementing regulations, which gives us the confidence that we will successfully at that should this challenge as well.

The third step in our roadmap is ramping up of our marketing engine.

My earlier commentary outlined our current strategy in terms of the quantum in direction of our marketing investments.

There is certainty around the timing of the resumption of sailing a milestone that is entirely dependent on obtaining the approval to sale from government agencies, such as the CDC, we can augment our marketing and demand generation investment and do what we do that execute on our go to market strategy of marketing to fill which leads to.

Our industry leading yields.

Lastly, the gradual fit relaunch of our ships first with the launch of a handful of vessel likely at some reduced occupancy level followed by the gradual edition of the rest of our fleet, which we continue to estimate will take at least six months to complete.

During the call over to you and I'd like to leave you with a few key takeaways that are shown on slide 13.

We continue to execute on our financial action plans to reduce expenses conserve cash and Opportunistically tap the capital markets to further strengthen our financial position and enhance our liquidity runway.

We continue to observe strong demand for cruising across all source and selling regions and brands in the medium to longer term.

And lastly, we are focused on our roadmap to relaunch as we work alongside a healthy sale and when global public health authorities to resume sailing and with that Michelle. Please open the call two questions.

Thanks.

Thank you Mr. del Rio if you have a question at this time. Please press Star then the number one on your Touchtone telephone.

In order to get as many people through the Q. Please limit your time to one question. If your question has been answered or you wish to remove yourself from the Q. Please press the pound cake.

First question comes from the line of Steve Lindsey Minsky with Stifel. Your line is open. Please go ahead.

Yes, good morning, guys.

So mark I want to go back and I don't I don't know if I pick this up right, but when you talked about the ship operating expenses in what you need to in terms of revenue to cover those.

Did I hear this right. So an individual ship, you're basically saying thats, 40% of net revenue and then to cover your corporate overhead it would be 50% of typical net.

Revenue levels is that kind of based on what I missed is that kind of pre covert levels is that 2019, that's what I'm a little bit confused about.

Yes, Hi, Steve Good morning, Yes, you're absolutely right. So when you look at the at the ships from just the ship operating expenses.

Based on our art, let's call. It 2019, or 2020 planned levels, we would need about 40% of our typical revenue to cover the opera the vessel operating expenses when you layer on your corporate overhead.

Into that that goes up to about 60%. So keep in mind that say, that's an average that's a blend obviously certain ships it might be lower than that and certain ships. It may be higher than that but generally speaking, it's about that 40 and 60%.

Okay Gotcha.

And then Frank probably a bigger picture question for you, it's really about the long term health of your.

Distribution network and what I mean by that is it seems there is.

A lot of smaller.

Our mom and pop agencies might be are going to be forced to kind of shut their doors that they havent already so I guess the question is how do you see the travel agent network and it really looking over the next five or 10 years and could this potentially forced.

Thats, a hand of customers to start booking a little bit more direct whether you guys.

Hi, Steve look it could happen we seen.

On smaller mom and pop types travel agents already building their tense.

Even larger travel agent distributors.

Furloughing employees no different than the cruise lines are furloughing employees.

You have to adjust to the current volume.

We have seen an uptick in our direct business more business coming in through our website.

And other direct channels.

We think that might be.

Exaggerated given time given the the.

At least partial closure of the of the travel agency distribution system, but I believe that travel agents.

We'll survive. This just like we will there will always be casualties has been casualty so far in acoustics.

So I think on the margins over the over at least the short term when selling we assume you might see a disproportionate business coming through direct channels.

Versus where we were seeing prior to the.

To the to the crisis, but I think over the long term the travel agents have shown there resilience over the years they've adapted to technology.

It wasn't too long ago that many people predicted the demise of travel agents and if anything over the years they've done stronger so.

Maybe around the margins at the at the beginning at the outset of the restart, but I think longer term youre not going to see much change.

Okay can I squeeze one more quick went in for you for you Frank and.

