Q2 2021 Norwegian Cruise Line Holdings Ltd Earnings Call

August 6, 2021

[music].

Good morning, and welcome to the Norwegian Cruise line Holdings second quarter 2021earnings conference call. My name is for Shay and I will 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 any once you require assistance during the call.

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

Thank you Rochelle and good morning, everyone. Thank you for joining us for our second quarter of 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, We would also like to welcome our special guests joining us today Dr. Scott.

Gottlieb former commissioner of the U S food and drug administration chairman of our company's sales, Steve Global Health and Wellness Council and author of the soon to be released book uncontrolled Bret.

Frank will begin the call with the opening commentary after which mark will follow to discuss our financial results before handing the call back the Frank for closing remarks.

We'll then open the call for your questions.

As a reminder of this conference call is being simultaneously webcast on the company's Investor Relations website at Www Dot NPL H L. P D dot com for the flash investors.

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 presentation will be available for replay for 30 days following today's call.

Before we begin I'd like to cover just a few items our press release with second quarter 2020..1 results was issued this morning and is available on our Investor Relations website.

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

Our comments May also reference non-GAAP financial measures and reconciliations of the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation and with that I'd like to turn the call over to Frank del Rio Frank.

Thank you Andrea and good morning, everyone.

Always I hope that all of you joining us today as well as your loved ones remain healthy and safe.

Before I get into my prepared remarks, and if you havent already and heard the good news I would like to congratulate Andrea and a new appointment to chief sales and marketing officer of our luxury brand regent 7 seas cruises.

After more than 30 earnings calls with our company, we will all miss her but wish her the very best of luck and her new role.

Jessica John who many of you have already met will assume the role of Vice President of Investor Relations Corporate Communications and ESG.

And in September 1st Congratulations Andrea and Jessica.

I am pleased to say that we are taking this morning's call from Seattle, Washington, as we prepare for a very exciting day tomorrow. The relaunch of our first ship from the United States and over 16 months.

And as Andrea mentioned and we also have a very special guest with US today, former FDA Commissioner Dr. Scott Gottlieb.

After over a year of working together remotely to reach its long and what it milestone it is truly a pleasure to finally meet Dr. Gottlieb and the other public health experts on our sales save global health and Wellness Council and person and for the first time today as we kick off our great cruise come back.

Today, we will focus our commentary and the progress we have made on our return to cruising our comprehensive plan for the phase of assumption of operations for the entire 28 should fleet and the record setting the strength, we continue to experience and consumer demand, which has translated into a record load and record pricing per calendar year, 2020.2 and beyond.

As you can see on slide 4 our return to service plan is centered around 3 key phases first we developed a multi layered sales safe health and safety strategy, including mandatory F. D. A W. H O or EMA authorize vaccinations for all guests and crew and its cornerstone.

In addition, we test all guests at the terminal prior to embarkation and all crew undergo weekly routine testing net.

We have now announced voyage resumption plans for all 28 chips and our fleet and lastly, we are intently focused on the flawless execution of the phase relaunch of our fleet, which we expect the complete by April 1.2022.

Against the <unk> still ever changing COVID-19 backdrop, we remain vigilant and ready to adapt as needed keeping a close watch on port availability travel restrictions and any changes to the global public health environment, which could affect our planned operations.

Overall, we are encouraged to see some relaxation of travel restrictions and the opening of borders in recent weeks, particularly for vaccinated travelers.

Just a few weeks ago, Canada moved up its plans to allow the return of cruise ships and November 4 months earlier than previously announced many countries and the EU and other allowing travelers from the U S and in the past few weeks, both Canada and the UK announced entry to factor of travelers without foreign teens.

Travel restrictions and port closures do remain in place and other parts of the world, but we are ready to execute on our cruise assumption strategy and have backup plans ready to go which we can implement and adapt to as needed.

Slide 5 details of our voyage resumption plans by brand and by vessel.

After 500 days the time has finally come and I could not be more pleased to say that our great cruise comeback of officially commenced last week with Norwegian Jade operating Greek and voyages out of Athens.

The relaunch went off without a hitch and demonstrated that strict vaccination requirements comprehensive pre boarding testing and a suite of other robust protocols and are working as designed to help mitigate the introduction and transmission of COVID-19 onboard our vessels.

A special Thank you goes out to the officers and crew of Norwegian Jade.

Even after 16 months of non operating seamlessly adapted our new protocols and deliver the same exceptional service and world class cruise experience and our guests expect from our company.

As an indication of this top notch service delivery of.

Our onboard revenue 1 of those first cruise significantly exceeded our target.

It was focused on 2019 actual results by over 50%.

All of our incredible team members around the world worked tirelessly to prepare for this critical moment and I am truly grateful for the privilege to work day in and day out alongside such a dedicated passionate and talented team.

I also want to express our sincere thanks to our loyal guests value travel partners and all of our stakeholders for their patience and support during these challenging times as we ramp up our return to cruise plants.

Norwegian Jade successful relaunch and it's just the first of many of you to come including our much anticipated returned to cruising and the United States.

Tomorrow Norwegian encore the lines newest and most innovative ship will make her west coast debut with the 7 night sailings to Alaska from Seattle, We are looking forward to once again and bringing guests to explore the last frontier 1 of the most popular destinations with our guests and providing some much needed economic relate to the communities families and small.

<unk> throughout coastal Alaska, who have been devastated by the loss of cruise tourism revenue during this prolonged suspension.

The next step and our relaunch plan and as I returned to Miami the cruise capital of the World I'd like to address our request for a preliminary injunction that we filed last month, which will allow us to confirm guests vaccination status for sailings departing from the state of Florida that is being heard and EMEA and aimed at Miami Federal Court today.

Combating this viruses and unprecedented historic challenge that requires everyone, including governments at the local state and federal levels, plus private enterprise and society at large to do their part.

And I have a tremendous empathy for our elected officials business leaders friends and families neighbors, who are all doing the best day can under enormously difficult circumstances. The beat back this virus.

Having had the pleasure to work and the cruise industry for nearly 30 years I am confident that and the current global health environment, and especially with the rise of the Delta variant, having a fully vaccinated and tested population of onboard our vessels is the best path best path to keeping our guests are dedicated crew members.

And the peoples of the communities, we visit safe from Covid.

And in order to do that and we must be able to confirm vaccination status of our guests at every port we sales from including those from the state of Florida.

We owe it to all our stakeholders to do everything possible to make sure we deliver on this critical mission.

We hope that the federal courts will agree with our vision and our mission.

When we say the health and safety of our guests crew and communities we visit as the number 1 priority priority. We mean it it is not a slogan nor a tagline the legal actions, we have taken and Florida reflect our deep commitment to resume sailing in accordance with our robust science backed sales safe health and safety protocols out.

Line on slide 6.

Our policy of 100% vaccinations, coupled with pre bought and testing of guests and routine testing of crew is in place without issue and the nearly 500 ports, we sell to and from around the world, except Florida ports no.

Nothing takes priority over health and safety and we have gone to great lengths and expense to pursue this commitment to our guests crew and all the stakeholders.

Again this commitment is not a slogan nor the tagline health and safety is far and away. The most important principle. The guide how our company operates at all levels and this fundamental philosophy has never been more important and right now.

We want to use every tool available to us that science and medicine have developed to prepare our ships to return to service and vaccine our most powerful tool.

Given that we have Dr. Gottlieb here today, who is not only a world renowned expert but it is also the chairman of our sales save global health and Wellness Council I'd like to give him the floor for his thoughts on our health and safety program.

Dr Gottlieb.

Thank you Frank it's a great pleasure to be here with you today and to witness the culmination of over a year's collaboration on enhancing Norwegian is health and safety protocols all of the scientific and medical experts on our sales of council of fully support and recommend a fully vaccinated and tested population to relaunch cruising as it's the most effective way to mitigate the introduction of.

Or spread of the virus onboard of cruise ship or anywhere else and society, even with vaccines. However, the risk can be fully mitigated, but this approach mitigates the risk to the greatest extent possible and significantly reduces the severity of any potential breakthrough cases.

While the Delta variant is fueling the current ryzen cases, if the U K is any guide and I believe we're perhaps further into this epidemic surge and we'll hopefully be turning the corner and the next several weeks in fact, some of the states hardest hit by the Delta surge and the south are already showing some indication that their epidemic waves could be starting to peak.

And the meantime, and the vaccines are highly effective if even against the Delta variant and Norwegian is taking the extra step of coupling vaccines with multiple additional layers of protection against COVID-19, including Universal testing prior to boarding the ship and this goes well beyond what we're seeing and other travel and hospitality sectors and with the controlled.

Environment of cruise ship provides the can offer 1 of the safest vacation options and I look forward to seeing our protocols and practice with you tomorrow and Norwegian encore.

Thank you Doug of Godley for your insights I didn't want to thank you and the members of the sales state of global Health and Wellness Council for all of the hard work and expert guidance that you and the council have provided us.

Now with our safety protocols in place and our voyage resumption plan and full swing full.

We'll swing will shift the discussion to our booking trends, which you can see on slide 7 and.

And short pent up demand for cruise vacations, especially for 2020..2 sailings are very strong as we have experienced record breaking demand from future cruise vacations across all 3 of our brands.

This outsized demand is even more impressive when considering that this strength is true despite significantly reduced levels of demand generating marketing investments and the absence of a full complement of our all important travel agent partners throughout the world the.

Unparalleled pent up demand and I speak of is demonstrated by a record book position and pricing.

For full year of 2020 to load factor continues to be meaningfully ahead of 2019 record levels by a wide margin.

And when you look at our booking curve at the same point in time versus 2 and 3 years ago. We are now book 9 to 10 weeks ahead of those levels Pri.

Pricing is also higher than 2019 as record level, even when including the dilutive effect of future cruise credits the.

The strength, we are experiencing is evident throughout 2022, but particularly strong sequentially as we move through the year and our fleet rollout of completed and becomes fully operational.

