Q3 2020 Norwegian Cruise Line Holdings Ltd Earnings Call

November 10, 2020

[music].

Good morning, and welcome to the Norwegian Cruise line Holdings third quarter 2020 earnings Conference call.

My name is crystal and I'll be your operator at.

At this time all participants are in a 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 assistance during the conference. Please press Star and then zero when your Touchtone telephone.

As a reminder to all participants this conference call is being recorded.

I would now like to turn the conference. So what's your host Ms., Andrea Demarco Senior Vice President of Investor Relations Corporate Communications and SG mixed Demarco. Please proceed.

Thank you Crystal and good morning, everyone. Thank you for joining us for our third quarter 2020 earnings call.

I'm joined today by Frank del Rio President and Chief Executive Officer of Norwegian Cruise line Holdings, and Mark Campbell 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 Frank for closing remarks, We will then open the call for your questions.

As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at Www Dot until each Ltd investor Dotcom.

We will also make references to a 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 items.

Our press release with third quarter 2020 results was issued last night 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.

These statements should be considered in conjunction with the cautionary statements contained in our earnings release.

Our comments May also reference non-GAAP financial measures.

A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation.

With that I'd like to turn the call over to Frank Delrio frame.

Thank you Andrew and good morning.

Thanks, everyone for joining us today.

Yeah, I'm not helping sales.

Hey, Good morning last earnings call today, we provide.

[laughter] focusing more on the progress of our response to the COVID-19 pandemic.

Then on financial results.

I'd like to begin by saying that we welcome the issuance of the CDC framework for conditional anyway.

We view this as a positive step in the right direction on that path of our shared goals regarding taking in the United States in a safe and responsible manner.

And we drink, including a much anticipated event.

Oil Pascal value travel partners, our team members and their communities, we visit around the globe, but in particular.

Hey, good morning around the United States.

Before the entire ecosystem, which included 40 employees luggage handlers stevedoring to operators taxi and write your drivers coach operators suppliers Airlines hotels and many other visited an industry.

Every significant economic hardship due to the ongoing suspension of cruising.

I am sure that they are anxiously awaiting the resumption of closing as much as we are.

[noise], while there continues to be a long way to full recovery ahead of us with many uncertainties still can be overcome the new CDC framework allows us to take the first definitive steps toward this recovery process.

The new conditional order creates phases for the resumption of cruising, including first testing and additional safeguard for guests and crew and building laboratory capacity and medical capabilities for future testing.

Simulated trial failing for we will test the overall effectiveness of our health and safety protocols in real life situation third evaluation and certification for vessels on a ship by ship basis versus by brand, our operator to confirm they meet specific requirements.

And for a phase return of guests to revenue generating voyages, while mitigating the risks of COVID-19.

The framework contains numerous rigorous hurdles that are without a doubt challenging for the cruise industry, but challenging they should be given the current high prevalence of the virus around the world, but even so we believe we are making continued sequential progress toward the resumption of crudes operation and I returned to pre cobot normality.

There are points any order that require further dialogue and clarification with the CDC and we have not yet received all the technical guideline for many aspects of the framework.

Given the short timeframe since the order was issued the complex logistics of the order and the many selling point that must still be clarified our team is working on analyzing and scoping the operational requirements of this order.

Our shared goal in this process is to create and implement a series of protocol driven by sign.

We are appreciative encouraged at the CDC has expressed a willingness to engage with us and meaningful dialogue.

We will continue to collaborate with the CDC to further clarify outstanding questions and determine next steps at which point, we hope to be in a position to share additional details about our return to service plan with all of you.

I want to be clear that despite this positive development, we are still very much in the middle of the public health crisis.

As we sit here today COVID-19 cases are surging in many areas of the world, particularly in Europe anything on its state and we are seeing nation states cities and communities across the globe responding to the surge in different ways.

As the seasons change scientists are warning of a likely hard winter ahead.

The good news is that our our understanding of the virus and the advancements in testing treatments and therapeutics, our leaps and bounds ahead earlier this year and I believe that as a society. We are much better equipped to respond this time around.

In fact, and as you know just yesterday, Pfizer and by INTECH announced that their trial demonstrated that the vaccine with more than 90% effective in preventing Pope at 19 among trial participants.

This is a significant milestone and likely the first of many breakthroughs to come on the vaccine front and.

While we recognize the continued fluidity of the current global public health environment and expect additional headwinds to get in our way our company in our industry has demonstrated resilience time and time again and I believe this time will be no different I am confident that our extraordinary team is well prepared to continue to adapt and.

Innovate to overcome the challenges of this pandemic.

I want to take this opportunity to thank all our team members around the globe their dedication perseverance patience and hard work is what is propelling us through this once in a lifetime crisis I could not be prouder of how this team has risen to the occasion, despite the significant personal and professional challenges. They are all facing during this pandemic.

Excluding gradually resumed resumed in other areas of the world. We continue to be encouraged by the success, our peers have experienced and we congratulate them for leading the way and demonstrating that the cruise industry can indeed safely operate in a pandemic environment.

We know it is impossible to fully eliminate all risks pertaining to COVID-19 anywhere in society, including on cruise ship, but with the appropriate size fact protocols in place and now with the prospects of an effective vaccine and therapeutic we have witnessed relaunch cruise ships dramatically reduce control and manage this risk.

Even successfully contained to mitigate over 19 cases on board.

Turning to our Companys recent events since our last earnings call. We have had another eventful quarter as you can see on slide three. These key events include two additional extensions of our voice suspension, resulting in a pause in operations through year end 2020. This brings our temporary suspensions to a total of nine plus months.

The announcement of the healthy sales panels, 74 recommendations, which will inform our specific health and safety strategy going forward and discussions and collaborations with the CDC, which resulted in the issuance of the framework for conditional sales order, replacing that no sales.

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

We address significant operational challenges, including the repatriation of over 24000 crew members to their homes around the globe and the transition of our vessels to minimum Manning's got it.

As we have previously stated our goal during the vessel layup period was to reach a minimum level of mounting on each of our ship, while complying with all the applicable regulations minimizing our cash burn rate and maintaining our vessels in class and ready to reenter service under short notice going forward. We plan to begin the process of a phase we staffing of our ship as.

We prepare for a gradual return to service.

Next we continue to execute on our financial action plan to position us to withstand this period of disruption.

Mark will provide an update on our progress and on the incremental actions we have taken to bolster liquidity later in the call. So I won't go into details now.

We also continue to make significant progress on our roadmap to relaunch, which is illustrated on slide five, particularly in the first phase the enhancement of health and safety protocol. The healthy sales panel a group of 11 globally renowned scientific and medical experts, which we assembled in collaboration with Royal Caribbean Group provided us with the recommendations to mitigate the risk.

The public 19 and cruise ship.

As you can see on slide six the.

The healthy sales channel led by Dr., Scott Dudley, former FDA Commissioner and Governor, Mike Leavitt, former health and Human services Secretary provided 74 detailed recommendations across five key focus areas and concluded that cruising can be made safe in the current health environment with a robust set of science backed protocol and procedures in place.

Guided by expert advisors, including a healthy sales channel and further informed by successful sailings in Europe clear and its member line also committed to mandatory core elements for our health and safety strategies, including 100% COVID-19 testing of guests and crew, they're wearing a phase coverings physical distancing requirements highly control shore excursion.

And much more.

Our multi layered approach to health and safety will have protocols that span the entire crews journey starting from the time guest book the crews and continuing post crews disembarkation.

There is no single solution to the current public health challenge no silver bullet, but we believe the cumulative effect of testing coupled with dozens of other measures or protection at different phases of the crude journey will significantly mitigate risks and allow us to provide one of the safest vacation alternatives anywhere.

Furthermore, society learns more about the virus and the effects of COVID-19, we in collaboration with the CDC will continue to evaluate refine and improve upon these protocols with our team of expert applying the best practices sign and technology available.

A concurrent step on our roadmap is to continually assess port availability and travel restrictions, which we believe will remain fluid the virus prevalent ebbs and flows in different regions around the world. Our team is in constant communication with key destinations regarding the reopening of port and we are ready to adapt as needed certainly the conditional order and then.

News of an effective vaccine and this morning have a promising therapeutic for COVID-19 infections will also aid in the return to normal in these critical areas.

The third step in our road map as to begin reactivating, our sales and marketing machine. Once we receive further clarity around the conditional order, which will then allow us to finalize an initial voids resumption plan. We will begin a disciplined process of wrapping up our sales and marketing efforts focusing on our go to market strategy of market to fill versus discount this bill.

Take advantage of our annual wake period.

Lastly, we will initiate the gradual phase relaunch of our vessels in U.S. territorial waters, but before Recommencing gets voyages, we will conduct trial sailings, which will be independently audited by a third party and overseen by the CDC.

Trial sales will allow us to train crew and check the effectiveness of our enhanced health and safety protocols confirmed or flawless implementation and execution and comply with new CDC requirements, including the necessary clearance on a ship by ship basis. So to find that the ship has complied with and past all regulatory mandate.

The independent audit, which will be conducted by Dnbi GL, Our classification society will provide another layer of reassurance.

All our key stakeholders in our health and safety program is working as designed.

When we are ready to resume guest sailings in U.S waters and have received all necessary approval, we will take a gradual and methodical approach to returning vessels back to service initial voyages will likely operate shorter duration itineraries of seven days or less at reduced gas capacity level.

Focusing on todays current business environment, and what we are seeing in our booking trends on slide seven we continue to be encouraged that despite our reduced investments in sales and marketing and other demand generating activities and the overall lackluster travel environment that continues to be strong demand for future proof vacation.

As expected the load factor for the full year 2021 is now below historical ranges, primarily driven by weak first half of the year occupancy impacted by continued uncertainty around the timing of the assumption of cruising.