You, obviously have the youngest fleet in the industry I think you only have a handful of ships over 20 years old, but as you've seen some of your competitors start.

Retire scrap ships and do you start thinking about taking similar actions or do you just continue to believe.

You need more capacity over time. It is you really remain underrepresented in certain markets.

Yes, Steve you answered the question beautifully how can we have we have a young fleet in fact, the oldest vessel we have.

Prior to the pandemic, we completed the work in mid February we invested $150 million in the Norwegian spirits, So that ship is better than new.

We love our capacity we are the smallest of the big three so we're always wanting more although I think you've heard me say the during this pandemic I'm glad I am the smallest because there's less mouths to feed so to speak but look we not only have the youngest fleet, but we also have nine incredible vessels on order, which allows us to have the.

The fastest growing fleet.

And so now we absolutely have no no plans to divest of of any of our vessels.

Okay. Thanks, guys. Appreciate it best of luck Nic data.

Thanks, Dave.

Thank you and our next question comes from the line of Felicia Hendrix with Barclays. Your line is open. Please go ahead.

Hi, Thank you so much and good morning.

Thank you Mark you've given us.

Mendis information.

Limited, that's what we know right now.

Frank just wondering what what inning do you think you are all with Bill CDC in terms of having the protocols in place for both crew and passengers sales basically.

As you know there's unfortunately been several lines recently that I've tried to sell and have had issues with cold it. So.

Got it adds that bank at all.

Yes look.

Theres no way to spin the.

The the initial.

Reemergence of Copel onboard vessels.

But it's like I said in my prepared remarks, it as an opportunity to learn from them.

This this virus teaches us something every day.

And so while it's disappointing.

I'm glad that the ports that the cruise company that suffer the setbacks have handled the situation very very well, we havent had a repeat of what happened earlier during the pandemic crisis.

In terms of where we stand with the CDC look I think the next 60 to 90 days are going to be very very key as you know the CDC requested an RF I request for information is do timber 21.

I'm told that.

There are thousands of comments I have already been received by the CDC around the same time, our panel is going to be.

Completing at least are first.

Initial set of recommendations, which we along with Royal we'll.

Look to implement in our return to.

We turned to sale protocols that we will submit about the same time as the RFP and so the CDC will have a lot of information to.

To come through and Digest and opine on.

Say beginning in Q4.

So what we'll see how they react to it we're confident that are the black the panel is going to.

Come up with.

Key signs base recommendations that the cruise industry can implement that should be impressive to the cruise industry to the CDC and then where theres. The hope that during the same time the prevalence of the pandemic will will subside two more manageable level that is the combination of the two will lead to.

Please be returned to service.

Thank you so on and just Mark.

On your balance sheet. This can you remind us.

Hi, guys any more capacity or do you have any secured debt capacity and then are there any practical limitations on how much and unsecured convertible debt you could issue.

Yes from a secured standpoint, Felicia, we we are pretty we are at our capacity.

Given some of the negative covenants, we have on our 3.6% notes, but we do believe there is we do have additional capacity on an unsecured basis stand as well as through additional convertible some comments and so we are we're in active discussions with with our various investment banks and always.

Looking at additional options should we need to do so but we do have we do have additional options available should we need it but given where given where we stand today, we feel like we're in a good position, but it's really going to be about time and time is time as the enemy here in this case, but.

We will continue to evaluate all options that we have.

Okay, great. Thanks for the color.

Thank you and our next question comes from the line of Patlan Tour with Jpmorgan. Your line is open. Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions.

So just going back to Frank's comments on the delta widening between the booking pace in the cumulative book position.

I mean that makes sense does I think it's it's just math, but I guess.

If if you are able to turn marketing back on and Youre able to start drumming up demand can you give us a sense for if youre sailing in earnest in the Twoq you at what point would we start to see that delta the into close again.

It begins to close once we.

Discharge, our full arsenal marketing initiatives in marketing spend.

Our base the market philosophy is.