In addition, the approximately 75% of our book position and 2022 is comprised of new cash bookings with the remainder of comprised of future cruise credits bookings.

So far approximately 45% of our outstanding future cruise credits have been redeemed.

The strong demand is also extending beyond 2022 last month regent 7 seas cruises easily broke the opening day booking record for its world cruise for the third year in a row the.

2024 World Cruise, a 132 night sailings surpassed all expectations and sold out and in under 3 hours and at higher price and of the 2023 World cruise.

Not only was this without a doubt the strongest world cruise launch day and the lines of history, but it also saw a strong increase and new to brand and guest which comprise of approximately 1 third of bookings.

This is further evidence of the continued demand we are seeing both from our loyal past guests and new to Brian cruisers, and even for these long exotic itineraries.

As I have said time and time again, the pent up demand Israel last quarter, we reached an inflection point and our advanced ticket sales built which continued its positive trajectory throughout the quarter. Our advanced ticket sales increase of approximately $300 million on a gross basis or.

Over 50% versus the prior quarters builds.

As we begin phasing and the rest of our fleet. We expect this momentum to continue to accelerate sequentially.

As we look to the future of the growth opportunity, we have planned for and as we emerge from this crisis is impressive.

And main Norwegian cruise line unveiled Norwegian Prima the first of 6 premium class ships, which mark the first new class of vessels for the Brian and nearly a decade.

<unk> beauty and summer 2022, Norwegian Prima, which you can see a rendering of on slide 8 is absolutely stunning offering the most outdoor deck space of any new cruise ship, including more total pool deck space and any other shipping the line split as well as multiple of Infinity pool and Bath outdoor walkways. She.

She will also take the lines groundbreaking ship within the ship constant with the Haven to the next level.

Most importantly, however, she is resonating with guests lot. Unlike any other new ship launch we have ever seen before her sales debut and May set of single best booking day and best initial booking week record.

<unk> the previous record set by Norwegian Bliss, and 2018, and if price is approximately 20% higher than Bliss commanded.

Turning to slide 9 we also had an exciting announcement from regent 7 seas cruises, which unveiled the name of its newest ship 7 seas grandeur of the sixth ship and the world's most luxurious fleet.

<unk> granule hold 750 guests and is the sister ship to 7 seas explorer and 7 seas splendor.

There are more reveals the comp leading up to her launch and the fourth quarter of 2023 with her inaugural season and set to be unveiled and open for reservations next month.

As you can see on slide 10, we have and industry, leading growth profile with 9 ships coming online through 2027.

These newbuild represented approximately 24000 additional book growing our fleet by approximately 40%.

And 2023, when our fleet is back in full force, we expect our capacity to be approximately 20% higher than 2019 pre pandemic levels with the benefit not only of our forward 2022, and 2023 Newbuild, but also a full year of both Norwegian Encore, which joined the fleet and November of 2019 and.

Regent 7 seas, splendor, which launched in February of 2020.

With a smaller footprint of 28 shifts and our fleet. The addition of our new 9 ships strongly positions us to further diversify our product offerings and penetrate unserved and underserved markets globally, which is expected to drive meaningful growth to both the top and bottom line.

As slide 11, clearly demonstrates our excellent track record speaks for itself and our ability to successfully absorb capacity and turn debt capacity growth into outsized revenue EBITDA and net cash flow growth. Our new ships are expected to be accretive to earnings into cash flow and I expect our historical.

Industry, leading performance to continue and the years to come with the addition of our new ship deliveries I'll be back later to provide and upgrade 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 Marc Thank you Frank.

Our remarks today will focus on the continued execution of our COVID-19 financial action plan, and our liquidity profile and our all important phase voyage resumption plan.

I am pleased with the significant progress we've made on our return to cruising.

As Frank mentioned, we are here in Seattle ready to relaunch Norwegian Encore Tomorrow.

We have a comprehensive voyage resumption plan in place and are focused on the execution of this phased relaunch.

We expect to have 8 ships, representing approximately 40% of our total capacity operating by the end of the third quarter and 17 ships, representing approximately 75% of our capacity by year and the.

And the last ship Oceana as nautica will emerge better the new after an extensive dry dock and re inspiration and joined the rest of the fleet on April 1.2022.

And while we've reached several important milestones and our road to recovery, we recognize that the global health environment is still fluid. So we remain focused on maintaining our cost discipline and pulling all available levers to conserve cash and maximize financial flexibility as we execute our relaunch plan.

As you can see on slide 12, since the halt and global cruise operations in March of 2020, we worked quickly to implement our COVID-19 financial action plan.

During the pause and operations, we successfully reduced operating expenses by nearly 60% and capital expenditures by over 75%.

As we ready our ships to return to service costs will increase as expected, but we will do so in a strategic and disciplined manner to balance our cash needs, while maintaining a strong liquidity profile.

Since the beginning of the second quarter, we've taken several additional proactive measures on our financial action plan, we continue to significantly reduce or defer near term demand generating marketing expenses and non essential capital expenditures.

In July we amended 9 credit facilities for a newbuild program to increase the commitments by approximately $770 million to cover owner supply costs and modification cost and financing premium fees and we want to thank our banking partners for their continued support of our company during these.

Extremely challenging times.

Turning to our liquidity and cash burn on slide 13.

And we had approximately $2.8 billion of cash and cash equivalents as of June 30th this.

This provides us with significant financial flexibility to continue to navigate through this fluid environment and execute on our return to service plan.

As for cash burn for the second quarter, our average monthly cash burn rate was approximately 200 million per month.

This was slightly higher than our guidance of $190 million driven by the announcement of additional ship Relaunches and our voyage resumption plan and the associated restart expenses.

As for the third quarter, we expect our average monthly cash burn rate to increase to approximately $285 million as restart expenses accelerate with additional vessels entering service.

<unk> 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.

Note that this cash burn estimate does not include our expected cash inflows from both new and existing bookings. We will continue to take a disciplined approach to reintroducing costs as voyages resume while at the same time balancing the need to drive new cash bookings.

Looking ahead.

Just on a resumption plan, we expect to reach a crucial inflection point with operating cash flow turning positive over the course of the first quarter of 2022.

To assist with modeling slide 22 details of additional guidance, we have provided for certain metrics, including depreciation and amortization interest expense and newbuild related capital expenditures.

Turning to slide 14, we ended the second quarter with approximately $2.8 billion of cash our cash balance and the second quarter decreased driven primarily by approximately $600 million of operating cash burn, including operating expenses SG&A interest and Capex.

Customer cash refunds for canceled voyages of approximately $150 million and net working capital and other outflow of approximately $10 million, 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 relaunch of our fleet over the next few quarters, we have not taken our focus of the future.

Our relaunched milestones bring us 1 step closer to executing on our medium and long term financial recovery plan as outlined on slide 15 and.

And to rebuild and continue to drive margin expansion maximize cash flow generation and optimize our balance sheet.

With that I'll hand, the call back to Frank to provide closing comments. Thank.

Thank you Mike before we wrap up our prepared remarks, I'd like to provide and update on our global sustainability program sales and sustain shown on slide 16. This summer we reached several key milestones on our ESG journey, starting with the publication of our first comprehensive ESG report, which included disclosures aligning with the sustainable.

The accounting standards board or S ASB index.

This was a significant step forward and our efforts to enhance our transparency and I encourage you all to take a look at the report which is on our website. If you haven't done. So already we also unveiled a redesign of cell and sustained program, which is structured around 5 pillars developed through cross functional collaboration with key internal and external stakeholders.

And the pillars include reducing environmental impact sailing safely empowering people.

<unk> and our communities and operating with integrity and Accountability. And addition, we are aligned to the United Nations Sustainable development goals and have identified 10 goals, where we believe we can make the greatest contribution to achieve a more sustainable future for all in conjunction with the report we have also developed a new sustainability web.

Site, which we will use to continue to provide critical disclosure to all of our stakeholders on the environmental front. We were pleased to announce our newly created long term climate action strategy and our goal to reach carbon neutrality. This ambitious program is centered around 3 key action areas, including reducing carbon intensity.

Identifying and investing in technologies, including exploring alternative fuels and implementing a carbon offset program.

We continuously seek opportunities to reduce our overall footprint by minimizing fuel consumption and in fact, our ongoing investments and systems and technologies have resulted in the reduction of fuel consumption per capacity day of approximately 17% from 2008 to 2019 for our entire 28 ship fleet.

And with the introduction of our 9 new and more fuel efficient vessels through 2027, and we expect to see further improvement and our intensity rates.

In addition to ongoing initiatives to reduce our greenhouse gas emissions rate, we are committed to purchasing high quality verified carbon credits to offset 3 million metric tons of carbon dioxide equivalent over a 3 year period, beginning last year.

This is a measurable step and the near term emissions reductions, which will help bridge the gap in our decarbonization efforts until new technologies become available.

3 million ton commitment and sizable to put it and perspective. It is the equivalent of over 7.5 billion miles driven and by an average passenger car and we plan to increase offset purchases and future years to help us reach our goal of carbon neutrality.

We are very proud of the progress we have made so far and ESG and we are committed to making a lasting impact on the world is responsible corporate citizens and ESG leaders I look forward to sharing additional details with you as we continue on our ESG journey.

Turning to slide 17, I'd like to leave you with a few final key takeaways first we are putting health and safety at the forefront of our return to service as demonstrated by the great length, we are taking to resume cruising and the safest manner possible, where the universal mandatory vaccination and pre boarding testing policy.

Across our 3 brands.

Our great cruise comeback has commenced and we are focused on the flawless execution of our phase void of assumption plan with a target to have our full fee and operations by April 1.2022.

We continue to experience strong future demand for cruising with very positive booking and pricing trends for 2022 and beyond.

And lastly, as we emerge from the pandemic and focus and our longer term prospects, we have and attractive and well thought out growth profile, which we expect will provide a meaningful boost to our financial results and shareholder value in the coming years.

Overall, while we still have a long road to full recovery ahead of US. We are encouraged by the significant milestones. We have reached in recent days and returned to cruising.

