Q1 2021 Norwegian Cruise Line Holdings Ltd Earnings Call
[music].
Good morning, and welcome to the Norwegian Cruise line Holdings first quarter of 2021 earnings Conference call. My name is Josh and I'll be your operator 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.
The press Star then zero on your Touchtone telephone as a reminder to all participants this conference call is being recorded.
I would now like to turn the conference over to your host Ms.
Andrea Demarco Senior Vice President and from Investor Relations Corporate Communications and ESG Mr. Marco. Please proceed.
Thank you Josh and good morning, everyone. Thank you for joining us from first quarter 2021 earnings call I'm joined today by Frank del Rio President and Chief Executive Officer of Norwegian Cruise line Holdings, and Mark Kempa Executive Vice President and Chief Financial Officer.
Frank will begin the call with opening commentary after which mark will follow to discuss our financials before handing the call back to Frank for closing remarks.
We will then open the call for your questions.
And as a reminder of this conference call is being simultaneously webcast on the company's Investor Relations website at Www Dot NCL each L T D investor Dot com.
We will also make reference to a slide presentation. During this call, which may also be found on our Investor Relations website.
Both of the conference call and the presentation will be available for replay for 30 days following today's call.
Before we discuss our results and we'd like to cover a few items our press release with first quarter 'twenty 'twenty. One results was issued this morning and is available on our Investor Relations website.
This call includes forward looking statements that involve risks and uncertainties that could cause our actual results to differ materially from such statements.
These statements should be considered in conjunction with 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 contained in our earnings release and presentation.
And with that I'd like to turn the call over to Frank del Rio Frank.
Thank you Andrea and good morning, everyone.
And as always I hope that all of you and joining us today as well as your loved ones remain healthy and safe.
Today, we will focus our commentary on the progress we have made thus far and towards the resumption of cruising and the <unk>.
Overall strength of the booking and pricing environment, and our efforts to bolster our liquidity and maximize financial flexibility as we methodically return of seen cooperation.
Over a year of since the suspension of voyages worldwide. Our teammate Norwegian has accelerated and the time has finally come to where we shift our focus and so what I liked the Cogs are great cruise come back.
Even if they come back start from international pork.
And you can see on slide four I returned to service. The plan is centered around three key phases first we developed a multi layered sales safe health and safety strategy and putting mandatory vaccinations for all guests and crew at the cornerstone, which I will touch on in more detail later in the call second last month and we announce.
Our initial voice voyage resumption plan with a two pronged approach to restarting cruises from both within and outside of U S waters, starting this summer.
All three of our brands have now announced the initial voyages and barking from both new and normally scheduled international point.
And we are and we remain engaged and active dialogue with the C. D. C regarding a potential of assumption of cruising from U S ports.
Lastly is the phase relaunch of the remainder of our fleet the <unk>.
And of which will depend on several factors such as the global public health environment Port opening travel restrictions and the all important and C. D C.
Slide five further details of our two pronged void and assumption plan.
Outside of the U S. Our long or whatever it turns a cruise and will begin on July 1st with three Norwegian cruise line and vessels sailing from Athens, and throughout the Greek Isles, and new Caribbean, Homeport, and Jamaica, and the Dominican Republic.
Oceania cruises will start in late August with voyages from Copenhagen, and Regent seven seas cruises will resume from Southampton, England and beginning in September with seven seas splendor, our newest and most luxurious vessel resuming her inaugural season.
The response of our international Voyager assumption has been overwhelming and even sailings from my new Caribbean home ports are performing better than expected. Despite the extremely condensed booking window.
I can't thank our loyal guests valued travel partners and all of our stakeholders enough for their patience and support over the past year as we prepare for a return to cruising.
And that's where I worked the restart voyages and the U S. On April 5th we submitted a comprehensive ironclad proposal to the C. D C.
The authorization to resume cruising this summer with the robust and healthy safety straddle strategy I. Just described which includes 100 per cent vaccination of all guests and crew.
We and the rest of the cruise industry has since continued dialog with the C. D C and just last week. The CDC issued additional clarification for the previously outlined the technical guidance, what's the alleviated some of the pain points and the original phase Iia guidance.
Even more importantly, we were pleased to see the C. D. C. Incorporate vaccines are most powerful tool against COVID-19, intuit's guidance, creating two different pathway for the resumption of cruising from U S ports, one for vaccinated voyages, where the vaccination threshold of 95 per cent for guests.
And 98% for crew and one for non Vacs had voyages and fall below the threshold.
The back of it path, which is consistent with like falls short of our plan for 100 per cent vaccination of guests and cruise has fewer hurdles to clear before we turn to cruising, including the removal of the requirement for the simulated voyages prior to revenue sailings and the relaxing of certain burdensome and costly testing requirements.
In addition, yesterday the CDC issued technical guidance for phase two and three of which covers the simulated voyages and restricted voyages and the application process for a conditional failing certificates.
The guidance includes and operations manual for stimulated and restricted voyages for which we need more clarity on whether the numerous and onerous requirements would apply to vaccinated of voyages as well.
Or only to those that are not.
Our team is working through the new guidance, but at first glance. However, it appears the path forward is a bit rockier and of the steeper than originally expected.