Market to spend no ticking along with each other thing and so we don't like discounting.

We have not discounting in the good news is that I think your analysis as indicated for the most part the industry wide has not been.

The FCC adjusted basis, our yields.

The 21 are relatively flat to where they were for 2020.

And as you know 2020 was tracking to be a record EBIT for the pandemic hits on pricing side.

We're holding our own very well.

And again.

Given the limited marketing spend.

Im established.

How well bookings are coming in given the fact that the industry is suspended there is not.

A lot of positive news flow.

And.

And going forward.

Cruise lines now have now.

Suspended sailing through October 31, or in some cases through the end of the year. So I do believe that we in the cruise industry enjoy a very loyal.

Customer base.

Our across our three brands.

Over 50% of our guests at any given crews are repeaters, we're going to lean on them heavily they're going to lean on us.

I want to crews again.

Depending on when you think the restart is there is going to be 15, 20 million people, who will not allowed to this year and there is lot of pent up demand. There. So I can't give you a specific date, when we think that the the booking.

Window.

To normal.

It will take some time, but.

We've seen one of the basic business.

And so if the cruise industry is you salespeople and you do what you have to do it is helpful. In our case, we market so and we think thats the best strategy. Its proven its time, it's metal time and time again, it's proving itself now so can give you a specific.

Date, but.

I don't think it will take that long.

Thank you for that Frank and I appreciate that that adjusted net yield and pricing a bit of information you gave us there as you look to other industry participants as we start to get into the prime booking season for Twoq and 21 and be out are you seeing anyone else get more promotion.

With pricing.

Really habits as I said, there's always pocket is always a sailing here or there, but I'm very happy to see the discipline that the industry has shown across the board.

And this pandemic I think logic tells you that.

Businesses soft not because of business fundamental business and soft because you cannot.

And in spite of that.

Business is relatively strong if you had told me that we're going to be facing the set of circumstances and your question is Frank will would you be taking any bookings I wouldn't lap that youre sort of course, not who would book Crazy.

But people are booking people are confident that we're going to come back people, we want to crude they miss.

And how come a heck of a vacation experience a heck of a vacation value.

And so this is temporary.

The question, how temporary temporary but it is temporary and and.

No to those who have the where with all.

The financial wherewithal to sustain the gain will reap the rewards later on.

Thank you for that best of luck.

Yes. Thank you.

Thank you and our next question comes from the line of Vince to tell with Cleveland Research. Your line is open. Please go ahead.

Great. Thanks, I wanted to focus a little bit on kind of your exposure to us source and as you think about starting up sailings in key markets for you I think we've seen over time in terms of gas willingness maybe switch over itineraries that you're not going to hopefully it out at once you are going ahead.

Pull ships by month, what do you assume overtime about how willing guys sorry to switch chips.

Well it all depends on on the extreme.

On how that's which occurs it for example, we're talking about.

Q1 in which the vast majority of the fleet is Caribbean centric and you stand up.

A handful of ships in the Caribbean, but not all moving.

From a ship that is not.

Being stand up to those that are relatively easy phenomenon.

I think more complicated if you're asking someone who booked a four day crews to the Bahamas to take a 12 day crude to Europe.

So a lot depends on on their start dates what we're talking about.

For example in Alaska, we have four vessels in Alaska.

And so it's again relatively easy to move people within a region within on actuary from let's say Norwegian Joy of Norwegian Bliss that Theyre, both operating seven day cruises in Alaska. The only difference is one.

Parts on a Saturday one Department Sunday.

But it but over time, we've seen that customers are willing to make those kinds of of changes you may have to sweeten the pot with a shipboard creditor or.

Cabin upgrade or something like that to induce them, but generally speaking nada.

On an overwhelming.

Obstacle.

Great and then I wanted to circle back on the 60% breakeven.

Not too in the believed to.

Could you mentioned that that would covered the pre crisis 2020 overhead heavy made changes to that as it flex down costs, some of which I think what maybe continue into 2021 and then on top of that you've talked about.