Tomorrow, we will take another monumental step forward with our official U S relaunch and I look forward to getting back to what we do best providing exceptional vacation experiences and lifetime memories for our guests.

And with that we can open the call for questions.

Before we take our first question, we ask that you. Please refrain from asking any questions regarding pending litigation and we appreciate your understanding and cooperation in this regard and be able to.

And not be commenting any further please take the first question.

Your first question the line of Steve <unk> with Stifel.

Yeah, Hey, guys good morning.

So.

You're clearly now have a nice roadmap as to when the full fleet will be back in service and.

The question is did you stay on that path. If you are on right now and let's say you get the.

Your target, 60% of your capacity back and serviced by the end of the year Mark.

I think I heard you correctly the by <unk>.

And that kind of breakeven.

The endpoint I want to make sure I heard that right and then maybe what goes into.

What are the some of the assumptions that you're making to kind of get to that level.

Hi, Good morning, Steve and thank you for the question So you're absolutely correct based on our.

First let's talk about our voyage resumption plan as you know we've been very disciplined we've been very methodical and we've said we are not interested in being the first to the race to launch of our vessels. We think we have a very measured and disciplined plan with approximately 75% to 80% of our fleet and operation by year end and as a result.

Of that when we look at our cash flow the both the inflows and just the regular operating contribution from each of our vessels, yes, we expect to be cash flow positive sometime over the course of the first quarter of 2022, and that's the only to put that and perspective, that's 5 to 6 months away. So we're very pleased with the book.

<unk> trends that we've seen obviously as we restart and our ships enter service that starts to generate that cash flywheel that we've been talking about so.

We're very pleased we don't think with anything theres always a little bit of risk out there, but based on our measured plan. We think we have a solid game plan of returning to cash flow positive operations.

Okay, Thanks, Mark and.

And then Frank.

And when asked about.

All of the changes that we've seen and it's been going on with the operators over the last week or so I mean, we've seen changes in terms of thinking of your peers around.

Matt mandates the requirement to get.

Tested free board or tested before you board just want to understand.

What do you think this does or what is it kind of due to the psychology of the cruise.

Cruise passenger right now, meaning do you think some of these folks are going to say.

Forget it.

Let's book at a at a later date or.

How do you think this is affecting your customer right now.

Hey, Steve.

And speak to you look it's not what we're seeing and our AR.

And our booking trends as I mentioned in my prepared remarks, we were ahead of approximately 10 weeks.

When compared to where we were in 2018 at this time from <unk> 19 of record year.

And as you know, we weird Norwegian cruise line Holdings came out very very early as early as late March and we said, we're not going to cruise until.

And it's safe to do so and and as a precursor.

Everybody has to be vaccinated crew and passengers and we haven't moved from that we think thats a competitive advantage quite frankly.

And during a pandemic people, who are willing to travel 1 of the travel safely and the Norwegian cruise line platform allows you to do that Dr. Gottlieb spoke about it it becomes the just about the safest place on Earth to be on the Norwegian cruise line ship and I'm glad to see my my peers and the industry following suit.

Now they have begun to introduce at least some of the measures that we have announced.

Early on so.

Today. It is a competitive advantage. We continue we will continue to do the right thing and.

And that is to protect the health and safety of all of our guests and the communities we visit and every possible way we can.

Okay, great. Thanks, guys appreciate it best of luck.

Yeah.

Your next question and I might know Stephen Grambling with Goldman Sachs.

Stephen Grambling.

Thank you.

Can we be thinking about the customer deposit inflow over the course of the restart and as you mentioned the the restart costs moving up a little bit in the coming quarter should that be front end loaded of should we be expecting a similar amount of spend each quarter and sort of fully up and the right.

Hi, Good morning, Steve It's Marc.

So look when we look at our customer deposits as we said and our prepared remarks, our customer deposits increased 50%.

Versus the prior quarter or roughly $300 million on a gross basis. So obviously as we continue to relaunch and restart and we get closer to the voyages operating we expect that to accelerate.

So we're very very pleased with that when we look at our relaunch costs look everything all of the costs, we're incurring other normal their expected.

You look at how many shifts we're restarting over the course of the next 5 to 6 months Ah Theres nothing out of the ordinary most of the there is going to be some onetime front and loaded costs.

And again Youre relocating.

Other it's 1500 crew per vessel from across the globe. So you have some onetime initial cost, but that will settle and that will.

The balance is typical but most importantly, as our vessels start to sale and as we've said publicly we are most of our vessels are starting at either 60, and then ramping and 60% load factor and then slowly ramping up to 80, and and then hopefully to over the back to a normal load factors and a and a.

Short time, those vessels, which are operating are cash flow positive out of the gate and that's very very important and we've seen that with our first 2.

The 2 initial voyages that have just been completed by Norwegian Jade and we expected that to be the case for the coming of wages as well for the rest of the fleet.

That's super helpful and maybe 1 more if I can sneak it in.

And kind of the topic Du jour, but have you seen any impact and you kind of talked about the smaller from the Delta variant.

Bookings pricing more recently and how would you think about the impact of a risk of further requirements are imposed even of 100 per cent vaccine failing such is masking the otherwise.

Hi, Steve It's Frank look.

We have seen a modest decrease and our net new booking activity during the month of July when the Delta variant is the.

Surfaced.

It is sequential so it's more and more pronounced in for in your 2021 sailings, which for us is not that.

The significant.

I'm not I'm not focus on 2020, 1 it's a transitional year. The focus is to get the ships the op.

Operating again.

Mark mentioned.

Successful launch of Norwegian Jade went off without a hitch and we.

Do have muscle memory, we do remember how to operate cruise vessels the <unk>.

Customers had a great time onboard revenue was through the roof.

And so.

We are encouraged that we're.

We're off to the races.

The.

It's good that we that we have such a pad so to speak on our forward bookings to be 10 weeks ahead of our best prior year ever as certainly a a wonderful cushion and insurance policy to have.

And.

And in discussing.

The the likely course of the Delta vary with Dr. Gottlieb. We think this is a transitory.

Barry phenomenon it is going to run through the through the course of the population and very very quickly. We don't think of it will have a lasting effects, but again, having a 10 week.

Advance so to speak is certainly a wonderful to have.

Helpful. Thanks, So much best of luck with the ramp.

Thank you.

Your next question the line of Brent <unk> with J P. Morgan.

<unk>.

Hey, good morning, everyone. Thanks for taking my questions and congratulations on the the.

And the official Relaunching.

And then Mark maybe you alluded to this and your prior comment, but I want to I want to understand Frank how youre thinking about occupancies.

While COVID-19 is still sort of among us and youre, 100% vaccinated.

Can you get to a full shift under that scenario without masks and as debt is that safe and as that and your plans and has that changed at all and the last few weeks because of the Delta.

As Mike mentioned, we're starting every vessel in the 60% to 70% range of load.

Factor, that's not anyone's requirement, it's not of CDC mandated something we think is the responsible way to start operations train our crew.

And get our feet wet so to speak if all goes well after 30 days will increase that the 80% load and after 60 days, we will resume trying to fill the vessel.

As in.

Pre pandemic levels, and yes, and a fully vaccinated environment. The way that we are conducting it where we.

We test everyone at the Pierre.

Where we have the protocols in place the new air filtration systems that we have spent tens of millions of dollars to upgrade throughout the fleet.

And we believe that we can safely operate.

Vessels at full capacity.

We will see it'll be staggered, we will learn along the way, but but.

But yes, we believe that that can be achieved.

And by the way and so does our sales and safety Council.

Which.

And again believe that our protocols are second to none.

Just and the cruise industry, but.

And any kind of.

The public environment.

Yes.

Brad I want to just add to that debt when we look at all of the measures we are taking.

And you look at that visit the any other hospitality.

Driven type of venue and the world what we're providing our customers is 1 of the most safest experience experiences that we can based on today's science and technology. So that again, we believe that that's an advantage for all 3 of our brands.

And this is Scott we feel confident that given the measures that we've taken and creating a 100% vaccinate population onboard the vessel testing people before they enter into that environment, you can substantially reduce the risk and create a safer environment and relative to other kinds of options people may have to engage and leisure and vacation.

This becomes a much safer environment and much more predictable environment and we have measures on the ship not only measures to control the risk of introduction of the virus onto the ship, we're taking significant measures to control the risk that if you do have an introduction youre going to have secondary spread onboard the ship and then if you do have the case that emerges on the ship.

We've tried to do our best and make it a safe environment to seek treatment, including getting some of the advanced therapeutics onboard the ships, having ICU level care of available having procedures in place on how to off board with passengers who may become ill during the cruise so and every step we've tried to take.

And every reasonable measure to create the safest possible environment for someone to engage and leisure activity.

That's great color. Thanks for that guys and then and then my second question is just on that debt metric you gave Frank on the onboard spend on.

The first ship out and the up 50%.

And that's obviously and really impressive statistic is that is that apples to apples I guess with.

What you would have seen from that ship in 2019, I guess on a per person basis since it's going to be have a little bit less load right on that on that ship, but I guess can you also talk about the mix on the shape of where youre seeing that consumer spend really sort of take off.

Yeah, Brent I'll take that 1 so certainly when we look at that and we look at the measure of onboard spend.

While we look at it and totality on the vessel.

More importantly, we're looking at it on a per person per day basis. So that's the measure of what the the customer is willing to spend and yes. It is on an apples to apples.

Basis of a similar voyage similar itinerary from 2019.

<unk> levels and when you look at the mix of passengers I think that voyage was predominantly probably the majority U S. Based and then followed by a European base and and you look when you look at the spending trends of of it. It was your normal areas shorts was very intense food and beverage and then casino so.

It's great to see that we're seeing the trends that the.

And that we're used to customers are willing to spend.

And while it's early it is certainly very very encouraging.

Excellent. Thanks for all of the color guys. Good luck.

Your next question of line of Vince <unk> with Cleveland Research.