As time goes by and given how long it takes to sustain that the shift from cold lay up the urgent need for an acceptable and definitive agreement with the C. D. C is imperative.
And they potential mid summer of restock from U S ports could be in jeopardy.
However, the cdc's recent willingness to engage with the industry and construct of constructive dialogue.
As shown that they are committed to working with us to find an acceptable path forward and we are certainly and a better place today than we were just 30 days ago.
The progress we have made so far has been possible and part due to the incredible grassroots efforts undertaken across the cruise ecosystem to encourage elected officials to help resume cruising and the U S, which supports the thousands of jobs families and salt business small businesses throughout the country.
True CLIA ready and set sales platform and our own and say safe to sale of advocacy advocacy campaign, we were able to send over 150000 messages to elected officials throughout the United States. Thank.
Thank you to all of you who have called emailed or tweet and your officials and support of the cruise industry.
The wind at our back and now is the time to keep the positive momentum going with our advocacy efforts.
And I encourage you to continue reaching out to you elected officials by cruising or excuse me by texting cruise 252886 and half of your voice is heard.
Turning to slide six we unveiled a robust and multilayered sales state of health and safety program, which includes mandatory vaccinations for all guests and crew as its cornerstone we believe that vaccinations combined with the dozens of science back preventive protocols, including Universal and COVID-19 tests.
And that was developed by the healthy sales panel will provide will provide one of if not the safest vacation option available anywhere on land or at sea.
Our protocols extend well beyond those of the already successfully reopened and travel and hospitality sectors, including hotels resorts and casinos theme parks restaurants movie theaters arenas and airlines sale.
The sales take was developed in conjunction with our expert advisers, including the healthy sales channel and our newly announced fail safe Global Health and Wellness Council chaired by former FDA Commissioner of doctors Scott Godley the.
The council, which is comprised of six of them public health and the scientific expert featured on the slide seven will complement the work of the healthy sales panel and provide Norwegian cruise line holdings with the specific expert advice on the implementation and continuous improvement of our sales safe program.
Shifting to our booking trends, but you can see on the slide eight we continue to see the strongest demand we have ever experienced from future cruise vacations across all three of our brands. Despite continued reductions of demand generating and marketing investment and the absence of the full complement of our all important travel agent partners and <unk>.
The virtual lockdown from many of our international source market.
Perhaps the best indicator of this pent up demand is there of booking volume, which is doing and what is probably the most unorthodox wave season, and our industry's history accelerated considerably with bookings net of cancellations more than doubling versus the prior quarter.
As I touched on at our last call of this demand coupled with the opening of voyages for sales further and advance continues to result, and a significant expansion of the booking curve with the first quarter's curve nearly doubling versus the same time last year.
Pent up demand is particularly evident for 2020 two voyages.
For the first half of 2022, our load factor is meaningfully ahead of 2019 with pricing higher when excluding the dilutive impact of future cruise credits.
Keep in mind, and 2019 was a record year, which makes a strong booking trends we are experiencing even more impressive.
In addition, approximately 70% of our book position is comprised of new cash bookings with the remainder is comprised of future cruise certificates.
By the time of summer of 2021 comes around and the industry begins to resume operations more than 50 million would be cruises of life and left the short for the <unk>.
Of the man is real and it's deep and you can see that it and our growing advanced ticket sales, which increased approximately $200 million on a gross basis and the quarter or up approximately 40% versus the prior quarters building.
We believe we have reached an inflection point and this is the highest gross build since the beginning of the pandemic and as we get closer to a resumption of cruising and begin phasing and the rest of our fleet. We expect this momentum to continue to accelerate sequentially.
Yes.
Another exciting milestone reached and the quarter was the naming of the Vista. The first of two new 1200 guest of Lora class ships for the Oceania cruises brand and the first newbuild for the line and over a decade, which you can see on slide nine.
The upscale vessel the seventh and put the line will set until the early 2020 three followed by a sister ship in 2025 like her sister vessel Vista will deliver the fun excuse me and let's see and we introduced several unique first for the brand and the realm of dining and guest experience.
More reveals of vistas venues and experiences will begin later this month and the lead up to the launch of sales for her inaugural voyages and September of 2020 one.
I'll be back weighted to provide and update on our ESG efforts as well as provide closing remarks, but now I'd like to turn the call over to Mark for a financial update Mark.
Thank you Frank.
My remarks today will focus on the continued execution of our COVID-19 financial action plan and a return on our planned return to cruising later this summer.
I'm pleased to say that we are beginning to see light at the end of the tunnel with the significant progress. We have made in recent months on a return to cruising the.
Despite this positive momentum we have not lost sight of the pandemic is not yet over and we remain focused on maintaining our cost discipline and pulling all levers available to conserve cash and maximize financial flexibility and what is and improving but still uncertain environment.
And I've said before our team is focused on what we can control and we continue to adapt our strategy as needed as the pandemic evolves.
<unk> 10, and illustrates the three focus areas of our action plan and the additional proactive measures taken since the beginning of the first quarter.
First we continue to tightly control operating expenses and capital expenditures through a number of initiatives, including the significant reduction or outright deferral of near term demand generating marketing expenses and non essential capital expenditures and.