Yes.

Jason is holding up well because demand has been exceeding supply is available sailings for next year in the potential for that.

So for not having the market as much. So when your analysis have you factored that into kind of the margin on the breakeven levels.

Yes, Vince this is mark so.

What we tried to do is 2020 as your is fluctuating so much and you're absolutely right that we have lowered our cost base.

In fact, we've lowered our operating expenses, a little more than 60%, but what we tried to do to give everybody a solid foundation on which to to measure that was really provided on either a 2019 or 2020 expectations.

Just to give it a consistent base. So but you are absolutely right as we continue to flex down that should improve.

With our lower cost structure, but keep in mind. This is a relatively fixed cost business for the most part.

So there will be some opportunities, but that was really the basis for providing it on those on those levels.

Thanks.

Thank you and our next question comes from the line of Ivan.

Chris Financial your line is open. Please go ahead.

Hi, Thank you for taking my questions.

First in the bookings that you're giving are you seeing any surprise trends. For example are you seeing more large families booking multiple cabins or.

Any certain trends that pop up from ZIP codes are more people, who are booking coming from drivable locations to the ports are they flying is there anything that's.

Positively surprising you and then second are you view, where are you able to work with airlines to create some kind of package promotion to take advantage of an opportunity there.

So in terms of the airline.

They've lowered their rates.

No substantially from their normal level so.

So the good pricing and hopefully consumers will take advantage of it.

Your first question is I think more important one and I mentioned that in my script, we've not seen any major shift in consumer behavior.

We have not altered IR itineraries. So the same itineraries that were available for purchase before the pandemic for 2021 for example, I still available today so.

That means by definition that.

Hello.

If they are showing favoritism too close to home cruising or not cruising to Asia or avoiding Europe.

We're not seeing it because our synergies have not changed as is our booking volumes are still relatively strong.

Given the marketing spend in the pricing is strong.

We believe that itineraries are still attractive to our customers. We are very proud of our itineraries.

You heard me say before itineraries a number one.

The driver of yields.

We lead the industry in yields by a very wide margin, which tells me that are itineraries are very well received.

And so as you know there our travel restrictions just about everywhere today.

Until those.

Begin to get lifted.

We really won't see whether customers favor one versus another.

Okay. Thank you stay safe and well.

Thank you to you to Ivan.

Thank you another reminder, ladies and gentlemen, please limit yourself to one question. Our next question does come from the line.

Tim Conder with Wells Fargo Securities. Your line is open. Please go ahead.

Well, Frank Mark and everyone first of all congrats on doing basically everything you can and an ongoing fluid difficult situation.

Yes to circle back.

Two.

Kind of.

State of what may be a new normal could be and again I know this is probably you know very highly speculative even on your part.

What type of occupancy is do you think would be reasonable, let's just say it'd be the end of Q2, if we get the fleet back in full service what type of occupancy would you guestimate might be reasonable.

Either at that point or for 21 as a whole and then also.

The returning to the structural cost question.

How should we once we get back to the new normal how much of the costs both on the on the on the ship side and then on the shore side would you anticipate at this point to be more structural.

In terms of load factors.

It's going to be so many variables and I know you practice your question with its highly speculative and you're right.

Hi, Mike My instinct, and I have no more than my instinct, My 25 plus years in this business.

Peppered with a little bit of.

[music].

Really perhaps reading between the lines of.

The government authorities.

Somewhere in the 75 range for full year.

Sailing and my guess is that we'll be gradual like everything else at mine started 50, 60% I think some of the cruise companies that have already begun cruising.

Hello, and it will.

We.

With the with the limitation being more.

Concern for the spread of covidien not than than than constraints on consumer demand I think consumer demand will be there I think we're all sick and tired of being being cooked up in the house and we want to get out and as long as weekend.

We can ascertain that cruising is a save Bible vacation alternative you that line customers coming back and growth.

With that I'll leave it to mark on the cost.