Great. Thanks for taking my question. It sounds like deposits are building nicely and there is an expectation the move cash flow positive at some point, maybe and the first quarter even of 2022 number of things going the right direction can you help us think about the path and timing for the deleveraging of the business.

Yes, good morning, Vince it's mark.

We are we are intensely focused on that as you can recall and 2019, we were on a path.

To our stated leverage of 2 and a half of $2.72 in 2 and 3 quarters.

We've obviously had the lever up the balance sheet is the result of this but as we look forward our goals right. Now are we want to get below 5 and then obviously, what we'll look to get into the force, it's a bit premature to.

Net.

The site or to really telegraph, when we're going to get to those levels.

As we've said before if 2022 continues on the path that we're seeing today it could be of very very nice year in terms of EBITDA and subsequent cash flow generation. So that's certainly going to assist and help us with that Delevering story. So we are focused on it.

We have not lost sight of that because we we know thats important but right now we're focused on relaunching and providing the best experience that we can to our customers and if we can do that that's going to that's going to subsequently turn into significant cash flow generation and I will reiterate we have said and we expect and our conservative relaunch of <unk>.

And we expect to be cash flow positive over the course of the first quarter of 2022. So when you think about that from a from a restart within a 6 month period to be cash flow positive.

We feel that that's pretty tremendous and we're pretty proud of that so we look forward over the next few months of restarting our fleet and again that the cash flow of that that spins off.

Thanks and.

Another question you look at the hotel industry Leisure nights 15, and 20% ahead of 19 levels right now pricing and that industry is 5% ahead of 2019.

And you think about the path for yield and to 'twenty, 2 and 'twenty 3 you've already kind of had a glimpse into once people get a path and the ability to go that unleashing of pent up demand what it could mean for pricing and.

And other aspects of leisure so.

I'm curious.

As you look out over the next couple of years is just a little bit of ahead of the 19, the right way to think about it or could pricing be even better than that and.

The years ahead for cruise.

I think it's the.

It's better than that.

And.

If you.

I hesitate to give you any specific numbers, but when you strip out the dilutive effects of the future cruise.

Credits.

And the like for like pricing.

The pricing to the public so to speak.

Is up significantly up.

Multiple of what our typical year over year of growth is in yield.

And so the pent up demand is real and we're taking advantage of it.

We do have the future cruise certificates to deal with which will end in 2022 that the FCC will not be dilutive at all in 2023 the the.

<unk> have to be used.

By the end of 2022 or else, we're going to refund the customer whatever they paid in.

And also remember as I mentioned, the I'd say at least at slide 11, and look at our future growth.

20% more capacity coming online through the end of 'twenty, 3 and look at our historic ability to absorb that that growth.

And how we turn the capacity growth.

And to gross revenue growth outsized.

Outside of it but the growth and outside net cash growth. So we're very much looking forward to taking delivery of these up.

Vessels over the next few years 4 of them come on line in 'twenty, 2 and 'twenty 3.

Theyre going to be accretive theyre going to be higher than the corporate average so.

And we believe that that's a wonderful setup.

And as Mark mentioned the.

Before the pandemic hit.

And CLA was hitting on all cylinders, we were delevering to investment grade, we're going to start paying a dividend. The biggest problem will use of sit around the boardroom was what are we going to do with all of these cash and well we're going to start generating cash again and that cash as far as kind of go to pay down debt the Wii.

Took on to survive the pandemic and then we're going to look to do what companies do.

The buyback stock if it's the opportunistically to do so perhaps expand the business. We're bullish on this business, we know how to operate of cruise and just.

Top line cruise company.

We haven't forgotten how to do that over the pandemic and.

And we're seeing the pent up demand from customers that allow us to do exactly what we do best So we're very much bullish on the future.

Thanks, and best of luck.

Next question the line of Robin Farley with UBS.

Great 2 questions..1 is if you could remind us of any you've laid out your research what percent of your share.

The 21 or and the next 6 months or our Florida base for this year and then also and expense question.

You mentioned car.

Carbon credits can you sort of help us quantify what the cost of that might be.

Your spend on carbon credits.

Hi, good morning, Robin So when we look over the next 6 months I believe we have roughly 6 vessels.

And that would at the operating out of out of Florida with the first 1 being Norwegian gem on the out of Miami on.

On August 15th and then I think the rest of come online and the late mid to late December.

I think the second part of your question was related to the carbon credits.

We're very we're very excited about this this is something we're serious about.

We've really taken a hard stance on our ESG.

On our ESG efforts over the over the last year or 2 and.

And we're committed to this so we've spent we spent a few million dollars on purchasing these carbon credits I think that together with our other investments that we continue to make it with the fleet, whether it's exhaust gas cleaning.

Cleaning technology waste heat recovery, we're looking at all viable investments, where we tend to.

To reduce our carbon footprint so.

And just back to the first part when you look at the Florida based vessels I believe it's about 35% to 36% of our fleet sailing out of Florida over the next 6 months.

Okay, great and the the carbon credit has not run through the P&L right.

And I guess, you've purchased said it's on the balance sheet somewhere and then that expense will run through when you're when you're operating yes.

And that'll get expense as we as we consume the fuel that it's related to and of pro rata of fashion over the course of the next 2 to 3 years, but again I want to I want to highlight that it's not a significant amount. It's a few million dollars. So its youre not even going to see it when you look at our financial statements. Okay. No that's very helpful.

Thank you.

Your next question comes from the line of Jamie Katz with Morningstar.

Oh. Good morning. My question is actually on the competition of cruise areas looking forward and given your disproportionate exposure to.

U S cruise areas.

And that looks like for some of the European Itineraries and September and October.

In addition to that I think you guys had commented that a third of it.

Bookings for the Regent 7 seas worlds crazy with new to brand. So is there anything noteworthy that you saw in the new passengers that's different from maybe what you've seen and pass passengers.

Yes.

And.

Typically for a cruise on the Norwegian brand that operates and Europe.

Roughly half the customers are from the U S and have the customers start from the rest of the world.

On the first 2 Norwegian Jade cruises to the Greek Isles of out of Athens, we have seen debt number jump.

And the neighborhood of 80%. So many Americans have not been able to go overseas for a long period of time that the pent up demand that we're seeing for cruising overall is higher index by Americans wanting these long haul.

And travel plans to the places like Greece. So we don't think Thats sustainable and the long term, perhaps in the short to medium term is this pent up demand is.

Is sort of burned off.

But it's it's good to see that we have the the marketing strength and the sales platforms lots of the world to be able to fill our ships.

And whether it's Americans, who want to come over or Europeans.

We're seeing the.

The strong demand across the board.

And then as far as on the.

The debt service on the balance sheet are you guys.

Taking the steps you may be refined some of the operating debt and debt you raised early and in.

And the cycle on the Covid cycle or.

Is that something that may be on pause for now.

Okay, Okay, and just restarting the plant.

Well, we're focused on all of the above.

While our immediate focus obviously is on restarting the operations, we have not lost sight of our balance sheet and balance sheet management opportunities. So it's something we've been looking at we continue to look at and there is some opportunities and some of our higher price notes I believe and our 12 of the quarter and 10% of quarter notes.

We have the ability to possibly.

Have some claw back opportunities around that so we're looking at it.

We want to get our the most important thing for US right now is getting the the.

The vessels operating.

But once we get a few vessels and the water and we have.

More visibility around that the I think thats, what youre going to see over the course of.

And the future is the us looking at all of those opportunities and exercising on some of those balance sheet management opportunities that we have.

Excellent. Thanks.

And your next question the line of James Hardiman with Wedbush.

Hey, good morning, Thanks for taking a couple of questions from me.

Maybe a clarification here so when I digest, what you've said about your fleet ramp and the Aki.

Thank you Ram.

Kind of feels like the second quarter of next year could be a pretty normal quarter.

Your fleet will be back to a 100%, but it seems like the expectation of that occupancy and there'll be.

At least on all but 1 chip.

Hundreds of percent costs, so is that sort of what you're targeting in terms of sort of the per.

The normal quarter that seems like.

Frank you made the point earlier that you weren't so much interested and the starting line book, but more so the finish line. It seems like that's maybe a little bit ahead of some of your peers.

Hi, James Good morning, it's Mark so look.

I think when you look at 2022, and you look at second quarter third quarter.

We are seeing very strong bookings for those periods, but let me just go back and the timeline here.

Something we just said about Norwegian jades first 2 voyages even at reduced capacity, we are seeing significant strength and significant spend on those vessels. So while our vessels are coming along and line over the course of the next 2 to 3 quarters.

Q1, I think is going to essentially look pretty normal as well so to speak.

Again, we do have we do have I believe it's 9 or 10 vessels that are coming on in Q1. So certainly by the second quarter, we anticipate that all of our vessels or the vast majority should be back at their normal load factor levels.

And if we're lucky maybe maybe sometimes sooner than that but.

It's not that we don't care about 'twenty, 1 we've taken the stand that we want to do this right, we want to create confidence and our customers.

And our shareholders and our employees and we want to make sure. We're learning from all of the cruise is that we're launching so we look we're excited about 2022 and beyond and but right now we're focused on 'twenty, 1 getting all of the fleet back in the water. So looking good but we've just got to go forward and and getting the ships what again.

Got it that's really encouraging and then.

Trying to do a little bit of math here.

Obviously, there are a lot of moving parts, but if I think about.

The $2.75 billion of cash of about 9 billion and net debt as we stand here today.

You have to add another $285 million a month of cash burn and the third quarter, presumably that comes down in the fourth quarter.

Just trying to figure out once we get to that inflection point of of.

Cash flow positive.

What the balance sheet looks like in.

And the ballpark to think that that maybe another $1 billion of net debt.

Before you hit that inflection point.

Look I think you set of right James do you look at the map today, we have roughly $2.8 billion, we're going to burn roughly $900 million and 3 Q, but I will highlight debt and I clearly stated that that does not include the customer inflows that we expect from me and ticket sales and as we said and and our comp.

We did see.

Significant growth and the second quarter, and we expect that to.