As an example of our non new build capital expenditures continue to be less than half of our pre pandemic expectations for 2021.
In addition, we finalized 50 million euro of incremental deferrals of new of.
Newbuild related shipyard payments since our last earnings call, resulting in a total deferral of $270 million euro through the end of the second quarter 2022.
Second we have made significant progress on improving our debt maturity profile to provide additional near term financial flexibility.
And March we repaid the pride of America, and Norwegian Jewel facilities, which were set to mature in 2020, two leaving no significant debt maturities until 2024.
We also worked with our lenders to amend certain credit agreements to free up approximately $2 billion of additional debt capacity.
Of which is on an unsecured basis.
While we believe our liquidity position today is strong the incremental debt capacity meaningfully improves our financial flexibility and gives us additional optionality should the need of rise.
And the final focus of area of our action plan the securing additional capital we successfully tapped the market, which resulted in and approximately $1 billion of incremental liquidity in the quarter.
Slide 11 illustrates the two highly successful capital market transactions executed in March.
First we issued $1 1 billion of senior unsecured notes consisting of a 575 million tack on to the December unsecured notes offering and.
And $525 million of new unsecured notes due 2028.
These transactions generated approximately $650 million of incremental liquidity after repaying the Norwegian jewel and Pride of America facilities, both of which were to mature in 2020 two.
Second we went to the market with the strategic multifaceted offering to proactively manage our balance sheet. We raised approximately $1 6 billion of proceeds net of underwriting fees through a public common equity offering of approximately 53 million shares at $30 per share we the.
And used approximately 1 billion of of the net proceeds to fully repay the L. Catterton exchangeable notes through 2020 six.
This opportunistic transaction has several strategic benefits.
First and enhanced our balance sheet by effectively converting debt to equity with the prepayment of debt at par.
Second the early redemption of the L. Catterton notes enabled us to repurchase a significantly lower number of shares than what would have been required. If the notes were held to maturity.
Third we unlocked value and added approximately $530 million of incremental liquidity with limited additional dilution of shareholders as the vast majority of the shares were already reserved for the L. Catterton notes and.
And lastly, we reduced our future interest expense burden.
To date, we've accessed the capital markets seven times over a 12 month period with several multi instrument transactions as a result since the onset of the pandemic, we've raised more than seven 5 billion, including the drawdown of the $875 million revolver early last year.
This incredible feet would not have been possible without the hard work and support and partnership of countless individuals, including our team at Norwegian and our lenders the shipyards investors bankers and many many more.
Turning to turning to our illustrative liquidity profile on slide 12 total liquidity as of March 31 was approximately $3 4 billion, which is net of the portion of customer deposit refunds that are included in accounts payable as of quarter and.
We have also estimated approximately of 100 million for anticipated health and safety investments.
These factors combined result, and a net liquidity on a pro forma basis of approximately $3 3 billion.
Enabling us to continue to navigate through this fluid environment and.
And execute on our return to service plan.
As for cash burn and our team continues to be laser focused on cost containment and cash conservation.
For the first quarter, our average monthly cash burn was in line with prior guidance at approximately $190 million or approximately $170 million per month, excluding non recurring debt modification costs.
We paid approximately $50 million of onetime cost and the quarter as the result of that deferrals and covenant waivers and suspensions, which when combined with the Newbuild payment extensions have resulted in approximately 1 billion of additional liquidity through first quarter of 2022.
As for the second quarter, we expect the average cash burn to be approximately $190 million per month as we prepare for a resumption of cruising beginning in July.
Restart expenses are primarily related to repositioning provisioning and staffing of vessels implementing new health and safety protocols and a measured ramp up of demand generating marketing investments.
We will continue to be disciplined and take a thoughtful approach to reintroducing costs with our voyage resumption in order to conserve cash while at the same time balancing the need to drive new cash bookings.
Slide 21 details exist additional guidance, we have provided for certain metrics, including depreciation and amortization interest expense and newbuild the related capital expenditures.
Turning to slide 13, we ended the first quarter with approximately $3 5 billion of cash and cash equivalents.
Our balance our cash balance and the first quarter increased driven by approximately $1 $2 billion of net proceeds from capital raises.
This was partially offset by approximately $570 million of operating cash burn, including operating expenses SG&A interest and capex customer cash refunds for canceled voyages and from approximately $100 million collateral obligations of approximately $250 million and a net working capital and other outflow of approximately 50 million.
And which includes health and safety investments.
Before handing the call back to Frank I want to reiterate that as we continue to navigate through this crisis and prepare to execute on our voyage resumption plans, we have not taken our focus off of the future our medium and long term financial recovery plan, which is provided on slide 14 is focused on three critical components first.
Rebuilding and gradually returning to pre COVID-19 margin levels, while continuing to identify opportunities to further drive margin expansion.
Maximize our cash generation and third focus on optimizing our balance sheet and charting a path to delever.
With that I'll hand, the call back over to Frank for closing commentary.
Thank you Mark and before we wrap up our prepared remarks, I'd like to provide and update on our global sustainability program cell and sustain.
Which is reflected on slide 15.
Despite the current public health challenges, we face our commitment to drive a positive impact on society and the environment through the advancement of our ESG strategy remains at the core of our everyday operations.