However load factors for the second half of 2021 and into Twentytwenty two continue to be in line with historical ranges and as repricing full year 2021 is in line with pre pandemic level. Despite the diluted impact of the value added future crews credit we provided for council voyages on a car.

Any wide basis, approximately 50% of these future crew certificate issued today have already been redeemed, including nearly 50% for the Norwegian brand, nearly 60% and Oceania cruises and approximately 75% on regent seven seas.

Consumer demand is evident across our entire suite of offerings with no one sailing regions sales in length brand or source market materially outpacing others in terms of performance April.

A particular area of strength that you would expect is our is with our loyal pass guests, who currently represent approximately 60% of all 2021 bookings.

In fact, our luxury brands regions in Oceana announced multiple booking records. They have achieved in the past two months first oceana had the most successful holiday promotion in its history with this labor day upgrade sales even more impressive with the fact that nearly half of the reservations were from new to brand guest and the vast majority of the reservations were cash.

Bookings with less than 5% of these reservation utilizing future cruiser tickets from canceled voyages.

For the region brand the opening of the 2023 world crude shatter its previous world cruise opening day booking record doubling reservations versus last year's record level.

Region also announced that the launch of its Twentytwenty 220, 23 voyage collection reservations on opening day surpassed regions previous all time booking day record by nearly 40%, which was set back in April of 2018 with the launch of seven seas plundered inaugural season.

While all destinations experienced high levels of interest cruises in Africa Asia, the Mediterranean and Northern Europe, the Baltics, and particular or notably popular.

And I must note that contrary to the perception.

That the more mature cruiser.

As we look to travel these three examples demonstrate the opposite.

That are older get have a continued appetite for upscale luxury travel even for long and exotic cruises once the immediate impact of the pandemic subsides subsides.

As I have said previously our marketing investment strategy will correspond with a gradual ramp up of sailing our go to market strategy of markets to fill as opposed to discount that bill has served us well in the past is serving us well now and I'm confident it will continue to serve us well as we reengage with guests and travel agent partners in earnest to redeem crew.

Avoided.

I'll be back later to provide closing comments, but now I would like to turn the call over to Mark for a financial update marketplace.

Thank you Frank and good morning, everybody My remarks today will focus on the continued execution of our COVID-19 financial action plan and.

Our road map to relaunch as we prepare for the resumption of cruising.

The global pandemic continues to have a significant impact on our business with crews mortgages now suspended through the end of 2020.

There is still much uncertainty around how the pandemic will evolve. So we're focused on what we can control and are prepared to adapt and modify our strategy in real time.

As part of our action plan, we continue to take proactive measures to conserve cash and enhance our liquidity profile.

Slide eight illustrates some of the additional initiatives taken since the beginning of the third quarter. These include further reducing operating expenses, including shore side General and administrative expenses Opportunistically executing on the July capital raise transactions to further bolster our liquidity profile and refinancing our short term success.

75 million revolving credit facility, which extended maturity from early 2022 to 2026.

Slide nine outlines the improvement of our debt maturity profile and response to the crisis, which we accomplished through numerous initiatives, including capital markets transactions, the deferral of amortization payments and the extension of maturities.

The support we continue to receive from the export credit agencies, our commercial lenders and the shipyards has been incredible and we cannot thank them enough for their ongoing partnership with us during this challenging time.

During the quarter, we successfully executed a triple tranche capital raise of approximately 1.5 billion comprised of senior secured notes exchangeable notes and ordinary shares to date, we've raised nearly 4 billion since March and increased our cash position by nearly 5 billion with the draw.

Down of the 875 million revolver early in the year.

Providing us with a solid liquidity foundation.

We truly appreciate the support we have received from all of our investors. Thank you for believing in our business model and our management team and in the long term potential of our company and of the industry.

Turning to liquidity Slide 10 provides our current illustrate of liquidity profile. Our total liquidity as of September Thirtyth was approximately $2.3 billion on a pro forma basis, which includes the portion of customer deposit refunds that are included in accounts payable as of quarter end.

We have also earmarked approximately $300 million to account for anticipated health and safety investments and other related items.

Our health and safety investments May change as we finalize requirements in the CDC conditional order and as we continuously improve and refine our protocols with the best available science and technology.

All of these factors combined results in a pro forma available liquidity of approximately 2 billion, enabling us to continue to navigate through this environment and execute on our return to service plan.

Once we have additional certainty around our voyage resumption schedule, we expect bookings to accelerate which restarts of cash why wheel and further improves our liquidity profile.

We have made significant progress on reducing our controllable cash burn with the Q3 average monthly rate coming in at approximately a 150 million representing over 60% reduction in net cruise cost versus normalized levels.

Our entire organization has worked tirelessly to pare back expenses, while at the same time balancing the need to be ready to reactivate quickly when the time comes to resume cruise operations.

For comparative purposes, if all of our vessels remain in their lay up status at minimum lambing Manning levels and did not begin preparations for a return to service, we would expect fourth quarter monthly cash burn to average approximately $175 million.

This is slightly higher than the third quarter, driven primarily by the timing of certain cash interest expense payments that are expected to be approximately $120 million incrementally higher in the fourth quarter.

Overall for the second half of 2020. This would result in an average monthly cash burn rate of approximately a 160 million, which is in line with the company's previously disclose target rate during a voyage suspension period.

However, due to the fluidity of the voyage resumption schedule and associated expenses, our actual cash burn rate for the fourth quarter is expected to be higher.

As we begin to prepare our fleet for the gradual resumption of operations, our cash burn will increase from the voyage suspension levels. As a result of the following additional the additional disciplined demand generating marketing investments, which drive new bookings and associated cash inflows, the re staffing and repositioning of our vessels.

The provisioning of our ships and of course, the new health and safety investments that we plan to make.

Given the continued uncertainty around the timing of our redemptions, we are not yet prepared to give guidance for 2021 capital expenditures broadly speaking however, excluding newbuild payments the minimum required capex needed to run the business and maintain our best in class fleet is generally a few hundred million.

Going forward, we do not expect a straight line recovery. So we will take a thoughtful and disciplined approach to reintroducing costs as we resume voyages in order to conserve cash while at the same time balancing the need to drive new cash bookings.

Shifting the focus to our financial results for the third quarter was significantly impacted by the pandemic. As a result, we recorded a net loss on a us GAAP basis of approximately 677 million or $2.50 per share.

Turning to slide 11, we ended the third quarter with approximately 2.4 billion of cash and cash equivalents, our cash balance the third quarter increased driven by the 775 million of net proceeds from our July capital raise after completing the pay off of our short term credit facility. This was partially offset by cup custom.

Our cash refunds for cancer voyages of approximately 200 million approximately $450 million of operating cash burn, including operating expenses SGN, a interest and required capex and a net working capital outflow of approximately $25 million.

Looking ahead, given the continued impact of the pandemic, we will report a net loss on a us GAAP basis for both the fourth quarter and the year ending December 31 2020.

Before turning the call back to Frank I want to emphasize that we while we are prioritizing our immediate business needs. We are also focused on the future of our company.

Our medium and long term financial recovery plan as laid out on slide 12 focuses on three critical components first rebuild and gradually returned to pre cobot margin levels. We also continue to identify opportunities to drive margin expansion through structural cost reductions and it.

Tenured strong focus on price discipline.

Second maximize cash generation, which we bolstered by our robust and disciplined growth profile of nine cash accretive ships on order through 2027.

And third focused on optimizing our balance sheet and charting a path to de levering.

The decision to increase our leverage and issue shares was not taken lightly but given the extraordinary circumstances presented by the pandemic. These were necessary steps. Despite these transactions our weighted average cost of debt is approximately 5% and our priority. Once we emerge on the other side of this is to focus on improving the balance sheet.

As we have demonstrated and proven our ability to do so time and time again.

Ill now hand, the call back over to Frank to provide closing comments.

Thank you Mark.

I'd like to leave you with a few key takeaways on slide 13.

We will continue to work with our expert advisors, including a healthy sales panel in the CDC to refine our signs that plans for a safer and healthier returning to crude protect our guests grew in communities we visit.

We continue to observe strong demand for cruising across all source markets deployments and brand in both the medium and longer term.

And lastly, we are focused on the initial assumption of voyages in the U.S. and a gradual phase we launched worldwide as we work in partnership with authorities around the globe.

With that Crystal Please open the call up for questions.

Thank you Mr. Gabriele.

No question at this time.

On the one key on your call song telephone.

In order to get as many people book or the queue. Please limit work on so one question.

If your question has been answered or you are sort of moving from Mcgill. Please press the pound pool.

And our first question comes from Felicia.

From Barclays. Your line is open.

Hi, good morning.

So many more than one question I will follow that rule.

No.

Mark on quick considering that you kind of get your prepared comment on your cash flow liquidity and your plan in terms of your long term financial recovery process.

I did have to ask given that you could possibly.

Paulson outflows longer than you initially mobile robot a lot on the call and acknowledging that your liquidity runway well into next year, just wondering how you're thinking about.

No.

Yes in the capital markets or further liquidity on your competitors have recently aftermarket so just wondering.

Your thoughts there.

Thanks, Felicia and good morning.

We continue to look and have the ability to access the capital markets should we need to as.

As we've said in the past, we believe and as we said on this call. We believe we have a very solid runway with just almost two and a half billion of cash on the balance sheet. So as we look forward, we will be we will look at it on an opportunistic basis.

But given like I've said in my repair part remarks, we've raised almost $4 billion. This year, so far or almost $5 billion of incremental cash. When you include the drawdowns of the revolver. So we have the ability we are constantly looking at it.

But we're not in a rush, we're going to do it on an as needed and as an on an opportunistic basis.

Well can you just remind us what your balance sheet looks like just in terms of raising further.

Let's go start going right Thats, an ATM structurally be more.

More attractive under any circumstances.

Yes, when you look at our raises today roughly half of it roughly two and a half billion has been bad debt.