The ramp up obviously and the third and fourth quarter and first quarter. So when you do the math and you look at where our cash is today and the fact that we've stated that we expect to be cash flow positive over the course of the first quarter and 2022, you can kind of triangulate, where our cash balance is going to be and the.

And the subsequent generation of cash so.

We're comfortable where our liquidity is today, we believe we have a strong foundation, we've taken significant measures to.

To get where we are today, so as long as we can reasonably execute on a resumption on our voyage resumption plan, we feel that we're in a very very strong position as we sit here today.

Good stuff, thanks, Mark and.

And we have time for 1 more question.

And your final question comes from the line of Patrick Scholes with true.

Good morning, everyone.

And in light of the severe labor shortage situation, we're seeing domestically and the United States and also problems with the supply chain for as it relates to <unk>.

Basic ingredients for food and I'm wondering with your farmer International company.

And what's the labor situation.

And Mike for you folks and also the.

The supply chain for food and beverage. Thank you.

Hi, Good morning, Patrick look, we're not immune to it and I think the benefit we have as the company has a lot of our the vast majority of our Labor Force, which is ship based comes from overseas and.

And quite frankly, our employees our crew are excited and ecstatic to come back to work, we do have collective bargaining agreements in place for most of those employees and you have to remember that those employees. Unlike other areas of the world have not for the vast majority of received government assistance.

And so they're excited they want to come back to work.

When we when we see employees on the vessel they just breakdown and tears of joy because they have the opportunity to work again, so we don't anticipate any issues around the labor sector of the labor portion of our operating model in terms of.

Good old fashion.

<unk> consumables things of that nature, yes, we're not immune to it we are seeing some inflationary pressure.

<unk> starts we have start to see and some of it's stabilized and we think there is.

Of course, there is probably going to be some laggards and the supply chain that debt.

The end up being slightly costlier, but on the.

And just as equally there is a lot of areas, where we've been able to take advantage and repriced over the last 18 months and and renegotiate contracts. So we're seeing some benefit from that so we're laser focused on the cost side.

We're not immune to it but we're focused on it and we.

We think we think we have a good opportunity in 2022 to take advantage of some of the the.

The renegotiations, we've seen so.

We're looking forward to it.

Okay. Thank you.

Okay, well, thanks, everyone for joining us this morning.

And where you can see by our tone of our voice, we're excited to be here in Seattle the kickoff the encores.

<unk> and season here and for the Alaska season, and start our cruising come back from the U S. Thanks, very much we'll see you next quarter Bye bye.

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

Okay.

[music].

Good morning, and welcome to the Norwegian Cruise line Holdings second quarter 2021earnings conference call. My name is for Shay and I will be the 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.

Press Star then zero on your Touchtone telephone as a reminder to all participants. This conference is being recorded and I'd now like to turn the conference over to your host Ms. Andrea Andrea Demarco Senior Vice President of Investor Relations Corporate Communications and E. S. G. Mr. Marco. Please proceed.

Thank you Richard and good morning, everyone. Thank you for joining us for our second 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, We would also like the walk on a special guests joining us today Dr. Scott.

Got me and former commissioner of the U S food and drug administration Chairman of our company's sales, Steve Global Health and Wellness Council and author of the soon to be released book out of control threat.

Frank will begin the call with the opening commentary after which mark will follow to discuss our financial results before handing the call back the Frank for closing remarks.

And we'll then open the call for your questions.

As a reminder of this conference call is being simultaneously webcast on the company's Investor Relations website at Www Dot and P. L. H L. P. The dotcom 4 and 5 investors.

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 presentation will be available for replay for 30 days following today's call.

Before we begin I'd like to cover just a few items our press release with the second quarter 2020..1 results was issued this morning and is available on our Investor Relations website.

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

Our comments May also reference non-GAAP financial measures.

Reconciliations of the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation and with that I'd like to turn the call over to Frank del Rio Frank.

Thank you Andrea and good morning, everyone.

As always I hope that all of you joining us today as well as your loved ones remain healthy and safe.

After more than 30 earnings call with our company, we will all Miss her but wish her the very best of luck and her new role.

Jessica John who many of you have already met will assume the role of Vice President of Investor Relations Corporate Communications and ESG beginning September 1.

Congratulations Andrea and Jessica.

And as Andrea mentioned and we also have a very special guest with US today, former FDA Commissioner doctors, Scott Godly and.

And after over a year of working together remotely to reach this long of what it milestone it is truly a pleasure to finally meet Dr. Gottlieb and the other public health experts on our sales save global health and Wellness Council and person and for the first time today as we kick off our great cruise come back.

Today, we will focus our commentary and the progress we have made on our return to cruising our comprehensive plan for the phase of resumption of operations from our entire 28 ship fleet and the record setting the strength of continued to experience and consumer demand, which has translated into a record load and record pricing per calendar year 2022 and beyond.

And as you can see on slide 4 I'll return to service plan is centered around 3 key phases first we developed a multi layered sales safe health and safety strategy.

Putting mandatory FDA W. H O or EMA authorized vaccinations for all guests and crew and its cornerstone.

In addition, we test all guest at the terminal prior to embarkation and all crew undergo weekly routine testing.

Next we have now announced voyage resumption plans for all 28 chips and our fleet and lastly, we are intently focused on the flawless execution of the phase relaunch of our fleet, which we expect the complete by April 1.2022.

Again, its a still ever changing COVID-19 backdrop, we remain vigilant and ready to adapt as needed keeping a close watch on port availability travel restrictions and any changes the global public health environment, which could affect our planned operations.

Overall, we are encouraged to see some relaxation of travel restrictions and opening of borders in recent weeks, particularly for vaccinated travelers.

Just a few weeks ago, Canada and moved up its plans to allow the return of cruise ships and November 4 months earlier than previously announced many countries and the EU and now, allowing travelers from the U S and in the past few weeks, both Canada and the UK announced entry to factor of travelers without foreign teens.

Travel restrictions and port closures do remain in place and other parts of the world, but we are ready to execute on our cruise the assumption strategy and have backup plans ready to go which we can implement and adapt to as needed.

Slide 5 details of our voyage resumption plans by brand and by vessel.

After 500 day as the time has finally come and I could not be more pleased to say that our great cruise comeback of officially commenced last week with Norwegian Jade operating Greek al Voyager the thought of Athens.

The relaunch went off without a hitch and demonstrated that strength vaccination requirements comprehensive pre boarding and testing and a suite of other robust protocols are working as designed to help mitigate the introduction and transmission of COVID-19 onboard our vessels.

A special Thank you goes out to the officers and crew of Norwegian Jade.

Even after 16 months of non operating seamlessly adapted our new protocols and delivered the same exceptional service and world class cruise experience that our guests expect from our company.

As an indication of this top notch service delivery of.

Our onboard revenue on this first cruise significantly exceeded our target, which was focused on 2019 actual results by over 50%.

Norwegian Jade successful relaunch and it's just the first of many of you to come including our much anticipated return to cruising and the United States.

Tomorrow Norwegian encore the lines newest and most innovative ship will make her west coast debut with the 7 night sailings to Alaska from Seattle, We are looking forward to once again, bringing guests to explore the last frontier 1 of the most popular destinations with our guests and providing some much needed the economic related to the community families and small.

<unk> throughout coastal Alaska, who have been devastated by the loss of cruise tourism revenue during this prolonged suspension.

The next step and our relaunch plan as a returning to Miami the cruise capital of the World I'd like to address our request for a preliminary injunction that we filed last month, which will allow us to confirm guests back the nation status for sailings departing from the state of Florida that is being heard and they may Miami and federal Court today.

Haven't had the pleasure to work and the cruise industry for nearly 30 years I am confident that and the current global health and environment, and especially with the rise of the Delta variance and having a fully vaccinated and tested population of onboard our vessels is the best path best path to keeping our guests are dedicated crew members.

And the peoples of the communities, we visit safe from Covid.

In order to do that and we must be able to confirm vaccination status of our guests and every port we sales from including those from the state of Florida.

We owe it to all our stakeholders to do everything possible to make sure we deliver on this critical mission.

The hope that the federal courts will agree with our vision and our mission.

And when we say the health and safety of our guests crew and communities. We visit as the number 1 priority priority. We mean it it is not a slogan nor the tagline. The legal actions, we have taken and Florida reflect our deep commitment to resume the sailing and according to the robust science backed sales safe health and safety protocols out.

Line on slide 6.

Nothing takes priority over health and safety and we have gone to great lengths and expense to pursue this commitment to our guests crew and all the stakeholders.

Again this commitment is not a slogan nor the tagline health and safety is far and away. The most important principle the guys. How our company operates at all levels and this fundamental philosophy has never been more important and right now.

We want to use every tool available to us that science and medicine have developed to prepare our ships to return to service and vaccine and our most powerful tool.

Given that we have Dr. Gottlieb here today, who is not only a world renown expert but it is also the chairman of our sales save global health and Wellness Council I'd like to give him the floor for his thoughts on our health and safety program.

Dr Gottlieb.

Thank you Frank it's a great pleasure to be here with you today and to witness the culmination of over a year's collaboration on enhancing Norwegian is health and safety protocols all of the scientific and medical experts on our sales of counsel and fully support and recommend a fully vaccinated and tested population to relaunch cruising as it's the most effective way to mitigate and the introduction.

Or spread of the virus onboard of cruise ship work anywhere else and society, even with vaccines, however, and the risk can be fully mitigated, but this approach mitigates the rest of the greatest extent possible and significantly reducing the severity of any potential breakthrough cases, while.

Environment of cruise ship provides it can offer 1 of the safest vacation options and I look forward to seeing our protocols and practice with you tomorrow and Norwegian encore.

Now with our safety protocols in place and are always resumption plan and full swing full.

Full swing, we'll shift the discussion to our booking trends, which you can see on slide 7 and.

And short pent up demand for cruise vacations, especially for 2020..2 sailings are very strong as we have experienced record breaking demand from future cruise vacations across all 3 of our brands.