Throughout the crisis, we have remained committed to supporting our local communities and the destinations we visit.
Earlier this week, we announced that we are providing a $10 million cash support the six Alaska and important communities to help families and small businesses with the basic relief programs and the localities severely impacted by the ongoing cruise suspensions.
My Heartbreaks from Alaska, and its wonderful people as we face the potential second year of zero or at Best Ltd cruise operations. During the one point of summer tourism season, which would bring in another blow to Alaska as hard hit tourism economy.
And we're doing everything and are powered to resume cruising and the U S. As soon as possible. So we can provide additional much needed relief to this important region and.
In addition, and we also joined the shop local Alaska program, which is a joint initiatives between via Alaska and voyage Dot com to encourage the support of severely impact of small businesses and in Alaska. The.
The spiritual platform allows consumers, who live around the globe to browse and purchase a wide range of items from virtual Alaska shop.
And our local Miami community, we provided $100000 worth of visa gift cards of the cruise members of the International Longshoremen's Association.
Local 14, and 16, who saw over 60% of their business wiped out nearly overnight with the suspension of cruise voyages.
Proud to support this pillar of the local community, which has been providing long short language of port Miami for over 85 years and holds the historic position as the oldest black Union and Florida.
As part of our ongoing humanitarian efforts and in the spirit of giving back. We also provided more than $2 million of in kind of humanitarian relief to support various community organizations worldwide throughout 2020 and 2021. The support was directed to a variety of efforts, including local food banks disaster relief and COVID-19 recovery efforts.
And.
In addition, and and in celebration of teacher appreciation week on Monday, we relaunched our giving Joy contest, which provides educators with 103 cruises and the chance to went up to 25000 and cash awards for their schools.
Throughout this unprecedented period countless teachers have worked tirelessly tirelessly to give their all to their students and we believe now more than ever and they deserve our recognition and gratitude.
On the environmental front, we are honored to receive the prestigious 2021 ACG build America married award for environmental enhancements for our newly constructed double the ship here at Ward Cove and catch it kind of Alaska through this project, we were able to transform ward Cove, a superfund site into a sustainable and <unk>.
Volume in Italy friendly and entertaining site for the local community and cruise visitor and alike.
Going forward and we continue to be focus on enhancing our ESG disclosures to provide additional transparency and all.
Look forward to sharing additional details with you as we continue on our ESG journey.
Turning to slide 16, and I'd like to leave you with a few final key takeaways.
First we are putting health and safety at the forefront of a return to service plan and as demonstrated by our science backed sales state health and safety program, which includes 100% vaccination of all guests and crew and addition to comprehensive protocols. We will continue to work with our expert advisers to evolve these protocols.
The overtime.
With the latest science and technology development.
We are focused on a great cruise come back with our phase voyage resumption plans, both within and outside of U S Port.
At the same time, we are keeping our longer term of strategic and financial priorities and focus as we execute on our recovery plan.
And lastly, we continue to experience strong future demand for cruising across all three of our award winning brands with very positive bookings and pricing trends for 2022 and beyond.
Overall, I am more hopeful today than when I spoke with you last.
I can't thinking of our dedicated and passionate team members around the globe for all of their hard work and perseverance.
Which has brought us to the critical point, and which will propel us forward.
We still have a long road to full recovery ahead of us, but we are optimistic and encouraged by the progress. We have recently made for a resumption of cruising as well as the continued robust demand we're seeing from our loyal guests.
We can't wait to get back to what we do best providing guests with incredible experiences and lifetime memories, and our shareholders with industry, leading financial metrics and year over year improved financial results.
And with that Josh Please let's open the call for questions.
Thank you Mr del Rio with you of any question at this time. Please press. The Star then the one key on your Touchtone telephone and order to get as many people through the queue. Please limit.
And your time to one question Yeah. Great question has been answered or you wish to remove yourself from the queue. Please press the pound.
The key Arthur's question comes from Stephen Grambling with Goldman Sachs. You May proceed with your question.
Thanks, Good morning.
I guess of quick clarification on on pricing if we look at the individual ship brands, what are you seeing and pricing, both including and excluding the FCC.
Hi, good morning, they're up.
And they're up sequentially, we raise prices beginning at the beginning of the second quarter.
And I'm just amazed at the much how much pricing power, we actually have.
Given the difficulty that we all know about and the the relatively low marketing spend that we are.
Have of I have put out and the last quarter and a half or so and so it's a and when you hear about inflation inflation means prices go up and up.
It's good to see that we too are seeing the positive side of inflation, which is pricing power. So we're very pleased with that.
And I guess as a follow up since you mentioned the in place and Theres, obviously been a lot of talk of labor shortages in the hospitality industry, but of course, you of a bit of of different labor models and I'm curious as you start prepping for resuming sales what are you seeing on the labor front and how should you or how should investors generally be thinking through the puts and takes between inflation versus the <unk>.
Patiency actions on your overall cost structure.
Yeah.
And we were just talking about it before the call on over 95% of our crew are non American nationals. So we're not seeing.
Any kind of.
Pressure on the labor side, the biggest issue on on labor for us getting to the crew back on the ships and.
The the various travel restrictions that still exist around the world.