So we have obviously uncovered the balance sheet pretty heavily so looking forward it would not be our desire to necessarily our first desire to issue incremental debt.

We do not have the ability to offer any material secured debt as we are at our.

At our limits on our negative covenants, however, there could be opportunities to issue unsecured debt, but most likely what we are looking at if we go down that path. It would be some sort of equity type transaction, whether it be an ATM similar to whatever competitors have done or any further exchangeable type or common equity.

Okay. Thank you.

On Paul.

Next question comes from Brandt Montour from JP Morgan Your line is open.

Hey, everyone. Good morning, and thanks for taking my questions. So I hate to ask.

Thats a short term question, but obviously, there's a there's a lot of exciting headlines in the cruise world out there over the last couple of weeks I was just curious regarding bookings that you guys are seeing.

We're all sort of expecting some other positive inflection when the CDC final. It's no sales order ordering what you saw when when that quarter was converted to the conditional sales order them and then if I may I.

I know, it's only been a day since the vaccine news that if youve seen any type of positive uptick in bookings data over the last 24 hours.

Hi.

Hi, Frank.

So bookings the last 24 hours yesterday were pretty good better than the previous four or five Monday.

And Thats I think attributable to the vaccine use we did not have any particular.

Promotion or did any any size marketing. So I do think that that was a positive news.

Contrary when the conditional sales order was issued was issued on of late on a Friday.

Bookings are typically we've gone over the weekend, we didn't see much of an uptick.

Much of anything give.

Given the CDC news most consumers I don't think follow that level of detail of what happens at the CDC level. These will be the cruise industry. The vaccine is something that is made huge news stock market hit an all time high soil is front and center on all consumers.

Mine.

Got it. Thank you Frank that's that's great color and then I wanted to ask a quick question about the medium and long term financial recovery plan number one rebuilding margins.

I was wondering if you if you've given any thought into what the potential sort of margin differential would be looking out a couple or.

Years, when lets say you top line is back to.

2019 levels, if you had to get any thoughts on what that how how much better the margin normalized margins could be in that scenario.

As you know we did have industry, leading margins were very happy with our margins today, we have no margin. So it's not like we have the rebuild from where we are which is when I get back to where we were.

And I believe that going forward, we're going to have.

As Mark mentioned nine new vessels that are going to be high yielding.

Very cash accretive joining our fleet over the next few years.

Thats going to help margin on I think we all have learned through this pandemic ways to control costs there.

We are amazed that we do as well as we do booking wise with little or no advertising and marketing and very little support from the.

The travel agency community. So we think there may be opportunities on the cost side, but primarily we are a revenue driven marketing driven company. We wind again, given our size not because we are the best at controlling costs given our limited scale, but we are the best the generating the highest ticket yields in the industry by very wide.

Margin the highest onboard revenue yields by even a wider margins and we think that will continue and grow as we bring on these nine incredible ships that we have on order.

Got it thanks for that good level.

Thank you.

Well.

Next question comes from like from all your line is open.

Hey, good morning, guys.

So Frank in the in the past you've indicated it could it could take five to six months before your full fleet would potentially could get mobilized and I'm guessing. The question is based on what you know today or what you know now is that still a pretty fair range and then.

The second part of that question would be maybe help us think about when you would potentially see a full recovery, meaning kind of getting back to that 29 team EBITDA level, you've been pretty helpful. In the past kind of walking us through that.

Look.

It's still very.

Very fuzzy very fluid.

We don't have a single ship operating so this is very speculative.

Steve.

In terms of how long, it's going to take to get the full fleet up and going my best sense today.

Given all the uncertainties that we still have to work out with the with the CDC and when we can start is six to nine months.

Broadly speaking I look at 2021.

As a transition year.

I believe that we will be able to have our entire fleet up and running.

Sometime in the latter half of 2001, so that 2020 to become the first full year since 2019 that we can.

Operating the entire fleet for the full year.

22 is the road to normalization and then 23 forward is normalization.

So lot lot of questions still to be answered we still have.

Travel restrictions around the world travel bans in some cases airlines have got to get back up and running ports have got to open but let's look at just what's happened in the last two weeks one week and a half we have the the framework from the CDC that was step one.

We are very encouraged by the cdcs willingness to sit down and discuss the the issues that we see.

The order.

With us, we think thats going to start very very soon and.

And that's just a great positive note, we've seen the vaccine and although it's going to take some time for the vaccine to find its way throughout the populations of the world. It's what we've been hoping for and my guess is that the Pfizer vaccine, maybe the first out of the gate, but they won't be the only one and just this morning the.

The breakthrough therapeutic from Eli Lilly is certainly up.

A very positive step weve seen incredible leap in progress in the technology of testing. So we now have some wind to our back we've got that flywheel going a little bit and so.

You know Mike.

On the encouragement the excitement level is.

Hasn't been this high in a long long time, so we're encouraged but still a lot of lot of obstacles to overcome we're prepared we've got the liquidity. We've got the know how we've got the history behind US we're going to go over this.

And Steve It add on that this is not a race. We are we are cognizant. We said, we're going to take our time, we want to instill confidence and the consumers we want instill confidence in all the constituents.

With our brands. So you only get one shot to do that right. So we're going to take it on a methodical approach and do it right. Because again you have one shot to do it.

Yes.

Okay, guys. Thanks, a lot and Mark I guess, one more quick one that that once the 175, you called out in the fourth quarter in terms of cash burn.

It does and I understand that's up ticking, mostly because of interest but are there any costs embedded in there in terms of getting some of your crew.

You know back in place for these tests cruises or if that doesn't can you help us think about maybe what that cash burn does start to look like over the next couple of months as you do as you do start to get folks in ships Bakken position.

The 175 for Q4 is really on a like for like basis, just to give you a comparison of how that stacks up against Q3 and again the differential is really just the timing of cash interest. So no. The 175 does not include any material start up costs that we may incur but given where we are today.

Given the the lead time in which we think we need to stand up vessels there could be some more material slightly caught a higher cost that come through in Q4, certainly, but I don't anticipate that it would be material.

At the end of the day your first smart and largest cost has really repatriating your crew and Fortunately we have shipped to do that right now so it doesn't really cost us an incremental a lot of dollars to do that so thats first and foremost all the other related startup costs are going to happen happened closer into your actual start up with the.

Exception of marketing so yes, there may be some slightly higher but I don't anticipate that it will be materially different.

Okay. Thanks, Frank Thanks, Mark appreciate it.

And our next question comes from April.

Glenn Research your line is open.

Hi, Thanks for taking my question I wanted to talk a little bit more on the future crews credits I think in August you were seeing something like a little under half of those canceled cruisers taken the FCC.

Sure. If you mentioned that updated number and what you've been seeing recently and then the second part of that is I think you alluded to pass so the fccs being outstanding which represents a really nice base of pent up demand that you've already spent kind of the marketing dollars on as you think about that group of customers.

Booking for next year booking for 2022.

Ken Ken the pricing on the overall book position continue to hold that what's really impressive it flat as more of those fccs come into the mix.

Yes, so Vince this is mark thanks on your first question.

In terms of the refund rate, yes, it has been hovering slightly and the mid Fiftys and that was really as a result of the the refund pressure that we we incurred in the early part of the pandemic, but when you look at the last three three months or so of cancer voyages that average rate has gone down.

Secondly, I end up somewhere in the 30 to mid 30 percentile range. So again, it's brought the overall so so that's been that again shows the confidence from that from Arkansas existing consumers and you're absolutely right. When you look at on a go forward basis, we do have a nice book of business inherently on the books from those efforts.

See customers. So what that's going to allow us to do is that allows us number one to leverage our cost base, we don't have to re market to those.

When we do we market to them, we're going to certainly try and see if we can upgrade those customers and what we're finding and I think I've said this in the past as those customers inherently have a 25% bonus on their hands today. So what we're finding is that when they re book they are actually upgrading over and above the 25% incur.

A mental so thats been beneficial to work to us as well so certainly.

Certainly I think thats going to that's going to help pricing.

We've always said that we want to maintain price discipline, where we are maintaining it and we can see that in our booking patterns and our pricing commentary.

Vince note that we said.

My prepared statements that.

Little over half of all FCC issued to date have been reading.

So of all the Fccs that we've issued they represent about 15% of annual capacity.

So that means that 7.5% of annual capacity has already been reading.

It's not insignificant, but not material and we've seen that pricing for 21, and 22 is flat to slightly higher than it was prior to the pandemic for like for like period. So the bottom line is the FCC redemption has had zero.

On on pricing, we're maintaining pricing for new bookings.

And since people have the 25% bonus.

Should we raise prices.

Still it's still a great deal for them so.

Bottom line as I've said things are not going to be affecting future pricing decisions.

Very helpful explanation. Thank you.

Thank you.

Our next question comes from John will call from Morningstar. Your line is open.

Hi, Thank you.

I'm curious if you will I will no trends you can share from the 40% tumors that are not.

Cruisers to the brands I think I am one of the slides.

Just that were loyal repeat crude theres anything any differences in.

If you're booking trends or anything like that.

Okay, no nothing that we've discerned up marketing is being done more online than in digitally than when we than we would normally do because again of the wanting to preserve passion and the fact that travel agents are not as active as they normally.

Do so.

We find and this is one of the potential areas for future cost savings is that digital marketing.

It's a real value in it.

It's not just kids buying.

Things on and on.

On Amazon or.

On Instagram people are buying cruise is worth thousands and thousands of dollars online and and we think thats a trend that the pandemic might have accelerated the whole zoom world. So we think thats a positive on a net net basis and we'll continue to.

To.

Manage our business and manage our workforce and and.

Vote resources to to this kind of a digital transformation that we find ourselves in.

Okay, and then just out of curiosity.

And then the original.

All right Great race and was first six month. When you guys were estimating at and that went from six to nine months I assume that's more about logistics and not have anything structural that stretching that time period out is that right.