This outsized demand is even more impressive when considering that this strength of its true despite significantly reduced levels of demand generating marketing investments and the absence of a full complement of our all important travel agent partners throughout the world the.

Unparallel pent up demand I speak of is demonstrated by a record book position and pricing.

For full year 2020 to load factor continues to be meaningfully ahead of 2019 record levels by a wide margin.

And when you look at our booking curve at the same point in time versus 2 and 3 years ago. We are now book 9 to 10 weeks ahead of those levels Pri.

Pricing is also higher than 2019 as record level, even when including the dilutive effect of future cruise credits.

The strength, we are experiencing as evidenced throughout 2022, but particularly strong sequentially as we move through the year and our fleet rollout of its completed and become fully operational and.

In addition, the approximately 75% of our book position and 2022 is comprised of new cash bookings with the remainder of comprised of future cruise credits bookings so far approximately 45% of our outstanding future cruise credits have been redeemed.

The strong demand is also extending beyond 2022 last month regent 7 seas cruises easily broke the opening day booking record for its world cruise for the third year in a row. The 2024 World cruise, a 132 night sailings surpassed all expectations and sold out and in under 3 hours and at higher price.

And the 2023 world cruise and.

Not only was this without a doubt the strongest world cruise launch day and the line history, but it also saw a strong increase and new to brand guest which comprise of approximately 1 third of bookings.

This is further evidence of the continued demand we are seeing both from our loyal past guests and new to Brian cruisers, even for these long exotic itineraries.

As I have said time and time again, the pent up demand as Rio last quarter, we reached an inflection point and our advanced ticket sales build which continued its positive trajectory throughout the quarter. Our advanced ticket sales increase of approximately $300 million on a gross basis.

Or over 50% versus the prior quarters builds.

As we begin phasing and the rest of our fleet. We expect this momentum to continue to accelerate sequentially.

As we look to the future of the growth opportunity, we have planned for and as we emerge from this crisis is impressive.

And May Norwegian cruise line unveiled Norwegian Prima the first of 6 premium class ships, which mark the first new class of vessels for the Brian and nearly a decade.

Debuting in summer 2022, Norwegian Prima, which you can see a rendering of on slide 8 is absolutely stunning offering the most outdoor deck space of any new cruise ship, including more total pool deck space and any other ship and the lines fleet as well as multiple of Infinity pool and Vas outdoor walkways.

She will also take the lines groundbreaking ship within the ship constant with the Haven to the next level.

Most importantly, however, she is resonating with guests lot. Unlike any other new ship launch we have ever seen before her sales debut and May set a single best booking day and best initial booking week record doubling the previous record set by Norwegian Bliss and 2018, and if price is approximately 20% higher.

Other than Bliss commanded.

Turning to slide 9 we also had an exciting announcement from regent 7 seas cruises, which unveiled the name of its newest ship <unk> Grand doors, the sixth ship and the world's most luxurious fleet.

<unk> Granule holds 750 guests and as the sister ship to 7 seas explorer and 7 seas splendor.

There are more reveals the comp leading up to her launch and the fourth quarter of 2023 with her inaugural season set to be unveiled and open for reservations next month.

As you can see on slide 10, we have and industry, leading growth profile with 9 ships coming online through 2027.

These newbuild represented approximately 24000 additional births growing our fleet by approximately 40%.

And 2023, when our fleet is back in full force, we expect our capacity to be approximately 20% higher than 2019 pre pandemic levels with the benefit not only of our 4 of 2022 and 2023 Newbuild, but also a full year of both Norwegian Encore, which joined the fleet and November of 2019 and.

And regent 7 seas, splendor, which launched in February of 2020.

With a smaller footprint of 28 shifts and our fleet. The addition of our new non shifts strongly positions us to further diversify our product offerings and penetrate unserved and underserved markets globally, which is expected to drive meaningful growth to both the top and bottom line.

<unk> industry, leading performance to continue and the years to come with the addition of our new ship deliveries I'll be back later to provide and upgrade 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 Marc Thank you Frank.

Our remarks today will focus on the continued execution of our COVID-19 financial action plan, and our liquidity profile and our all important phase voyage resumption plan.

I am pleased with the significant progress we've made on our return to cruising as Frank mentioned, we are here in Seattle ready to relaunch Norwegian Encore Tomorrow.

We have a comprehensive voice resumption plan in place and are focused on the execution of this phased relaunch.

We expect to have 8 ships, representing approximately 40% of our total capacity operating by the end of the third quarter and 17 ships, representing approximately 75% of our capacity by year end the.

Last ship Oceana as nautica will emerge better than new after an extensive dry dock and re inspiration and joined the rest of the fleet on April 1.2022.

While we've reached several important milestones and our road to recovery, we recognize that the global health environment is still fluid. So we remain focused on maintaining our cost discipline and pulling all available levers to conserve cash and maximize the financial flexibility as we execute our relaunch plan.

As you can see on slide 12, since the halt and global cruise operations in March of 2020.

We worked quickly to implement our COVID-19 financial action plan.

During the pause and operations, we successfully reduced operating expenses by nearly 60% and capital expenditures by over 75%.

Since the beginning of the second quarter, we've taken several additional proactive measures on our financial action plan.

We continue to significantly reduce or defer near term demand generating marketing expenses and non essential capital expenditures.

And July we amended 9 credit facilities for a newbuild program to increase the commitments by approximately $770 million to cover owner supply costs modification costs and financing premium fees and we want to thank our banking partners for their continued support of our company during these.

Extremely challenging times.

Turning to our liquidity and cash burn on slide 13.

We had approximately $2.8 billion of cash and cash equivalents as of June 30th.

This provides us with significant financial flexibility to continue to navigate through this fluid environment and execute on our return to service plan.

As for cash burn for the second quarter, our average monthly cash burn rate was approximately 200 million per months.

And this was slightly higher than our guidance of $190 million driven by the announcement of additional ship Relaunches and our voids resumption plan.

And the associated restart expenses.

As for the third quarter, we expect our average monthly cash burn rate to increase to approximately $285 million as restart expenses accelerate with additional vessels entering service.

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.

Looking ahead based on our resumption plan, we expect to reach a crucial inflection point with operating cash flow turning positive over the course of the first quarter of 2022.

Turning to slide 14, we ended the second quarter with approximately $2.8 billion of cash.

Our cash balance and the second quarter decreased driven primarily by approximately $600 million of operating cash burn, including operating expenses SG&A interest and Capex.

Customer cash refunds for canceled voyages of approximately $150 million and net working capital and other outflow of approximately $10 million, 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 relaunch our fleet over the next few quarters, we have not taken our focus of the future.

Our relaunched milestones bring us 1 step closer to executing on our medium and long term financial recovery plan as outlined on slide 15, and to rebuild and continue to drive margin expansion maximize cash flow generation and optimize our balance sheet.

With that I'll hand, the call back to Frank to provide closing comments. Thank.

The accounting standards board or S ASB index.

This was a significant step forward and our efforts to enhance our transparency and I encourage you all to take a look at the report which is on our website. If you haven't done. So already we also unveiled our redesign and sustained program, which is structured around 5 pillars developed through cross functional collaboration with key internal and external stakeholders.

And the pillars include reducing environmental impact sailing safely empowering people and strengthening our communities and the operating with integrity and Accountability. And addition, we are aligned to the United Nations Sustainable development goals and have identified 10 goals, where we believe we can make the greatest contribution.

To achieve a more sustainable future for all in conjunction with the report we have also developed a new sustainability website, which we will use to continue to provide critical disclosure to all of our stakeholders on the environmental front. We were pleased to announce our newly created long term climate action strategy and our goal to reach carbon neutrality.

This ambitious program is centered around 3 key action areas, including reducing carbon intensity identifying and investing in technologies, including exploring alternative fuels and implementing a carbon offset program.

We continuously seek opportunities to reduce our overall footprint by minimizing fuel consumption and in fact, our ongoing investments and systems and technologies have resulted in a reduction of fuel consumption per capacity day of approximately 17% from 2008 to 2019 for our entire 28 ship fleet.

With the introduction of our 9 new and more fuel efficient vessels through 2027, and we expect to see further improvement and our intensity rates.

This is a measurable step and the near term emissions reductions, which will help bridge the gap in our decarbonization efforts until new technologies become available our 3 million ton commitment and sizable to put it and perspective. It is the equivalent of over 7.5 billion miles driven and by an average passenger car and we plan to increase offset.

The purchases in future years to help us reach our goal of carbon neutrality.

Turning to slide 17, I'd like to leave you with a few final key takeaways first we are putting health and safety at the forefront of our return to service as demonstrated by the great length, we are taking to resume cruising and the safest manner of possible with a universal mandatory vaccination and pre boarding testing policy and.

Across our 3 brands.

Our great cruise comeback has commenced and we are focused on the flawless execution of our phase voids of resumption plan with a target to have our full fleet and operation by April 1.2022.

We continue to experience strong future demand for cruising with very positive booking and pricing trends for 2022 and beyond.

Overall, while we still have a long road to full recovery ahead of US. We are encouraged by the significant milestones. We have reached in recent days and returned to cruising.

And before we take our first question, we ask that you. Please refrain from asking any questions regarding pending litigation and we appreciate your understanding and cooperation in this regard as we will not be commenting any further please take the first question.

Your first question the line of Steve was the key with Stifel.

Yeah, Hey, guys good morning.

So.

You're clearly now have a nice roadmap as to when the full fleet will be back in service and.

I guess the question is that you still got past the drawn right now and let's say you get the.

Your target, 60% of your capacity back and serviced by the end of the year, Mark I think I heard you correctly the by <unk> and.

And that kind of breakeven.

Standpoint, I want to make sure I heard that right and then maybe what goes into.

What are those some of the assumptions that you're making to kind of get to that level.

Hi, Good morning, Steve and thank you for the question So you're absolutely correct based on our.

<unk> trends that we've seen obviously as we restart and our ships enter service that starts to generate that cash flywheel that we've been talking about so.

Okay, Thanks, Mark and.