These are the consulate and embassies or are slow and issuing visas the situation in India now and we all know about.
And then of course, we've committed to 100% vaccination of crew so.
Putting the crude together with the vaccine.
These are all challenges.
And that may impact, our ability to stand up shifts and the future, but we don't really believe that it will.
And vaccines coming on the surplus of vaccines now coming on pretty strong around at least around the U S.
We feel that we'll be able to the standup the vessels.
On a pretty pretty good clip.
That's helpful. Thanks, I'll yield to the Florida pest of luck and back out there.
Steve.
Thank you. Our next question comes from Graeme on tour with JP Morgan. The proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions.
Frank I was hoping you could opine a little further on the CDC the announcement yesterday and wondering if you thought that the spirit of the update from them.
Was aligned with the Cdc's on goal of getting you guys scaling back in July and then specific to your comment.
Parts of the CSO, which I know it may not apply to you and the and do you.
And did you think we're more rocky or steeper than expected.
Look I think everybody has the same goal of of.
Of getting the industry back and operationally.
D C and themselves have stated that.
Cruising or any any activity cannot be zero risk.
<unk> acknowledged that the vaccines is the game changer. That's why society is racing towards vaccinations in the fastest possible, which is why we proposed to the city's feedback on April 5th and iron clad multi pronged approach to the situation, which as everyone on board. It has to be vaccinated. So I have to tell you that.
I am disappointed at first read on when it gives the CDC and opportunity too.
Span and clarify we have a call with them this afternoon.
And on some of the requirements for example, as we read Yesterdays pronouncements.
Even though everyone on board would be vaccinated.
And between bites of your meal and.
And in between Sips of your beverage you have to put on your math take off your mask.
So nobody should order of soup, because your mask might get sloppy.
So that's to me.
The preposterous and it's not and the spirit of where the country is heading where president and bite and wants to open the country, 70% of American adults will be vaccinated by the beginning of the third quarter.
And so we hope with it we're reading it wrong, we hope that there would be clarifications quite frankly, we're hoping that these some of these.
More onerous requirements.
And the.
And phase two b only apply to cruise is ships of brands or companies that are not going to the vaccinate, the 95% of passengers and 98% of crew as mandated by the CDC.
We hope that if you do get to $95 98, or even better. The 101 hundreds of Norwegian is proposing that there won't be a need for such.
Impractical.
Onerous burdensome requirements and so we'll see what happens over the next few days as we engage with them re engage with them on on these particular phase.
Places, but certainly on the first read and we were disappointed.
And that's really helpful. Thanks for that and then.
All of the maybe maybe and impossible hypothetical but.
If everything went well.
Well from from here on out with the CDC and the very near term like you get those positive revisions you're looking for and the July it looks like the July is going to happen.
Best case scenario and again you found the sell let's say tomorrow baskets and hear how many additional ships do you think you could launch for July and the U S.
None.
The July U S. A.
The launch.
And at least from of our company.
You know.
It's just not possible it was possible back in early April when we proposed to the CDC, 100% vaccination. We've always said it takes about 90 days.
And <unk>.
The stand up of vessels. So from April 5th when we submitted our proposal on.
90 days would have been early July and that was possible, but today. We're in early may and so now we're looking past that but look there's there's more to it and just what the CDC says there is only so much capacity to be able to stand up vessels.
The standing up of vessel after a 15 to 18 months.
Cold lay up.
And overnight.
[noise] exercise it takes a while and making it more complicated as the travel restrictions for cruise of vaccination mandates that we are imposing for group. So we are we are focused on standing up our first five vessels that we've announced.
And for six vessels that we've announced.
Norwegian Oceania and regent outside the U S and as you know.
And we the industry we are company.
Regularly opt.
Operating vessels outside the U S and especially in the summer season.
Europe is the the big draw and so on.
July August September is summer and and.
And the best and highest use for our vessels to operate in Europe, and that's what we're doing and a couple of occasions, we are standing up vessels and the Caribbean.
Because of the CDC and I'll have not given up and the pathway.
We'll see we'll see how things.
Progress over overtime, but remember and isn't seasonal industry.
And.
Outside of Alaska.
Which is and doubt not only because of the CDC the cause of the Canadian situation.
Outside of Alaska, the world's cruise fleet are typically outside of the U S and the.
Summertime, we're cruising elsewhere, and we're including primarily in the Mediterranean and Northern Europe et cetera.
So.
Seasonality plays a big role and.
The the final CDC regulations will play a big role and Brent as we've always said we're not in the race, we want to do this properly we want to instill confidence in and our and our passengers our guests all of our constituents. So we want to do it we want to do at the end of methodical manner and it's important that we just stop.
And the momentum going and that's the key.
Got it thanks for that guys and good luck.
Thank you. Our next question comes from Steve was and SKU with Stifel. You May proceed with your question.
Hey, guys good morning.
So so Frank I guess, a little bit confused here I mean, you guys have already indicated that all of your guests and all of your crew or we're going to have to be vaccinated. So.
And I'm not reading this right from the CDC yesterday that.
You would be able to skip the stimulated cruises and be able to start north American cruising sooner rather than later and if you did go down the path of participating and the stimulated cruises for certain ships that don't meet those vaccine mandates do you believe that 60 day wait period would still be in place or would that get accelerated.