Yes, let's logistics, it's the prevalence of the disease around the world and seasonal.

If.

Shipped number 25 is ready to go in.

September one and she normally would have been in Alaska, maybe we don't bring her up on September one because.

The season is almost over and I would be penny wise pound foolish to the stand are up.

Then in there and maybe we wait until the following month when she normally would have been in the Caribbean. So those types of.

Positionings and deployments.

Considerations like that.

Our important.

Thank you.

Thank you. Our next question comes from comments Alan from Martin formal your line is open.

Thank you good morning, So just a clarification on back to selling or when do you expect to start the trial sailing then how long do you expect the trial to take and then share. It takes six to nine months after that to get older ships sailing.

And kind of a follow up question at what point in there do you see free cash flow or EBITDA breakeven. Thank you.

Youve overstepped your boundary of while one question Thomas.

Well do our best to remember I hope that our guidance travel.

The question police won't get you.

Look.

We have a lot of questions to sit down with the CDC to work out, but if you if you just.

Reid literally the order and the open in the sequence that we need to get a vessel ready to start the sailing.

We think those sailings could start.

As early as.

Early January as Mark said this is not a race for us.

We want to get this 100% right.

Or stressing flawless execution, there's still a lot to learn.

About about the order and the nuances of how to execute those orders hot out how to implement the 74 recommendation sales.

Seamlessly along with the.

Framework that the city is laid out.

And those are complex issues.

What kind of testing, how often do we test et cetera. So.

Don't pin me down to an exact date, but I would tell you that.

There is a there is a chance that maybe some some companies can start these trial cruises and in December.

We don't forecast that we will be wanting to do so until probably sometime in January and then there is another series of of up.

Sequence that.

The CDC has called for in terms of giving notice and getting the ship sort.

Certified on a ship by ship basis, the audits that have to go through and so.

We're very reluctant to give you a date of one day.

The first trial sailing began is because your next question is going to be will then one is your first revenue sales are going to begin and and we simply don't know at this early stage when that is.

In terms of when do we return to the EBITDA up breaking.

Breakeven or cash breakeven.

On a on a ship by ship basis, we have said that given where our pricing is which is historical.

Levels, we believe that number on a ship by ship basis is somewhere between 40% to 50%.

Depending on the ship the size of the vessel and so forth on a corporate level I would be very hesitant. So hesitant that I'm not going to answer the question asked so as to when we would be corporate wide EBIT.

Breakeven or or even cash breakeven, it's going to take some time so.

So far and just to further elaborate on that if you look at our working capital change over from Q2 to Q3.

Essentially we essentially flattened it out excluding our normal ongoing operating expenses. So we are making progress there and.

You know, it's just going to take time, it's going to be a matter of of of what load factor capacity as we roll out how quick quick the ships are rolling out. So it's tough to give you an answer to say, we're going to be cash flow positive on X date theres. So many variables involved but I can assure you that.

We're going to ramp up our costs on a as needed basis, we will be very disciplined about it as I said in my prepared remarks, but we will spend the dollars, where we need to to protect price and drive demand, which is what we always do.

Helpful color. Thank you.

Thank you.

And our next question comes from Paul Goldstein from Macquarie. Your line is open.

Thanks, so much for taking the question and I appreciate the detail.

Always.

For either Mark or Frank I was wondering in the table that you have around pro forma liquidity.

You have that 300 million cash health and safety initiatives.

Component I was wondering if you could give any detail around.

How much that covers of the fleet or how long that's supposed to be.

Good for is that just for an initial restart any color around that and then I have a follow up.

Yes, they at that 300 million, obviously is an estimate and when you look at it on a go forward basis, what we really what we're trying to do is give the market color on.

Some of the funds that we're carving out so.

In the past I think we've said we would you know in the past couple of calls we've estimated that we think we need $100 million to $150 million of investments to make the ships safer under the under the new standards. That's.

Thats going to be spent over time, it's not all going to be spent in the fourth quarter or the first quarter, it's going to it's going to come out over time over the next few quarters. So that's not going to be an immediate outflow, but it's an estimate as you can imagine as the as the framework has been issued and as we continue to assess the.

The more intricate technical guidelines around that framework that enables us to then just determine what needs. We have on the backend for investment purposes. So again, we just wanted to be cognizant that we we're carving out a significant amount of funds related to that to cover ourselves.

Got it so not implying that it's payable or going to be spent.

Immediately.

The redemption, you can think about that that that outflow would probably happen over the course of two to three quarters.

Got it Thats Super helpful. Thanks, So much and then the follow up I had around.

Basically like liquidity again would be.

We saw the region 2023.

World crews go up then.

You've got that far out booking available I was wondering how you are considering pricing versus fourq bookings now for the other brands.

From from a liquidity shoring perspective.

No.

Our our pricing strategy has not changed.

As you know if you go back the last four or five years.

On average we are able to raise our ticket yield in the 3% to 4% range.

We want to continue that trend, we think that the combination of pent up demand in the marketplace our industry leading brands.

Less capacity in the marketplace. The new ships that are coming online for us as you recall, we we had so many.

Under penetrated markets are markets, where we simply didn't have a presence because we don't we only have 28 ships, we long for our vessels to newer vessels to come online and we think that will help the overall yield growth profile of our company.

And Paul the remarks around the region in Oceana book.

Bookings I think that was more of a signaling more around the demand that there is solid demand out there and there's pent up demand from a liquidity standpoint, if you think about it that really doesnt impact us or benefit us in the near term as you know, yes, we do get deposits initial deposits from that but the bulk of those funds don't come in until.

Roughly anywhere on average 122, depending it could be 180 days on a world Lloyd's unit or more but but again, there's going to be a significant near term liquidity benefit from that.

Is there a general rule that you're comfortable with sharing as far as how much of the deposit base is non refundable at this point.

Well, yes, so its fully refundable, we don't we at this point in time, we don't have.

Non refundable fares.

So it is fully refundable up until you know again, depending on the voyage anywhere from 122 could be 180 days or more for a world voyage.

Got it thanks, so much appreciate it.

Yeah.

Okay.

Our next question comes from Bond cycle from Credit Suisse. Your line is open.

Hey, How's it going thanks for taking my question.

With regards to the CDC no sale update.

The way I read it I guess, the I think that the dates for ship approval simulated testing in that revenue ceilings.

All kind of run on a sequential timeline I think 30 days for the simulated 60 days for the revenue sealing I guess number one is that correct and then two is there any opportunity or a wiggle room that that process could be change to run concurrently I guess.

Not not all those.

Periods and notice periods, our sequential we.

We think they are concurrent.

And those are some of the.

Clarification.

Questions that we have that we will be discussing with the CDC in the coming weeks.

Great. Thank you for me.

On cable.

Our next question comes from Ivan.

Hi, Great Financial partners. Your line is open.

Hi, Thank you for taking my question.

What do you what are your thoughts on developing more private islands, and creating more of a controlled distribution environment and building on but so you said once said if you had a hotel on great start Okay would be one of the world class destinations in the Caribbean and creating a shifting to something like that.

Yes, I still stand by those comments ill Ivan as you know.

Where they only cruise company that actually has a private island private destination in the western Caribbean.

A lot of folks have it in the Bahamas area is we do a great there of where we've made significant investments in making it a an upscale.

Destination as you and you mentioned.

And we're very very proud very happy doesn't get the.

Fanfare that.

Hainan Island, Scott, maybe that's our fault, but great has a harvest caye and believe it's just a wonderful destination.

We think that because of the pandemic overtime.

On the new vessels coming online that it will be more utilized than it has been in the past.

As we position vessels around.

Around the southern part of the country.

It can reach beliefs and back and seven days or so.

You know so we're very happy with those two island.

You take what we are doing in Alaska, where we have made major investments in real estate development at.

And catch a candidate with Ward Cove land, we bought in Juneau.

So we now have.

Besides the investment we've made in Seattle at the Port There, we are really really in good shape and leading the industry in.

In.

Controlling the destinations that we need so that we can.

Deploy even more vessels to Alaska.

Real estate is expensive and it takes a lot of money to develop real estate I think that.

Around the world.

I'd love to have a private island in the Mediterranean. Let me know if you can already for sale.

I don't I don't think they are but.

But we're very happy with what we've got today, one one of the Bahamas, when western Caribbean or Alaska investment.

The the situation we have in Hawaii with our Pride of America vessel and the fact that the only American flag vessel that Incruse and Hawaii gives us even more flexibility there. So we are very.

We're very happy with our with our land based.

Offerings and.

And we will keep an eye out in case, there is a other available but.

For the time being we're very pleased with what we got.

Do you think you've got to say, yes go ahead I'm sorry consume.

Consumers will say if you could create a controlled environment. Once people are onboard let's say in Miami, Yeah and been tested and then they go to your island. For example, there's still in this contained environment that you control so absolutely coin if.

That could be I mean that I believe will be a good vacation and them.

Yes, Mark claim that as being you know.

I would like to have a nice vacation, but have limited outside exposure certainly the bubble that we're trying to create onboard can be created and private island, but remember that what we're going through now is not what we're going to go through forever and I don't want to make long term investments long term decisions in order to fix a short term problem.

But we've seen that our customers like these private destinations there are controlled.

Forget about the health and safety part of it there control just from a from an experience point of view and and I'm glad I've got towable.

So, but but I do think that look the pandemic won't last forever, we will return to normalcy people do like variety in itinerary people do like itinerary rich.

Our port intensive itinerary and.

And we're hoping that and our plan is to continue to offer that.

Thanks, Ivan operator, we got time for one more you. Please thanks.

Thank you.

And our last question comes from Stephen Grambling from Goldman Sachs. Your line.

And it's open.

Thanks, Justin.

This is a.