And then Frank.

Wanted to ask about.

All of the changes that we've seen and it's been going on with the operators over the last week or so I mean, we've seen changes in terms of the timing of your peers around.

Mass mandates and the requirement to get.

Adjusted Free board it or get tested before you board just want to understand.

What do you think this does or what is it is kind of due to the psychology of the the.

The cruise passenger right now, meaning do you think some of these folks are going to say.

Forget it.

Let's book at a at a later date or.

How do you think this is affecting your customer right now.

Hey, Steve good to speak to you look it's not what we're seeing and our AR.

And our booking trends as I mentioned in my prepared remarks, we were ahead of approximately 10 weeks.

When compared to where we were in 2018 at this time from <unk> 19 of record year.

And as you know we we at Norwegian Cruise line Holdings came out very very early as early as late March and we said, we're not going to cruise until.

And it's safe to do so and and as a precursor.

Everybody has to be vaccinated crew and passengers and we haven't moved from that we think thats the competitive advantage quite frankly.

And doing a pandemic people, who are willing to travel 1 of the travel safely and the Norwegian cruise line platform allows you to do that Dr. Gottlieb spoke about it it becomes the just about the safest place on Earth to be on the Norwegian cruise line ship and I'm glad to see my my peers and the industry following suit.

Now they have begun to introduce at least some of the measures that we have announced.

Early on so.

To me it is a competitive advantage. We continue we will continue to do the right thing and.

And that is to protect the health and safety of all of our guests and the communities we visit and every possible way we can.

Okay, great. Thanks, guys appreciate it best of luck.

Yes.

Your next question you might know Stephen Grambling with Goldman Sachs.

Stephen Grambling. Thank you.

Should we be thinking about the customer deposit inflow over the course of the restart and as you mentioned the restart costs moving up a little bit in the coming quarter should that be front end loaded or sort of be expecting a similar amount of spend each quarter and sort of fully up and the wrong.

Hi, Good morning, Steve It's Marc.

So look when we look at our customer deposits as we said and our prepared remarks, our customer deposits increased 50%.

Versus the prior quarter or roughly $300 million on a gross basis. So obviously as we continue to relaunch and restart and we get closer to the voyages operating we expect that to accelerate.

So we're very very pleased with that when we look at our relaunch costs look everything all of the cost that we're incurring other.

Other normal they are expected.

Look at how many shifts we're restarting over the course of the next 5 to 6 months Theres nothing out of the ordinary.

There is going to be some onetime front and loaded costs.

And youre relocating whether it's the 1500 crew per vessel from across the globe. So you have some onetime initial cost but that will settle that all of our balances as typical but most importantly, as our vessels start to sale.

And as we've said publicly we are most of our vessels are starting at either 60 and.

And then ramping and 60% load factor and then slowly ramping up to 80, and and then hopefully to over the back to a normal load factors and a and a short time those vessels, which are operating or cash flow positives out of the game and that's very very important and we've seen that with our first.

The 2 initial voyages that have just been completed by Norwegian Jade and we expected that to be the case for the coming voyages as well for the rest of the fleet.

That's super helpful and maybe 1 more if I continue to get and what you.

And kind of the topic Du jour, but have you seen any impact and you've kind of talked about the flow from the delta on bookings pricing more recently and how would you think about the impact of a risk of further requirements are imposed even of 100 per cent vaccine sailings, such as vascular and otherwise.

Hi, Steve It's Frank look.

We have seen a modest decrease and our net new booking activity during the month of July when the Delta variant is the.

Surfaced.

It is sequential so it's more and more pronounced in for in your.

2021, sailings, which for us is not debt.

The significant.

I'm not I'm not focus on 2020, 1 as a transitional year. The focus is to get the ships the operating again.

Mark mentioned very successful launch of Norwegian Jade went off without a hitch and we do have muscle memory, we do remember how to operate cruise vessels and the customers had a great time onboard revenue was through the roof.

And so.

We were encouraged that the.

We're off to the races.

The the it's good.

Good debt that we have such a pad so to speak on our forward bookings to be 10 weeks ahead of our best prior year ever as certainly a a wonderful cushion and insurance policy to have.

And in discussing the.

The the likely course of the Delta vary with Dr. Gottlieb. We think this is a transitory or temporary phenomenon. It is going to run through the through the course of the population very very quickly. We don't think of it will have a lasting effects, but again, having a 10 week.

Advance so to speak is certainly a wonderful to have.

Helpful. Thanks, So much best of luck Philip ramps. Thank you.

Your next question the line of Brent <unk> with J P. Morgan.

<unk>.

Hey, good morning, everyone. Thanks for taking my questions and congratulations on the the.

And the official Relaunching.

And the Mark maybe you alluded to this and your prior comment, but I want to I want to understand the Frank how youre thinking about occupancies.

While COVID-19 is still sort of among us and you're 100% vaccinated.

Can you get to a full shift under that scenario without masks and as debt is that states and does that and your plans and has that changed at all and the last few weeks because of the Delta.

As Mike mentioned, we're starting every vessel in the 60% to 70% range of load.

Factor, that's not anyone's requirement, it's not of CVC mandate is something we think is the responsible way to start of operations train our crew.

And get our feet wet so to speak if all goes well after 30 days will increase that to 80% load and after 60 days, we will resume trying to fill the vessel as the.

And pre pandemic levels, and yes, and a fully vaccinated environment. The way that we are conducting at where we were.

And we test everyone at the Pierre.

Where we have the protocols in place the new air filtration systems that we have spent tens of millions of dollars to upgrade throughout the fleet.

We believe that we can safely operate the.

Vessel at full capacity.

We will see it'll be staggered, we will learn along the way, but but.

But yes, we believe that that can be achieved.

And by the way and so does our sales and safety Council.

Which.

And again believe that our protocols are second to none.

Just and the cruise industry, but.

And any kind of.

The public environment.

Brian I want to just add to that debt when we look at all of the measures we are taking.

And you look at that vis vis any other hospitality.

Yeah, and this is Scott we feel confident that given the measures that we've taken and creating a 100% vaccinate population onboard the vessel testing people before they enter into that environment, you can substantially reduce the risk and create a safer environment and relative to other kinds of options people may have to engage and leisure and vacation.

We've tried to do our best and make it a safe environment to seek treatment, including getting some of the advanced therapeutics onboard the ships, having ICU level care of available having procedures in place on how to off board passengers, who may become ill during the cruise so and every step we've tried to take.

And every reasonable measure to create the safest possible environment for someone to engage and leisure activity.

That's all great color. Thanks for that guys and then and then my second question is just on that debt metric you gave Frank on the onboard spend on.

The first ship out and the up 50%.

And that's obviously and really impressive statistic is that is that apples to apples I guess with.

What you would have seen from that ship in 2019, I guess on a per person basis since it's going to be have a little bit less low right on that on that ship, but I guess can you also talk about the mix on the ship of where youre seeing that consumer spend really sort of take off.

Yeah, Brent I'll take that 1 so certainly when we look at that and we look at the measure of onboard spend.

While we look at it and totality on the vessel.

More importantly, we're looking at it on a per person per day basis. So that's the measure of what the the customer is willing to spend and yes. It is on an apples to apples basis.

Basis of a similar voyage similar itinerary from 2019.

A record levels and when you look at the mix of passengers I think that voyage was predominantly probably the majority U S. Based and then followed by European base and and you look when you look at the spending trends of it.

And it was your normal areas shorts was very intense food and beverage and casino. So it's great to see that we're seeing the trends.

And that we're used to customers are willing to spend while it's early it is certainly very very encouraging.

Excellent. Thanks for all the color guys. Good luck.

Your next question of line of Vince <unk> with Cleveland Research.

Great. Thanks for taking my question. It sounds like deposits are building nicely and Theres, an expectation of the move cash flow positive at some point, maybe and the first quarter, even though 2022 number of things going the right direction can you help us think about the path and timing for deleveraging of the business.

Yes, good morning, Vince it's mark.

We are we are intensely focused on that as you can recall.

And 2019, we were on a path.

To our stated leverage of 2 and a half of $2.72 in the 2 to 3 quarters.

We've obviously had the lever up the balance sheet as a result of this but as we look forward our goals right. Now are we want to get below 5 and then obviously, what we'll look to get into the force.

Premature too.

To decide or to really telegraph, when we're going to get to those levels.

As we've said before if 2022 continues on the path that we're seeing today.

It could be of very very nice year in terms of EBITDA and subsequent cash flow generation. So that's certainly going to assist and help us with that Delevering story. So we are focused on it.

We have not lost sight of that because we we know thats important but right now we're focused on relaunching and providing the best experience that we can to our customers and if we can do that that's going to that's going to subsequently turn into significant cash flow generation and I will reiterate we've said and we expect and our conservative relaunch plan we.

Spec to be cash flow positive over the course of the first quarter of 2022. So when you think about that from a from a restart within a 6 month period to be cash flow positive.

We feel that that's pretty tremendous and we're pretty proud of that so we look forward over the next few months of restarting our fleet and again that the cash flow of that that spins off.

Thanks and.

Another question you look at the hotel industry Leisure nights 15, and 20% ahead of 19 levels right now pricing and that industry is 5% ahead of 2019.

And you think about the path for yield and to 22% and 23, you've already kind of had a glimpse into once people get a path and the ability to go that unleashing of the pent up demand what it can mean for pricing and.

And other aspects of leisure so.

Curious.

As you look out over the next couple of years, it's just a little bit of ahead of the 19, the right way to think about it or could pricing be even better than that and.

The years ahead for cruise.

I think it's the.

It's better than that.

And.

If you.

I hesitate to give you any specific numbers, but when you strip out the dilutive effects of the future cruise.

Credits.

And the like for like pricing.

The pricing to the public so to speak of.

Is up significantly up.

Multiples of what our typical year over year of growth is in yield.

And so the pent up demand is real and we're taking advantage of it.

We do have these future cruise certificates to deal with which will end in 2022 that the FCC's will not be dilutive at all in 2020.3.