Morning, Steve We're gonna have one rule and one rule only and that is at least at the beginning 100% of our guests and our crew will be vaccinated, we're not going to.
And pick and choose the ship is less safe and another ship. It's one rule covers everyone. Whether you are sailing in Europe selling out of the Caribbean are selling out of the U S. So.
I really haven't paid too much attention to the latest.
Stimulated voyages because we don't plan on on.
On participating in that program, we're going on we're going to be fully vaccinated and therefore, we won't have to.
So I just I don't know the answer to your question in terms of timing.
Okay got you and let me ask this a little bit differently that and so you obviously have been in front of the CDC and you've had conversations with the CDC and I'm sure. You've asked this question of them, but.
How can they differentiate between you guys and let's let's take for example, the airline industry. So if I'm going into the airline I don't have to be vaccinated theres no social distancing requirements and they go on a cruise line on one of your ships everybody is going to be vaccinated, how what is the answer to that.
Question in terms of how they are differentiating there.
And you just through a piece of Red meat at me.
I I.
Listen day, they just won't answer it and we were prepared.
<unk> were flat gas and were outraged.
Airplanes casinos.
And just about every venue and.
And when we talk about.
And we're willing to vaccinate every single person on board the cruise ship there isn't another venue on Earth.
Not a school not a factory not your office building apartment building much less and entertainment venue like of Casino Hotel and resort that can make that claim we will have we will be the safest place on earth by definition.
And on top of that vaccination of mandate, we're going to implement the 74 healthy sales kind of a recommendation that one two punch is unbeatable and no one on Earth has it yet.
On the CDC continues to treat us differently.
We dare say unfairly.
And and look it's not like the CDC and has done a great job of controlling the virus around the country. We we ranked number one and the world for the most of the <unk>.
Most of infections of the most hospitalization I think the most deaths yet day they pick on the cruise industry, new and extreme that is just unbelievable unexplainable.
And you know.
Frustrates us and no one.
And we're hopeful that the discussions that we've been having lately with them.
These two.
And two two times a week calls.
Will the will result in continued the improvement we saw improvement and when they announced the.
Last Wednesday night clarifications to the original phase Iia.
We're certainly going to let them know this afternoon that what they publish for.
Phase <unk> and three.
And is unacceptable and in many areas.
And that we're again hopeful at this point I cant say more than hopeful that.
Clarifications will come soon to alleviate the pinpoint exactly of that we've identified.
And.
And if I could ask one more quick one for probably for Mark, but you know.
Mark whether you start North American cruising July August September whatever timeframe, obviously, you're going to of some operations around Europe and other parts of the Caribbean.
And the near term.
The question Mark is your current liquidity position do you feel that it's pretty adequate at this point many of you feel comfortable enough with with where you sit today.
Hi, Steve look we are of very solid liquidity position today, almost $3 5 billion at the end of the quarter. So.
We have we feel like we have a great foundation going forward, we still have.
A sufficient amount of tools and our toolbox should we need it but the key really is you know we have to stay ahead of our needs, but the key is that they are still relatively uncertain theres a lot of uncertainty out there. So we have to watch that while we're certainly encouraged with the recent momentum and the discussions that have taken.
Place and with the restart that certainly bodes well for us and the rest of the industry. So we just need to see that continued meant the momentum going forward.
But we do have tools should we need it but we feel we're in a very strong position as we sit here today.
Okay, great. Thanks, guys best of luck.
Thank you and our next question comes from Patrick Scholes with two of Securities. You May proceed with your question.
Yeah.
Hi, good morning, everyone.
Mhm.
Oh, Thank you had talked about.
With having the complete the explanations to start with out of.
The U S overcoming a hurdle.
With the CDC however.
More of the.
Prohibiting.
Customers and patrons of the businesses, providing any documentation.
Regarding certifying the COVID-19 vaccine.
How do you plan to deal with that so Florida law and this.
Thank you.
That's an issue Patrick we had discussions with the Governor's office those continue.
But it is a classic.
State versus federal government issue.
Legally.
You know the law.
Lawyers believe that the.
The federal law applies and not state law, but I'm, not a lawyer and and we hope that this doesn't become a legal football or a political football.
But at the end of the day.
Cruise ships have motors propellers, and rotors and.
And God forbid we can't operate and the state of Florida for whatever reason and there are other states that we do operate from.
And we can operate from the Caribbean for for ship that otherwise would have gone to Florida, We certainly hope it doesn't come to that.
And everyone wants to operate out of Florida.
And it's a very lucrative.
Lucrative market close drive market.
So.
But it is it is an issue can't ignore it.
And.
And we hope that everyone is pushing on the same direction, which is we want to resume cruising and unsafe manner, especially at the beginning.
Things might be different six months from now or a year from now but today with the pandemic still being front and center on everybody's mind, and we're just getting out of the worst part of it just weeks ago.
I think everyone should be wanting to start cruising and the safest possible manner and that's exactly what the Norwegian cruise line Holdings plan does 100% of vaccination of both crew and passengers for the life of me I don't understand 98.