Although local quarter fall off price and primark, but can you maybe help us think about free cash flow sensitivities different occupancy levels and then just touch on kind of intermediate term target net debt to EBITDA levels and also how the long term kind of pre recall that targets of 2.5 to two point.

Kevin Biotime has maybe changed or not changed.

In the longer term.

Yes, yes.

Look we obviously were targeting you know.

To get back to our reduced net leverage levels, that's going to take time and there's a lot of variables in between there, but we're focused on that in terms of sensitivity is on the cash flows and load factors again, we've said generally a ship.

Breaks even roughly 40% to 50%. So if you if you take that that can kind of give you your free cash flow.

Sensitivity from there and the second part I apologize I got lost on your second part of the question.

It was more on the leverage levels just thinking through if there was like an intermediate term target that you might be thinking lower lower ahead of some revenue as soon as we can I mean, you know.

Number one we need earnings and we need visibility on the industry. So our number one product or one of our top priorities as we emerge from this is going to be figuring out how do we how do we de lever and finding financial flexibility in the markets to possibly refinance some of our debt or you know again balance sheet management, So that's front and center, but.

We have to emerge out of this first.

Thank you, Steve and thanks, everyone for your time and support your patience during our third.

Distanced earnings call.

As always we'll be available to answer your questions later on today, they say bye bye.

This concludes today's conference you may now disconnect everyone have a great.

[music].

Good morning, and welcome to the Norwegian Cruise line Holdings third quarter 2020, <unk> earnings Conference call.

My name is crystal and I'll be your operator.

Time, all participants are in a listen only mode.

Well you know, we will conduct a question and answer session and instructions.

Follow at that time.

If anyone should require assistance during the conference. Please press star and then well I guess I just don't telephone.

Well it might offer gets done.

<unk> is being recorded.

I would now like to turn the topic, what's your hope yes.

Sorry, Michael Senior Vice President of Investor Relations, Corporate communications, and yet still looks Demarco. Please proceed.

Thank you Crystal and good morning, everyone. Thank you for joining us for our third quarter 2020 earnings call.

I'm joined today by Frank del Rio President and Chief Executive Officer of Norwegian Cruise line Holdings, and Marc Kempe, <unk> 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 Frank for closing remarks.

We will then open the call for your questions.

As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at Www Dot until each Ltd investor Dotcom.

We will also make references 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 discuss our results I'd like to cover a few items.

Our press release with third quarter 2020 results was issued last night 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.

These statements should be considered in conjunction with the cautionary statements contained in our earnings release.

Our comments May also reference non-GAAP financial measures.

A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation.

With that I'd like to turn the call over to Frank del Rio Frank.

Thanks, Good morning.

Hi, everyone joining us today.

[laughter] earnings.

Earnings call [laughter].

[laughter] focusing more on the progress.

The cold at night.

[laughter].

Actual results.

I couldn't get by saying that we welcome the issuance of the TDC framework for conditional [noise].

You did a nice positive step in the right direction on that.

Our shared goals.

In the United States in a safe and responsible manner.

And we didn't get the much anticipated event.

Well, our loyal Pascal value travel partners, our team members and it can be really they did around the globe that in particular by our own corn.

Good morning around the United States.

Before I mean, the ecosystem, which includes 40 employees login handler stevedoring to operators taxi and write your drivers.

Operator suppliers Airlines hotels and many other this is an industry.

Very significant economic hardship due to the ongoing suspension of cruising and I am sure that they are anxiously awaiting the resumption of cruising as much as we are.

While there continues to be a long road to full recovery ahead of us with many uncertainties still to be overcome that.

You see framework allows us to take the first definitive steps towards recovery process.

And you can do more to create spaces, but every assumption of cruising.

Turning first.

An additional safeguards for gas and crew and building laboratory capacity in medical capabilities for future testing.

Second simulated trial failing for we will test the overall effectiveness of our health and safety protocols in real life situation third evaluation in certification for vessels on a ship by ship basis versus by brand, our operator to confirm they meet specific requirements.

And for a phase we train of GAAP revenue generating voyages, while mitigating the risks of COVID-19.

The framework contain numerous rigorous hurdles that are without a doubt challenging for the cruise industry, but challenging they should be given the current high prevalence of the virus around the world, but even so we believe we are making continued sequential progress toward the resumption of cruise operation.

Returning to pre cobot normality.

There are points anywhere that require further dialogue and clarification with the CDC and we have not yet received all the technical guideline for many aspects of the framework.

Given the short time frame. The order was issued the complex logistics of the order and the many selling endpoint that must still be clarified our team is working on analyzing a scoping the operational requirements of this order.

Our shared goal in this process is to create and implement a series of protocol driven by site.

We are appreciative and encourage the CDC has expressed a willingness to engage with us and meaningful dialogue.

I want to be clear that despite this positive development.

Still very much in the middle of the public health crisis.

As we sit here today 19 cases are surging in many areas of the world, particularly in Europe anything on it today and we are seeing nation states cities and communities across the globe responding to the surge in different ways.

As the seasons change scientists are warning of a likely hard winter ahead.

Our understanding of the virus and the advancements in testing treatments and therapeutics, our leaps and bounds ahead earlier this year and I believe that the society. We are much better equipped to respond this time around.

In fact, and as you know just yesterday, Pfizer and buy impact announced that their trial demonstrated that the vaccine with more than 90% effective in preventing COVID-19 among trial participants.

This is a significant milestone and likely the first of many breakthroughs to come on the vaccine front.

And while we recognize the continued fluidity of the current global public health environment and expect additional headwinds to get in our way our company in our industry has demonstrated resilience time and time again and I believe this time will be no different I am confident that our extraordinary team is well prepared to continue to adapt.

Innovate to overcome the challenges of the.

Pandemic.

I want to take this opportunity to thank all our team members around the globe their dedication perseverance patience and hard work.

It is propelling us through this once in a lifetime crisis I could not be prouder of how this team has risen to the occasion, despite the significant personal and professional challenges. They are all facing during this pandemic.

Excluding gradually reserve review than other areas of the World. We continue to be encouraged by the success, our peers have experienced and we congratulate them for leading the way and demonstrating that the cruise industry can indeed safely operate in a pandemic environment.

We know it is impossible to fully eliminate all risks pertaining to COVID-19 anywhere in society, including on cruise ships.

With the appropriate size back protocols in place and now with the prospects of an effective vaccine and therapeutic we have witnessed relaunch cruise ships dramatically reduce control and manage this risk and even successfully contained to mitigate COVID-19 cases onboard.

Turning to our Companys recent events since our last earnings call. We have had another eventful quarter as you can see on slide three. These key events include two additional extensions of our voices spansion, resulting in a pause in operations through year end 2020. This brings our temporary suspensions to a total of nine plus months.

The announcement of the healthy sales panel 74 recommendations, which will inform our specific health and safety strategy going forward and discussions and collaborations with the CDC, which resulted in the issuance of the framework for conditional sales order, replacing no sales.

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

We addressed significant operational challenges, including the repatriation of over 24000 crew members to their homes around the globe and the transition of our vessels to minimum manage data.

As we have previously stated our goal during divest the lay up period. Once you reach a minimum level of netting on each of our shift while complying with all the applicable regulations minimizing our cash burn rate and maintaining our vessels in class and ready to re enter service on their short notice going forward. We plan to begin the process of a phase we staffing of our shift as we.

Prepare for a gradual return to service.

Next we continue to execute on our financial action plan to position us to withstand this period of disruption.

Mark will provide an update on our progress and on the incremental actions we have taken to bolster liquidity later in the call. So I won't go into details now.

We also continue to make significant progress on our roadmap to relaunch, which is illustrated on slide five, particularly in the first safety enhancement of health and safety protocol.

Help me fill panel a group of 11 globally renowned scientific and medical experts, which we assembled in collaboration with Royal Caribbean Group provided us with the recommendations to mitigate the risk to public 19 on accretion.

You can see on slide six.

Healthy sales channel led by Dr., Scott Dudley, former FDA Commissioner and Governor, Mike Leavitt, former health and Human services Secretary provided 74 detailed recommendations across five key focus areas and concluded that cruising can be made safe in the current health environment with a robust set of Seinfeld protocols and procedures in place.

Guided by equity advisors, including a healthy sales panel and further informed by successful sailings in Europe CLIA and its member line also committed to mandatory core elements for our health and safety strategies, including 100% COVID-19 testing of guests and crew and wearing a face coverings physical thing requirements highly control shore excursion.

And much more.

Our multi layered approach to health and safety will have protocols that span the entire crews journey starting from the time I guess, both the crude and continuing post crews disembarkation.

There is no single solution to the current public health challenge no silver bullet, but we believe the cumulative effect of testing coupled with dozens of other measure their protection at different phases of the crude journey all sick.

Basically mitigate risks and allow us to provide one of the safest vacation alternatives anywhere.

Furthermore, as the Saudi learned more about the virus and the effects of COVID-19, we in collaboration with the CDC will continually evaluate refine and improve upon these protocol with our team of expert applying the best practices science and technology available.

Hey, concurrent step on our roadmap as to continually assess port availability and travel restrictions, which we believe will remain fluid the virus prevalent ebbs and flows in different regions around the world. Our team is in constant communication with key destinations regarding the reopening of port and we are ready to adapt as needed.

Really the conditional order and the news of an effective vaccine and this morning have a promising therapeutic for COVID-19 infections will also aid in the return to normal in these critical areas.

The third step in our roadmap is to begin reactivating, our sales and marketing machine. Once we receive further clarity around the conditional order, which will then allow us to finalize an initial voice resumption plant. We will begin a disciplined process of ramping up our sales and marketing efforts focusing on our go to market strategy of market to fill versus discount to fill.

Take advantage of our annual wait period.

Lastly, we will initiate the gradual phase relaunch of our vessels in U.S. territorial waters.

Before we commence in gas mergers, we will conduct trial sailings, which will be independently audited by a third party and overseen by the CDC.