FCC is have to be used.

By the end of 2022 or else, we're going to refund the customer whatever they paid in.

And also remember as I mentioned I believe it's slide 11, and look at our future growth.

We have 20% more.

<unk> coming online through the end of 'twenty, 3 and look at our historic ability to absorb that that growth and.

Now, we turn the capacity growth.

The gross revenue growth outsized outsized the growth and outside net cash growth. So we're very much looking forward to taking delivery of these up.

Vessel over the next few years 4 of them come online and 'twenty, 2 and 'twenty 3.

They're going to be accretive theyre going to be higher than the corporate average so.

We believe that debt.

Wonderful setup.

As Mark mentioned.

Before the pandemic hit and.

CLA was hitting on all cylinders, we're delevering to investment grade, we're going to start paying a dividend the biggest problem will use and sit around the boardroom was what are we going to do is always cash and.

And well, we're going to start generating cash again and that cash as far as kind of go to pay down debt. We took on to survive. The pandemic and then we're going to look to do what companies do.

And the buyback stock if it's the opportunistically to do so perhaps expand the business. We're bullish on this business, we know how to operate a cruise industry.

Top line cruise company.

We haven't forgotten how to do that over the pandemic and and we're seeing the pent up demand from customers that allow us to do what exactly what we do best So we're very much bullish on the future.

Thanks best of the water.

Next question the line of Robin Farley with UBS.

Great 2 questions..1 is if you could.

And as many of you've laid out your research.

And what percent of your ships.

Your line or in the next 6 months or our Florida base for this year and then also and expense question.

And you mentioned the.

Carbon credits can you sort of help us quantify what the cost of that might be.

Your spend on carbon credits.

Hi, good morning, Robin So when we look over the next 6 months I believe we have roughly 6 vessels.

That would at the operating out of out of Florida with the first 1 being Norwegian gem on the out of Miami on.

On August 15th and then I think the rest of come online in the late mid to late December.

I think the second part of your question was related to the carbon credits.

We're very we're very excited about this this is something we're serious about.

And we've really taken a hard stance on our ESG.

On our ESG efforts over the over the last year or 2 and.

And we're committed to this so we've spent we spent a few million dollars on purchasing these carbon credits I think that together with our other investments that we continue to make up with the fleet, whether it's exhaust gas cleaning.

Cleaning technology waste heat recovery, we're looking at all viable investments, where we can to.

Reduce our carbon footprint so.

And just back to the first part of when you look at the Florida based vessels I believe it's about 35% to 36% of our fleet sailing out of Florida over the next 6 months.

Okay, great and the D M carbon credit has not run through the P&L right.

And I guess, you've purchased said it's on the balance sheet somewhere and then that expense will run through when you're when you're operating yeah that'll that'll get expense as we as we consume the fuel that it's related to and of pro rata of fashion over the course of the next 2 to 3 years, but again I want to I want to highlight that it's not a significant amount.

It's a few million dollars so its youre not even going to see it when you look at our financial statements. Okay. No great. That's very helpful. Thank you.

Your next question comes from from the line of Jamie Katz with Morningstar.

Hi, Good morning, my questions are actually on the composition of cruise areas looking forward and given your disproportionate exposure to.

U S cruise there is what that looks like for some of the European Itineraries and September and October.

In addition to that I think you guys had commented that a third of the.

Bookings for the Regent 7 seas worlds Crazy as it was.

New to brand. So is there anything noteworthy that you saw it and there's new passengers thats different from maybe what you've seen and past passengers.

Yes.

And.

Typically for a cruise on the Norwegian brand that operates and Europe.

Roughly half the customers are from the U S and have the customers start from the rest of the world.

On the first 2 Norwegian Jade cruises to the Greek Isles of out of Athens, we have seen debt number jump.

Travel plans to the places like Greece. So we don't think Thats sustainable and the long term, perhaps in the short to medium term is this pent up demand is.

As a sort of burned off.

But it's it's good to see that we have the the marketing strength and the sales platforms throughout the world to be able to fill our ships.

And whether it's Americans, who want to come over or Europeans.

We're seeing the.

Strong demand across the board.

And then as far as some of the.

The debt service on the balance sheet are you guys.

He may be refined some of the operating debt and debt you raised early.

And the Frankel and the Covid cycle or.

Is that something that the arm.

Pause for now.

And our focus on just restarting.

Well, we're focused on all of the above while our while our immediate focus obviously is on restarting. The operations, we have not lost sight of our balance sheet and balance sheet management opportunities. So it's something we've been looking at we continue to look at and there is some opportunities and some of our high.

Your price notes, I believe and our 12 and a quarter and tenant of quarter notes, where we have the ability to possibly.

Have some claw back opportunities around that so we're looking at it.

We want to get our the most important thing for US right now is getting the.

The vessels operating.

But once we get a few vessels and the water and we have.

More visibility around that the I think thats, what youre going to see over the course of.

And the future is the us looking at all of those opportunities and exercising on some of those balance sheet management opportunities that we have.

Excellent. Thanks.

And your next question the line of James Hardiman with Wedbush.

Hey, good morning, Thanks for taking a couple of questions from me.

Maybe a clarification here so when I digest, what you've said about your fleet and ramp in the and the occupancy ramp.

And it feels like the second quarter of next year could be a pretty normal quarter. Obviously your fleet will be back to a 100%, but it seems like the expectation is that occupancy and there'll be.

And all but 1 chip.

100% cost so is that sort of what you're targeting in terms of sort of the the first normal quarter that seems like.

Frank you made the point earlier that you weren't so much interested and the starting line book, but more so of the finish line and seems like that's maybe a little bit ahead of some of your peers.

Hi, James Good morning, it's Mark so look.

I think when you look at 2022 and you look at the second quarter third quarter.

We are seeing very strong bookings for those periods, but let me just go back and the timeline here.

We just said about Norwegian jades first 2 voyages and even at reduced capacity, we are seeing significant strength and significant spend on those vessels. So while our vessels are coming along in line over the course of the next 2 to 3 quarters.

Q1, I think is going to essentially look pretty normal as well so to speak.

Again, we do have we do have I believe it's 9 or 10 vessels that are coming on in Q1. So certainly by the second quarter, we anticipate that all of our vessels or the vast majority of should be back at their normal load factor levels and if we're lucky maybe maybe sometime sooner than that but.

It's not that we don't care about 'twenty, 1 we've taken the stand that we want to do this right, we want to create confidence and our customers and our shareholders and our employees and we want to make sure. We're learning from all of the cruise is that we're launching so we look we're excited about 2022 and beyond and but right.

And we're focused on 'twenty, 1 getting all of the fleet back in the water. So looking good but we've just got to go forward and and getting the ships what again.

Got it that's really encouraging and then.

Trying to do a little bit of math here.

Obviously, there are a lot of moving parts, but if I think about.

The $2.75 billion of the cash of about 9 billion and net debt as we stand here today.

You said, another $285 million of bump of cash burn and the third quarter, presumably that comes down the fourth quarter.

And just trying to figure out once we get to that inflection point of of.

Cash flow positive.

What the balance sheet looks like it is in the ballpark to think that that maybe another $1 billion of net debt book.

For you you hit that inflection point.

Look I think you set of right James do you look at the map today, we have roughly $2.8 billion, we're going to burn roughly $900 million and 3 Q, but I will highlight debt and I clearly stated that that does not include the customer inflows that we expect from our brands ticket sales and as we said and and our <unk>.

Comments, we did see significant growth and the second quarter and we expect that to.

<unk>, obviously, and the third and fourth quarter and first quarter. So when you do the math and you look at where our cash is today and the fact that we've stated that we expect to be cash flow positive over the course of the first quarter and 2022, you can kind of triangulate, where our cash balance is going to be in and the.

And subsequent generation of cash so.

We're comfortable where our liquidity is today, we believe we have a strong foundation, we have taken significant measures to to.

To get where we are today, so as long as we can reasonably execute on a resumption on our voyage resumption plan, we feel that we're in a very very strong position as we sit here today.

Good stuff thanks, Mark.

And we have time for 1 more question.

And your final question comes from the line of Patrick Scholes with true.

Good morning, everyone.

In light of the.

Their labor shortage situation, we're seeing domestically in the United States and also.

Problems with the supply chain for as it relates to.

Basic ingredients for food and I'm wondering with your farmer International company.

What's the labor situation like for you folks and also.

And the supply chain for food and beverage. Thank you.

Hi, Good morning, Patrick look we're not immune to it I think the benefit we have as the company has a lot of our the vast majority of our labor force which of ship based.

Comes from overseas and.

Quite frankly, our employees our crew are excited and ecstatic to come back to work.

We do have collective bargaining agreements in place for most of those employees and you have to remember that those employees. Unlike other areas of the world have not for the vast majority of received government assistance.

They are excited they want to come back to work.

When we when we see employees on the vessel, they just breakdown and <unk>.

Tears of Joy, because they have the opportunity to work again, so we don't anticipate any issues around the labor sector or the labor portion of our operating model in terms of.

Good old fashion.

Food consumables things of that nature, yes, we're not immune to it we are seeing some inflationary pressure. We have start we have started to see and some of its stabilized and.

And we think theres.

Of course, there is probably going to be some laggards and the supply chain.

And the end up being slightly costlier, but on the.

Just as equally there is a lot of areas, where we've been able to take advantage and reprice over the last 18 months and and renegotiate contracts. So we're seeing some benefit from that so we're laser focused on the cost side.

We're not immune to it but we're focused on it and.

We think we think we have good opportunity in 2022 to take advantage of some of the the.

The renegotiations, we've seen so.

We're looking forward to it.

Okay. Thank you.

Okay, well, thanks, everyone for joining us this morning.

You can see by our tone of our voice, we're excited to be here in Seattle, the kickoff the encores made and season here and for the Alaska season, and start our cruising come back from the U S. Thanks, very much we'll see you next quarter Bye bye.

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

Q2 2021 Norwegian Cruise Line Holdings Ltd Earnings Call

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