The percent and not 100% so you've got a day or a big ship of 1800 crew members on board and you're going to you're going to vaccinate 1764 of them, but not 36, I mean, what a loophole to allow potential COVID-19 to be introduced and the crew area.
100% of 100% at least at the beginning I believe.
And should be the the model and if the if the CDC once they go on a different direction and the rest of the industry. Once they go on great. We want to go of 100%, we want clearance for 100% and as of today, which is.
A little over a month since we submitted our proposal of the city and we've not yet heard back from them.
And that is.
Very disappointed.
Yeah.
Okay.
Thank you for the detailed answer.
Thank you. Our next question comes from Robin Farley with UBS you May proceed with your question.
Thank you.
And like everyone else I have questions about the restart of the timing, but I know that there aren't there of all the answers so I actually.
And can I ask the question.
One of the slides talking about the recovery plan had mentioned private island infrastructure.
And and even ahead of maybe some deleveraging so and I'm just wondering if that is something related to the reopening plan that you.
You felt you need it given their day, maybe initially limited to private islands, and just kind of.
Wanted to hear what that reference maybe high.
Hi, Robyn, it's mark so look that.
As we look at our path going forward and our plans you know medium long term.
Certainly obviously the Delevering is is a is a critical component of what we want to do and we're continuously be looking at that when we talk about our islands and our infrastructure. We've been talking about this for a while that we believe the private islands are a unique destination that that.
And that we can continue to monetize and and a positive economic way.
That said, we are not targeting anything with our come back where it would force us to have significant capex around that we're simply keeping on our radar that as we recover and as we rebuild those are opportunities, where we can invest and see a significant return on so.
I wouldn't read too much into it but as we go forward, we're going to balance all needs, whether it's delevering and trying to take out some debt investing and the fleet and investing in our islands invest.
Investments to become more efficient, that's all going to be and our playbook and will balance the needs accordingly.
Okay, great. Thank you very much.
Thank you and your next question comes from Jamie Katz, with Morningstar and B C.
And with your question.
Hi, Good morning, I don't think you guys have mentioned the demand that you've seen on the three ships that you put into the Caribbean and the now.
And last month, so if theres any insight into how pent up demand has played out for those itineraries and I'd love to hear it and then I do think the sourcing of cruise. There is has been a little bit more geographically homogeneous for some of the other cruise lines and what they have currently announced.
And Europe. So are there any logistical difficulties and they should be thinking about one year sort of thing across.
Geography is or because of the vaccination requirement is that not as much of a problem. Thanks, yeah. Thank you Jamie.
First question.
All three of the.
Initial savings, we announced we're at Norwegian.
The one vessel out of the absence of the Greek Isles and doing incredibly well.
And the tie that with your second question consistent with our prior history of little over 80% of the people who are booked on those cleats and cruises out of Greece, Our American sell of Americans are willing to get on an airplane and fly over there.
On the the two sailings out of our out of the Caribbean are doing better than expected remember that normally.
And Caribbean sailings out of Miami out of South Florida. This is the low season. So we have two ships, where we normally have one.
So the the on relative terms.
They're they're not going to be the highest producing vessels in terms of yields but given what we expect that they're doing better than expected, especially given the the fact that we introduced the only about a month ago and so the the booking windows very very compressed, but again speaking to the the pent up demand, it's filling up quickly.
And so on.
And I'm glad we did it certainly deep.
And the ship laid up.
But but we would've preferred to start those vessels and Alaska start those vessels and Europe, but because of other reasons that you know of we we couldnt until the next best thing was to start new home ports and we'll see what happens we're very encourage especially with the the vessel out of the Dominican.
Public.
Dr has a very good air lift to the U S.
I believe it's sort of a number of one destinations for Americans to the Caribbean, and and who knows that that vessel might prove to be so profitable. There that had never returns back to two U S waters, which would be again one of the economic casualties of this prolonged.
C D C induced suspension.
Thank you.
Thank you and your next question comes from Vincent <unk> with Cleveland Research You May proceed with your question.
Yeah.
Hi, Thanks question on longer term supply demand dynamics pre COVID-19, there was concern and the industry has elevated the capacity additions limited pricing power based on what Youre seeing today with scrapping of delaying of the.
And the scheduled arrivals and how much lower do you think industry capacity ends up shaking out over the next couple of years and.
And what are you seeing early on right now for longer dated sailings and 'twenty, two and 'twenty three and how does that shape your view of industry pricing going forward.
And that's nine questions and one I'll try to remember them.
Look I think that.
The narrative of too much capacity coming on line.
Pre pandemic.
<unk> had pretty much been debunked.
All of the cruise industry and as we're taking on the new delivery and digesting that and human tragedy, very nicely and increasing pricing.
And so we always are come back always was and we only have 28 ships. There are many unserved underserved markets that we simply don't have ships to operate in and so we're eager to get our hands on on our new vessels of all nine of them across the three brands.
And what we're seeing now with the and the pandemic is pricing is strong demand is stronger than ever.
Give you of a nugget of of data.
The Oceania and regent brands.
Reach their 50% load factor for 2022 over 100 days earlier than they did for the record year of 2019.
Nearly four months they hit their 50% load factor Mark.
Earlier than ever before and at higher prices.
So.
Yeah.
Pricing power is there.