Ill say links will allow us to train crew and check the effectiveness of our enhanced health and safety protocols confirmed their flawless implementation and execution, thank comply with new CDC requirements, including the necessary clearances.

By ship basis, so to find that the ship has complied with and path all regulatory mandate.

The independent audit, which will be conducted by DMV GL. Our classification society will provide another layer of reassurance, all our key stakeholders and our health and safety program is working as designed.

When we are ready to resume guys sailings in U.S waters and have received all necessary approvals, we will take a gradual and methodical approach to returning vessels back to service initial voyages will likely operate shorter duration itineraries of seven days or less have reduced gas capacity level.

Focusing on today's current business environment, and what we are seeing in our booking trends on slide seven we continue to be encouraged that despite our reduced investments in sales and marketing and other demand generating activities and the overall lackluster travel environment continues to be strong demand for future cruise vacation.

Ever load factors for the second half of 2021 and into Twentytwenty two continue to be in line with historical ranges.

As for pricing full year 2021 is in line with pre pandemic levels. Despite the diluted impact of the value added future crews credits, we provided for cancer voyages.

On a company wide basis, approximately 50% of these future crucifixion issued today have already been reading, including nearly 50% for the Norwegian brand nearly 60% I know she Anna cruises and approximately 75% on regent seven seas.

Consumer demand is evident across our entire suite of offerings with no one sailing region sales in length Brando resort market materially outpacing others in terms of performance.

Hey, particular area of strength that you would expect is our is with our loyal Pascal who currently represent approximately 60% of all 2021 booking.

In fact, our luxury brands regions, and Oceana announced multiple booking record they have achieved in the past two months first oceana had the most successful holiday promotion in its history with its labor day upgrade sales even more impressive with the fact that nearly half of the reservations were from new to brand guest and the vast majority of the reservations where cash.

Bookings with less than 5% of these reservation utilizing future crusa tickets from canceled voyages.

For the region brand the opening of the 2023 world crude shatter in previous World cruise opening day booking record doubling reservations versus last year's record level.

Region also announced the launch of its Twentytwenty two 2020 three voyage collection reservations on opening day, surpassing regions previous all time bookings a record by nearly 40% which was set back in April of 2018 with the launch of seven seas blenders inaugural season.

While all destinations experienced high levels of interest cruises in Africa Asia, the Mediterranean and Northern Europe, the Baltics in particular were notably popular.

And I must note that contrary to the perception.

The more mature cruiser.

We love to travel these three examples demonstrate the opposite.

That are older guess have a continued appetite for upscale luxury travel even for long and exotic cruises once the immediate impact of the pandemic subsides.

As I have said previously our marketing investment strategy will correspond with a gradual ramp up of sailing our go to market strategy of market to fill as opposed to discount to fill has served us well in the past.

Giving us well now and I'm confident it will continue to serve us well as we reengage with guests and travel agent partners in earnest to redeem crude void.

I'll be back later to provide closing comments, but now I would like to turn the call over to Mark for a financial update Mark. Please.

Thank you Frank and good morning, everybody My remarks today will focus on the continued execution of our COVID-19 financial action plan and our roadmap to relaunch as we prepare for the resumption of cruising.

The global pandemic continues to have a significant impact on our business with crews mortgages now suspended through the end of 2020.

There is still much uncertainty around how the pandemic will evolve. So we're focused on what we can control and are prepared to adapt and modify our strategy in real time.

As part of our action plan, we continue to take proactive measures to conserve cash and enhance our liquidity profile.

Slide eight illustrates some of the additional initiatives taken since the beginning of the third quarter.

These include further reducing operating expenses, including shore side general and administrative expenses Opportunistically executing on the July capital raise transactions to further bolster our liquidity profile and refinancing our short term 675 million revolving credit facility, which extended maturity from early 2020.

To the 2026.

During the quarter, we successfully executed a triple tranche capital raise of approximately $1.5 billion comprised of senior secured notes exchangeable notes and ordinary shares.

To date, we've raised nearly 4 billion since March and increased our cash position by nearly $5 billion with the drawdown of the 875 million revolver early in the year provide.

Providing us with a solid liquidity foundation.

We truly appreciate the support Weve received from all of our investors. Thank you for believing in our business model and our management team and in the long term potential of our company and for the industry.

Turning to liquidity Slide 10 provides our current illustrate of liquidity profile.

Our total liquidity as of September Thirtyth was approximately $2.3 billion on a pro forma basis, which includes the portion of customer deposit refunds that are included in accounts payable as of quarter end.

We have also earmarked approximately 300 million to account for anticipated health and safety investments and other related items.

Once we have additional certainty around our wage resumption schedule, we expect bookings to accelerate which restarts the cash flywheel and further improves our liquidity profile.

We have made significant progress in reducing our controllable cash burn with the Q3 average monthly rate coming in at approximately $150 million representing over 60% reduction in net cruise cost versus normalized levels.

Our entire organization has worked tirelessly and pair back expenses, while at the same time balancing the need to be ready to reactivate quickly when the time comes to resume cruise operations.

For comparative purposes, if all of our vessels remain on their way up status at minimum lambing Manning levels and did not begin preparations for a return to service, we would expect fourth quarter monthly cash burn to average approximately $175 million. This.

Overall for the second half of 2020.

This would result in an average monthly cash burn rate of approximately $160 million, which is in line with the company's previously disclosed target rate during a voyage suspension period.

However, due to the fluidity of the voyage resumption schedule and associated expenses are actual cash burn rate for the fourth quarter is expected to be higher.

As we begin to prepare our fleet for the gradual resumption of operations, our cash burn will increase from the void suspension levels. As a result of the following additional the additional disciplined demand generating marketing investments, which drive new bookings and associated cash inflows, the re staffing and repositioning of our vessels.

The provisioning of our ships and of course, the new health and safety investments that we plan to make.

Given the continued uncertainty around the timing of our redemptions, we're not yet prepared to give guidance for 2021 capital expenditures.

Broadly speaking however, excluding newbuild payments the minimum required capex needed to run the business and maintain our best in class fleet is generally a few hundred million dollars.

Turning to slide 11, we ended the third quarter with approximately 2.4 billion of cash and cash equivalents, our cash balance in the third quarter increased driven by the 775 million of net proceeds from our July capital raise after completing the payoff of our short term credit facility. This was partially offset by customer cash.

Refunds for cancer voyages of approximately $200 million approximately $450 million of operating cash burn, including operating expenses SGN, a interest and required capex and a net working capital outflow of approximately $25 million.

Looking ahead, given the continued impact of the pandemic, we will report a net loss on a us GAAP basis for both the fourth quarter and the year ending December 31 2020.

Before turning the call back to Frank I want to emphasize that we while we are prioritizing our immediate business needs. We are also focused on the future of our company are.

Our medium and long term financial recovery plan as laid out on slide 12 focuses on three critical components first rebuild and gradually returned to pre cobot margin levels.

We also continue to identify opportunities to drive margin expansion through structural cost reductions and the continued strong focus on price discipline.

Second maximize cash generation.

We bolstered by our robust and disciplined growth profile of nine cash accretive ships on order through 2027.

And third focused on optimizing our balance sheet and charting a path to delevering.

The decision to increase our leverage and issue shares was not taken lightly but given the extraordinary circumstances presented by the pandemic these where necessary steps. Despite these transactions our weighted average cost of debt is approximately 5% and our priority. Once we emerge on the other side of this is to focus on improving the balance sheet.

As we have demonstrated and proven our ability to do so time and time again.

Ill now hand, the call back over to Frank to provide closing comments.

Thank you Mark.

I'd like to leave you with a few key takeaways on slide 13.

We will continue to work with our expert advisors, including a healthy sales panel in the CDC to refine our signs that plan for a safer and healthier returning to crude protect our guidance grew in communities we bid.

We continue to observe strong demand for cruising across all source markets deployments and brand in both the medium and longer term.

And lastly, we are focused on the initial reception of voyages in the U.S. and a gradual phase we launched worldwide as we work in partnership with authorities around the globe.

With that Chris So please open the call up for questions.

Thank you Mr. Gabriele.

No question at this time. Please press the Star then the one key on your cost on telephone.

In order to get as many people further scale. Please limit your time, so one question.

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And our first question comes from Felipe So Im sorry from Barclays. Your line is open.

Hi, good morning I.

I have so many more than one question I will follow that rule.

So.

Mark on quick considering that you kind of get your prepared comment on your cash flow liquidity and your plan in terms of your long term financial recovery process.

I did have to ask.

Given that you could see that Paul.

How close rather than you initially although that was actually about a lot on the call and acknowledging that your liquidity runway well into next year, just wondering how you're thinking about all sales.

Accessing the capital markets for further liquidity.

Our competitors have recently aftermarket so just wondering.

Your thoughts there.

Thanks, Felicia and good morning.

We continue to look and have the ability to access the capital markets should we need to as.

As we said in the past, we believe and as we said on this call. We believe we have a very solid runway with just almost two and a half billion of cash on the balance sheet. So as we look forward, we will be we will look at it on an opportunistic basis.

But given like I've said in my prepared for park remarks, we've raised almost $4 billion. This year, so far or almost $5 billion of incremental cash. When you include the drawdowns of the revolver. So we have the ability we are constantly looking at it.

We're not in a rush, we're going to do it on an as needed and as an opportunistic.

Opportunistic basis.

Well can you just remind us what your bouncy looks quite different types of grazing.

Okay and this goes for closing remarks.

Structure would be more.

Our attractive under any circumstances.

When you look at our raises today roughly half of that roughly two and a half billion has been via debt.

So we have obviously uncovered the balance sheet pretty heavily so looking forward it would not be our desire to necessarily our first desire to issue any incremental debt we.

We do not have the ability to offer any material secured debt as we are at our.

Okay. Thank you.