Yes, Tim So I think when you look at the at the cost structure. We certainly are learning learning as we go along that maybe there is levers we can look at so from a ship sizes.

I wouldn't anticipate any significant changes in our ship operating expenses, yes might may we have some some incremental cost here and there as a result of new health or safety measures, but I think the on the margin that's going to be pretty minimal when we look at when we look at our overhead structure one of the interesting things, we've we've learnt going as Frank mentioned as.

We've really cut back our marketing spend and yet we continue to see relatively strong bookings. So we're going to learn from that and we're going to figure out is there a better way to get to spend and more and more for that dollar.

That said our strategy is market to fill so we won't we will continue along that strategy, but if we can find ways to become more efficient, we certainly will do that and as we start sailing and as as as the business starts to ramp back up we're going to be we're going to be prudent in terms of adding back to our overhead.

We.

I have always run a relatively lean organization, but we will continue to try and air on the side of being lean until we get back to two to normalized levels. So.

Okay, and just to clarify Frank you are just to make sure I heard you write use guesstimate.

That 75% that would tend to be an exit run rate for 21 or the back half a 21, and then and then mark to your point.

Would we benchmark off of 18, 19 being lower than those levels sort of like on a on a per per diem basis.

Yes, I think.

Go ahead, Mark I'm sorry.

Yeah, I think when you look at 18 or 19.

Off those levels.

One piece, you're really going to have to look at as what we'll do that we spend in marketing in those years, because what we've always said.

On on a net cruise cost basis, our cost are pretty normal and when we do have fluctuations that our net cruise. We've always said it typically comes from marketing and when we've spent that marketing. We've also we've also garnered that significant yields uplift as well so it's been accretive to the bottom line. So.

When you're looking at that try to figure out how to isolate that in the background, but I think 18 or 19 levels is reasonable when you take out some of the hurricane and storm noise from those years and Cuba as well don't forget we had some increased cost and 19.

Hi.

Operator, we have time for one more question.

All right.

Last question comes from the line of Craig Ben Kamya with Wolfe Research. Your line is open. Please go ahead.

Hey, guys. Good morning, it's actually Fred Whiteman on for Greg last quarter. So so back in mid May you talked about being in a positive working capital position within 30 to 60 days. We've obviously seen the restart date pushed back a few times. Since then just wondering if you could give an update on where that stands today and if it's really just a matter of getting shifts back.

Right into the water, if there's something else we should be tracking.

Hi, Fred it's Mark so yes.

I will say on our last call I think we were a little bit more hopeful then then it panned out a couple of things number one at that point voyages were only suspended through June Thirtyth and now we've added we've not we're now suspended through October 30, Onest. So thats, obviously put more pressure on our advanced ticket.

Sale refunds that had been in the queue. So we did not we did not we were not working capital positive in the quarter. Although when you look at the numbers, we were only roughly 100 million deficit I think as we go forward.

The biggest piece of our working capital is that Ats and from an outflow standpoint, theres really not much more that we from a cash standpoint.

That we would have to refund we have about 1.1 or $1.2 billion of EPS on the books as the quarter and roughly 800 million of that is in the form of future crew certificates. So when you think about that theres not a lot of cash outflow and.

So from the inflow standpoint, we continue to take new bookings, we continue to collect a deposit in final payments from customers.

All the customers that that we've referenced that are booking in 2021. They continue to deposit funding. So we would anticipate looking toward the tail end of third quarter fourth quarter being.

Breakeven or positive on a working capital standpoint.

Great. Thanks, so much.

Okay. Thank you everyone for joining us this morning.

Okay environment.

Okay.

But.

Liquidity runway to see this through.

And are hopeful that things will begin to improve both on the prevalence of the koby case in our ability to put together a.

Comprehensive and robust set of protocols that gets us back in service.

Quick so we look forward to speaking to you again.

I guess in late October early November and please stay help in say all the best Bye Bye. Thank you bye bye.

This concludes today's conference call you may now disconnect.