And in terms of capacity exits I think.
And from what I can see and I don't know because different companies and you got to ask the individual company, but from what I can see the capacity exits have already occurred.
We have the youngest fleet and the industry. So we never considered any any exits and still have it.
And the the order book and the future hasn't changed so they're coming with very very few.
Ladies and whatever it is delayed and delayed by by a few weeks of month or so so.
Look the industry was healthy as heck.
Before the pandemic, we're seeing during the pandemic how resilient. It is how much pent up demand or is we just need to get started we just need to get all of these ridiculous regulations the overreach.
Eliminated.
And listen and I'll tell you. This if we could operate given what's on the books right now for 2022.
If we can operate the itineraries that we're actually selling 2020 two it could be of record here.
That's how good things are but the big risk is can we operate how are we going to have to continue to cancel sailings because of this rolling you know conditional sale order, which as you know.
Very difficult to comply with.
And it's not just the city to see let's say the let me try to be a little fair here.
On the rest of the World has got to open up as well the city and see it affect U S. Embarking disembarking guest but the rest of Europe has the open up Asia has to open up South America has to open up remember this is the global industry.
Cruise companies visit 500 ports around the world and only a handful of our open today.
And so that's the risk how quickly can.
The world return to the.
The normal the opening up the ports lifting the travel restrictions et cetera, but from a pure market dynamic point of view.
2020 two it would be a record year.
That's really helpful. Thank you.
And Josh and your time for one last question from.
Thank you and your last question comes from IV mindset.
Financial you May proceed with your question. Thank.
Thank you for taking my questions and.
Congratulations on site and the good fight and almost getting there and just kind of of <unk>.
Couple of quick questions do you think that the demand is even greater than you're experiencing because a lot of people may be hesitant to book, but once they know they can book and the rules are clear that you will see maybe travel agents were saying I have a bunch of people ready to book.
And once it's ready to go and also what which ones of your lines of seeing the strongest demand and the best pricing.
And last thing.
No.
A lot of the travel industry has started to embrace the concept that's been driven by a certain company that books houses is working from home doesn't have to be your home and.
And the work from anywhere it can be anywhere and maybe there's an opportunity to address people that want to work from anywhere, including a cruise ship from time to time would be of great place to work.
Yeah.
And I don't know I think that's little fatty and.
And then when you work from home because you have this incredible.
Fast Internet service and Internet service on a cruise ship and the middle of the Ocean is not optimal.
So.
And I wouldn't.
I wouldn't get too carried away on that one of Ivan.
Look in terms of overall demand.
We're hitting only on partial cylinders. The U S is by far the the biggest driver of new demand.
Even though we have you know.
50000 cases of day and all of the risk.
The restrictions that we still have to live with and and the new cycle and everything else.
On Europe for the most part.
And has not reopen in terms of.
The robust marketing and travel agencies coming back the UK is doing Okay, Australia, New Zealand, which is I think you know has always been and number three number four top source market for us is completely closed down and so the fact that we're doing as well as we're doing with marketing spend that is in the neighborhood of three to four.
The percent of what we normally spend.
The new cycle the travel restrictions the.
The the unknown right, where we're just not sure of what what's going to be happening there is no certainty the.
International Mark the source markets for the most part being sub.
Suboptimal.
I mean like I said in my prepared remarks, the the pent up demand is deep 50 million people.
But by the time somebody rolls around 33 million people cruise the here and we will have been shut down 18 months, that's 50 million people that wouldn't have the wood of crews that have on crude.
And and so I think we have.
Pent up demand tail.
And that we're going to be able to enjoy over the next couple of years totaling 22, and 23 and perhaps beyond because look.
It's sort of all the digging and the Yang you know we've gone with no cruising was zero and and these people want to cruise and they're gonna cruise and the future and so we believe that sets up a beautiful dynamic for increased pricing and we're taking advantage of it to be to beat as well booked as we are and again I gave you a nugget that Oceania and regent hit the 50%.
Load factor for 'twenty, and 'twenty to over 100 days earlier than they ever had before and their pricing is up.
Even with the FCC dilution is just okay.
Yeah.
Of them believable.
Let me cruise C D C and will have incredible financial result, just let us cruise.
And I have and your your comment on the demand getting better I think you're spot on where we are seeing that with data points. When we talk about our booking volumes that have doubled and we see our ats continually growing so as consumers get more certainty and more comfortable I think you know there's good signs that that should continue and continue strong.
And so so we're very hopeful around that.
Well congratulations on managed and if so well and really on your own because like all the industries you received so far and no help so.
From.
And hopefully we're getting there soon so good luck. Thank you I'm thinking the best too.
Before we go I'd like to remind everyone that our interim general meeting is coming up on me.
This year, we have a number of very important proposals on the balance, including an increase and our authorized share capital and we're extremely appreciative of the support we've received from our shareholders. During this extraordinary time and we're asking for our shareholders continued support please vote and support our board's recommendations for annual general.
The proposal that we have the flexibility to continue to respond to the unprecedented challenges of the pandemic. Thank.
Thank you again, everyone for your time and support and as always we'll be available to answer any of your questions have a great day and stay well.
Yeah.
Thank you. This concludes today's conference call you may now disconnect.
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