Thank you.

Next question comes from Brandt Montour from JP Morgan Your line is open.

Hey, everyone. Good morning, and thanks for taking my questions. So I hate to ask such.

Such a short term question, but obviously there is there's a lot of exciting headlines in the cruise world out there over the last couple of weeks, but just curious regarding bookings that you guys are seeing.

We're all sort of expecting some other positive reflection when the CDC final. It's no sales order ordering what you saw when when that quarter was converted to the conditional selling order and then if I may I.

I know, it's only been a days the vaccine news, but if you've seen any type of positive uptick in bookings data over the last 24 hours.

Hi, Frank.

So looking at the last 24 hours yesterday were pretty good.

Better than the previous four five Monday.

And that I think attributable to the vaccine use we did not have any particular.

Promotion or did any money.

Marketing.

I do think that that was a positive news con.

Contrary.

Then the conditional sales order was issued it was issued on of late on a Friday.

On the bookings are typically weak on over the weekend, we didn't see much of an uptick.

Much of anything.

Given the CDC news most consumers I don't think follow that level of detail of what happened is that the CDC level. These will be the cruise industry, but the vaccine is something that is made huge news stock market hit an all time high So I was front and center on all consumers.

Mine.

Got it. Thank you Frank Thanks, Thats, great color and then I.

I wanted to ask a quick question about the medium and long term financial recovery plan number one right.

Building margins.

I was wondering if you if you've given any thought into what the potential sort of margin differential would be looking out a couple or.

Years, when lets say you topline is back to.

2019 levels, if you got any thoughts on what that how how much better the margin normalized margins could be in that scenario.

As you know we did have industry, leading margins were very happy with our margins today, we have no margin. So it's not like we have to rebuild from where we are we just want to get back to where we were.

And I believe that going forward, we're going to have.

As Mark mentioned nine new vessels.

That are going to be high yielding.

Very cash accretive joining our fleet over the next few years.

That's going to help margins on I think we all have learned through this pandemic ways to control costs better.

We are amazed that we do as well as we do booking wise with little or no advertising and marketing and very little support from the.

The travel agency community. So we think there may be opportunities on the cost side, but primarily we are a revenue driven marketing driven company. We wind again, given our size not because we are the best at controlling costs, given our limited scale, but where the best generating the highest ticket yields in the industry by a very wide.

Margin the highest onboard revenue yields by even a wider margin and we think that will continue and grow as we bring on these nine incredible ships that we have on order.

Got it thanks for that good luck.

Thank you.

On sale.

Next question comes from revenue from Stifel. Your line is open.

Hey, good morning, guys.

So Frank in the past you've indicated it could you could take five to six months before your full fleet would potentially could get mobilized and I'm guessing. The question is based on what you know today or what you know now is that still a pretty fair range and then.

The second part of that question would be maybe help us think about when you would potentially see a full recovery, meaning kind of getting back to that 2019 EBITDA level, you've been pretty helpful. In the past kind of walking us through that.

Look.

It's still very.

Very fuzzy very fluid.

We don't have a single ship operating so this is very speculative.

Steve.

In terms of how long, it's going to take to get the full fleet up and going Mike My best sense today.

Given all the uncertainties that we still have to work out with the with the CDC and when we can start is six to nine months.

Broadly speaking I look at 2021.

As a transition year.

I believe that we will be able to have our entire fleet up and running.

Some time in.

Latter half of 21, so that 2020 to become the first full year since 2019 that we can.

Operate the entire fleet for the full year.

22 is the road to normalization and then 23 forward is normalization.

So.

Lot of questions still to be answered.

We still have.

Travel restrictions around the world travel bans in some cases airlines have got to get back up and running ports have got to open but let's look at just what's happened in the last two.

Two weeks when we're going to have we have the the framework from the CDC that was step one.

We are very encouraged by the cdcs willingness to sit down and discuss the the issues that we see with the order.

With us, we think thats going to start very very soon and.

And that's just a great positive note, we've seen the vaccine and although it's going to take some time for the vaccine to find its way throughout the populations of the world. It's what we've been hoping for and my guess is that the Pfizer vaccine, maybe first on the gate, but they won't be the only one and just this morning the.

The breakthrough therapeutic from Eli Lilly is certainly up.

A very positive step weve seen incredible leap.

In progress in the technology of testing. So we now have some wind to our back we've got that flywheel going a little bit and so.

You know Mike.

The encouragement the excitement level is has hasn't been this high in a long long time. So we're encouraged but still a lot of lot of obstacles to overcome we're prepared we've got the liquidity. We've got to know how we've got the history behind US we're going to go over this.

And Steve It add on that this is not a race. We are we are cognizant. We said, we're going to take our time, we want to instill confidence and the consumers we want to instill confidence in all the constituents.

With our brands. So you only get one shot to do that right. So we're going to take it on a methodical approach and do it right. Because again you have one shot to do it.

Yes.

Okay, guys. Thanks, a lot and Mark I have one more quick one that once the once 75, you called out in the fourth quarter in terms of cash burn.

It does and I understand that's up ticking, mostly because of interest but are there any costs embedded in there in terms of getting some of your crew.

You know back in place for these tests cruises or if that doesn't can you help us think about maybe what that cash burn does start to look like over the next couple of months as you do got as you do start to get folks in ships back in position.

The 175 for Q4 is really on a like for like basis, just to give you a comparison of how that stacks up against Q3 and again the differential is it really just the timing of cash interest. So no. The 175 does not include any material startup costs that we may incur but given where we are today.

Given the the lead time in which we think we need to stand up vessels there could be some more material slightly caught a higher cost to come through in Q4, certainly, but I don't anticipate that it would be material.

At the end of the day your first smart and largest cost has really repatriating your crew and Fortunately we have shipped to do that right now so it doesn't really cost us an.

An incremental a lot of dollars to do that so thats first and foremost all the other related startup costs are going to happen. It happened closer into your actual start up with the exception of marketing. So yes, there may be some slightly higher but I don't anticipate that it will be materially different.

Okay. Thanks, Frank Thanks, Mark appreciate it.

Thank you our next question comes from.

From Cleveland Research your line is open.

Sure. If you mentioned that updated number and what you've been seeing recently and then the second part of that is I think you alluded to passive fccs being outstanding which represents a really nice base of pent up demand that you've already spent kind of the marketing dollars on as you think about that group of customers.

Bookings for next year bookings for 2022.

Ken Ken the pricing on the overall book position continue to hold that what's really impressive at flat as more of those fccs come into the mix.

Yes, so Vince this is mark thanks on your first question.

Secondly, I think somewhere in the 30 to mid 30 percentile range. So again, it's brought the overall so so thats been at that again shows the confidence from that from Arkansas existing consumers and you're absolutely right. When you look at on a go forward basis, we do have a nice book of business inherently on the books from those F.

You see customers, so what thats going to allow us to do is that allows us number one to leverage our cost base, we don't have to remarket to those.

Mental so thats been beneficial to work to us as well so certain.

Certainly I think thats going to thats going to help pricing.

We've always said that we want to maintain price discipline, where we are maintaining it and we can see that in our booking patterns and our pricing commentary.

Vince note that we said.

My prepared statements that.

Little over half of all FCC issued to date have been reading.

So of all the FCC that weve issue and they represent about 15% of annual capacity.

So that means that 7.5% of annual capacity has already been reading.

It's not insignificant, but not material and we've seen that pricing for 21 and 22.

<unk> is flat to slightly higher than it was prior to the pandemic for like for like period. So the bottom line is the FCC redemption has had zero.

On on pricing, we're maintaining pricing for new bookings.

And since people have the 25% bonus.

Should we raise prices.

Still it's still a great deal for them so.

Bottom line as I've said things are not going to be affecting future pricing decisions.

Very helpful explanation. Thank you.

Thank you.

Our next question comes from General cost from Morningstar. Your line is open.

Hi, Thank you.

I'm curious if you guys have any noteworthy trends you can share from the 40% of the consumers that are non cruisers.

Great. Thanks to the brands I think on one of the slides is that 60% were loyal repeat cruisers are you seeing any differences in behavior booking trends or anything like that.

Okay.

No nothing that we've discerned.

Marketing is being done more online than in digitally than when we than we would normally do because again of the wanting to preserve passion and the fact that travel agents are not as active as they normally do so.

We find and this is one of the potential areas for future cost savings is that digital marketing.

It's a real value in it.

Not just kids buying things.

Things on.

Amazon or.

Instagram.

Well, our buying cruise is worth thousands and thousands of dollars online and.

And we think Thats a trend that the pandemic might have accelerated the whole zone world. So we think thats a positive on a net net basis and we'll continue to.

Manage our business and manage our workforce and and.

Vote resources to to this kind of digital transformation that we find ourselves in.

Okay, and then just out of curiosity.

And that the original.

All right the race and was first six months. When you guys were estimating at Annapolis from six to nine months I assume that's more about logistics and not about anything structural that.

During that time period out is that right.

Yes, let's logistics, it's the prevalence of the disease around the world and seasonal.

If.

Ship number 25 is ready to go in.

September one and she normally would have been in Alaska, maybe we don't bring are up on September one because it's.

The season is almost over and I would be penny wise pound foolish to the stand are up.

Then and there and maybe we wait until the following month when she normally would have been in the Caribbean. So those types of.

Positionings and deployment.

Considerations like that.

Our important.

Excellent. Thank you.

Thank you. Our next question comes from comments Alan from Martin formal your line is open.

Hi, good morning.

Good clarification on back to sales when do you expect to start the trial sailings and how long do you expect the trial to take and then said it takes six to nine months after that to get all the ships sailing.

And kind of a follow up question at what point in there do you see free cash flow or EBITDA breakeven. Thank you.

Youve overstepped your boundary of one question Thomas.

[laughter].

Remember I hope I don't guidance travel.

The question police long get you.

Look.

We have a lot of questions to sit down with the CDC to work out, but if you if you just.

Reid literally in the order and the open in the sequence that we need to get a vessel ready to start the sailing we think those sailings could start.

As early as.

Early January as Mark said this is not a race for us.

We want to get this 100% right.

Or stressing flawless execution, there's still a lot to learn.

Bob about the order and the nuances of how to execute those orders hot up how to implement the 74 recommendations.

Seamlessly along with the the framework that the city scenes laid out.

And those are complex issues.

What kind of testing, how often do we test et cetera. So.

Don't pin me down to an exact date, but I would tell you that.

There is a there is a chance that maybe some some companies can start these trial cruises and in December we.

We we don't forecast that we will be wanting to do so until probably sometime in January and then there is another series of of.

[music].

No.

What's that.

That the CDC has called for in terms of giving notice and getting the ship sort.

Certified on a ship by ship basis, the audits that have to go through and so.

We're very reluctant to give you a date of one.

The first trial sailing began because your next question is going to be will then one is your first revenue sales in going to begin and and we simply don't know at this early stage when that is.

In terms of when do we return to the EBITDA.

Breakeven or cash breakeven.

On a on a ship by ship basis, we have said that given where our pricing is which is historical levels.

Levels, we believe that number on a ship by ship basis is somewhere between 40% to 50%.

Depending on the ship the size of the vessel and so forth.

On a corporate level I would be very hesitant, so hesitant that I'm not going to answer the question as soon as to when we would be corporate wide.

Breakeven or or even cash breakeven, it's going to take some time so.

So far and just to further elaborate on that if you look at our working capital change over from Q2 to Q3.

It's essentially we essentially flattened out excluding our normal ongoing operating expenses. So we are making progress there and.

It's just going to take time, it's going to be a matter of of of what load factor capacity as we roll out how quick quick the ships are rolling out. So it's tough to give you an answer to say, we're going to be cash flow positive on X date theres. So many variables involved but I can assure you that.

Helpful color. Thank you.

Thank you.

And our next question comes from our Golden from Macquarie. Your line is open.

Thanks, so much for taking the question and I appreciate the detail.

Always.

For either Mark or Frank I was wondering in the table that you have around pro forma liquidity you have.

Of that 300 million cash health and safety initiatives component I was wondering if you could give any detail around.

How much that covers of the fleet or how long that's supposed to be.

Good for is that just for an initial restart any color around that and then I have a follow up.

Yes, they at that 300 million, obviously is an estimate and when you look at it on a go forward basis, what we really what we're trying to do is give the market color on.

Some of the funds that we're carving out so.

In the past I think we've said that we were in the past couple of calls we've estimated that we think we need $100 million to $150 million of investments to make the ships safer under the under the new standards.

Thats going to be spent over time, it's not all going to be spent and the fourth quarter or the first quarter, it's going to it's going to come out over time over the next few quarters. So that's not going to be an immediate outflow, but it's an estimate.

As you can imagine as the as the framework has been issued and as we continue to assess the more intricate technical guidelines around that framework that enables us to then just determine what needs. We have on the backend for investment purposes. So again, we just wanted to be cognizant that we we're carving out a significant amount of.

Funds related to that to cover ourselves.

Got it so not implying that.

Payable or going to be spent.

Immediately.

Sort of redemption, you can think about that that outflow would probably happen over the course of two to three quarters.

Got it Thats Super helpful. Thanks, So much and then the follow up I had around.

Basically liquidity again would be.

We saw the region 2023.

World Cruise go up then.

You've got that far out booking available I was wondering how you are considering pricing versus far out bookings now for the other brands.

From from a liquidity shoring perspective.

No.

Our our pricing strategy has not changed.

As you know if you go back the last four or five years.

On average we are able to raise our ticket yield in the 3% to 4% range.

We want to continue that trend, we think that the combination of pent up demand in the marketplace our industry leading brands.

Less capacity in the marketplace. The new ships that are coming online for us. If you recall, we we had so many.

And Paul the remarks around the region in Oceana book.

Bookings I think that was more of a signaling more around the demand that there is solid demand out there and there's pent up demand from a liquidity standpoint, if you think about it that really doesnt impact us or benefit us in the near term as yes, we do get deposits initial deposits from that but the bulk of those funds don't come in until.

Roughly anywhere on average 122, depending it could be 180 days on a world Lloyd's or more but but again, there's going to be a significant near term liquidity benefit from that.

Is there a general rule that you're comfortable with sharing as far as how much of the deposit bases nonrefundable at this point.

Well, yes, so its fully refundable, we don't at this point in time, we don't have.

Non refundable fares.

So it is fully refundable up until you know again, depending on the voyage anywhere from 122 could be 180 days or more for a world voyage.

Got it thanks, so much appreciate it.

Thank you. Our next question comes from Tyson Some credit clean your line is open.

Hey, How's it going thanks for taking my question.

With regards to the CDC no sale update.

The way I read it I guess, the I think that the dates for ship approval simulated testing in that revenue sailings.

All kind of run on sequential timeline I think 30 days for the simulated 60 days for the revenue sales I guess number one is that correct and then two is there any opportunity or a wiggle room that that process could be changed to run concurrently I guess.

Not not all those.

Period notice period, our sequential.

We think they are concurrent.

And those are some of the Clara.

Clarification quite.

Question is that we have that we will be discussing with the CDC in the coming weeks.

Great. Thank you Thats it from me.

On cable.

Our next question comes from Alvin.

Hi, there its financial partners. Your line is open.

Hi, Thank you for taking my question.

What are your thoughts on developing more private islands, and creating more of a controlled destination environment and building on but so you said once said if you had a hotel on great start Okay would be one of the world class destinations in the Caribbean and creating shifting to something like that.

Yes, I still stand by those comments you know Ivan as you know.

Where they only cruise company that actually has a private island private destination in the western Caribbean.

A lot of folks have it in the Bahamas area is we do a great there of where we've made significant investments in making it a an upscale.

Destination at you and you mentioned.

And we're very very proud very happy doesn't that.

Fanfare that.

The Bahamian Eileen's get maybe that's our fault, but great.

Great typically harvest caye and beliefs that just a wonderful destination.

And we think that because of the pandemic overtime on the new vessels coming on line that it will be more utilized than it has been in the past.

As we positioned vessel around.

Around the southern part of the country.

It can reach police and back and seven days or so.

So we're very happy with those two islands.

You take what we are doing in Alaska, where we have made major investments in real estate development at.

And Petro, Canada with Ward Cove land, we bought in Juneau.

So we now have.

Besides the investment we've made in Seattle at the point there we are really really in good shape and leading the industry in.

In.

Controlling the destinations that we need so that we can.

Deploy even more vessels to Alaska.

Real estate is expensive and it takes a lot of money to develop real estate I think that.

Around the world.

I'd love to have a private island in the Mediterranean. Let me know if you can already for sale.

I don't I don't think they are but.

But we're very happy with what we've got today, one one of the Bahamas, what and when.

Western Caribbean or Alaska investment.

The the situation we have in Hawaii with our Pride of America vessel and the fact that the only American flag vessel that Incruse and Hawaii gives us even more flexibility there. So we are very.

We're very happy with our with our land base.

Offerings and.

And we will keep an eye out in case, there is other available but.

For the time being where we're very pleased with what we got.

Do you think you've got to say, yes go ahead I'm sorry.

Consumer is let's say, if because you could create a controlled environment. Once people are onboard let's say in Miami, Yes, and has been tested and then they go to your island. For example, there's still in this contained environment that you control. So absolutely coin if that could be I mean that I believe will be a good vacate.

And then.

Marketing that as being.

Well, what I would have a nice vacation, but have limited outside exposure certainly the bubble that we're trying to create onboard can be created and private island, but remember that what we're going through now is not what we're going to go through forever and I don't want to make long term investments long term decisions in order to fix a short term problem.

But we've seen that our customers like these private destinations there are controlled.

Forget about the health and safety part of it there controls just from a from a and experience point of view and and I'm glad I've got tool.

So, but but I do think that looked a pandemic won't last forever. We will return to normalcy people do like variety in itinerary people do like itinerary rich.

Our port intensive itinerary and.

And we're hoping that and our plan is to continue to offer that.

Thanks, Ivan operator, we got time for one more you. Please thanks.

Thank you Bill.

And our last question comes from Stephen Grambling from Goldman Sachs. Your line is open.

Thanks, Justin.

Yes.

Okay, part or follow up price and primark, but can you maybe help us think about free cash flow sensitivities different occupancy levels and then just touch on kind of intermediate term target net debt to EBITDA levels and also how the long term kind of pretty cold that targets of 2.5% coupon.

Seven five times has maybe changed or not changed.

For the longer term.

Yes, yes.

Look we obviously were targeting.

To get back to our reduced.

That leverage levels, that's going to take time, and there's a lot of variables in between there, but we're focused on that in terms of sensitivity is on the cash flows and load factors again, we've said generally a ship.

Breaks even roughly 40% to 50%. So if you if you take that that can kind of give you your free cash flow.

Sensitivity from there and the second part I apologize I got lost on your second part of the question.

It was more on the leverage levels just thinking through if there was like an intermediate term target that you might be thinking yellow logo ahead of some revenue order book as soon as we can I mean.

Number one we need earnings and we need visibility on the industry. So our number one product or one of our top priorities as we emerge from this is going to be figuring out how do we how do we de lever and finding financial flexibility in the markets to possibly refinanced some of our debt or again balance sheet management, So that's front and center, but.

We have to emerge out of this first.

Thanks, Dave and thanks, everyone for your time and support your patience during our third.

Distanced earnings call.

As always we'll be available to answer your questions later on today, they say bye bye.

This concludes today's conference you may now disconnect everyone have a great.

Q3 2020 Norwegian Cruise Line Holdings Ltd Earnings Call

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