Q2 2023 Royal Caribbean Cruises Ltd Earnings Call

The question and answer session to ask a question. During this session you'll need to press star one on your telephone keypad I would now like to introduce Michael Mccarthy, Vice President of Investor Relations Mister Mccarthy the floor is yours.

Good morning, everyone and thank you for joining us today for our second quarter 2000 twenty-three earnings call. Joining me are Jason Liberty or Chief Executive Officer, Naftali holds our Chief Financial Officer, and Michael Bailey, President and CEO of Royal Caribbean International.

Before we get started I would like to note that we will be making forward looking statements. During this call. These statements are based on management's current expectations and are subject to risks and uncertainties a number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning as well.

Those are filings with the SEC for a description of these factors, we do not undertake to update any forward looking statements Ah circumstances change also will be discussing certain non-GAAP financial measures, which are adjusted as defined in a reconciliation of all non-GAAP items can be found on our website and in our earnings release avail.

<unk> Www dot arceo investor Dotcom, unless we stayed otherwise I'll metrics or on a constant currency adjusted basis.

Jason will begin to call by providing a strategic overview and update on the business stuffed Hollywood follow with a recap of our second quarter.

And an update on our latest actions and on the current booking environment.

We will then open the call for your questions with that I'm pleased to turn the call over to Jason.

Thank you Michael and good morning, everyone I'm thrilled to share with you. This morning are strong second quarter results.

And another step change in the trajectory of our business.

May recall that we doubled our revenue yield guidance and increased our earnings expectations by 40% in may on the heels of a record way period that drove strong booking momentum for our brands well as we shared in this morning's press release it got even better since then.

The combination of strong preference for a leading brand.

Numerous consumer tailwinds and the attractive value proposition of Cruz contributed too strong an accelerated demand for our vacation experiences.

Our brands continued to excel and we not only delivered another outstanding quarter, that's significantly exceeded expectations, but are also.

Increasing our full year earnings guidance by another 33% I'm thrilled to share that we are now expecting double digit yield growth for the full year and low teens growth rate for the remaining quarters.

I want to thank the entire Royal Caribbean group team for delivering another outstanding quarter their passion dedication and commitment.

Wow us to deliver the very best vacation experiences responsibly, while generating strong financial results.

Last year, we laid out trifecta, which set clear and ambitious targets. We have made tremendous progress towards those goals and now expect to achieve record EBITDA Perry P. C D and record return on invested capital this year.

We are well on our way to achieving trifecta as we continued to execute on our strategies.

As highlighted on slide three we delivered another outstanding quarter that exceeded expectations.

The robust demand environment, we reported back in May continued throughout the second quarter and translated into strong booking volumes and meaningfully higher prices.

During the second quarter, we delivered a record 1.9 million memorable vacations unexceptional guest satisfaction scores, we achieved record yields that were 12.9% higher in 2019.

Strong close in demand higher pricing and continued strength of onboard spend drove the revenue outperformance.

While the Caribbean remains the standout performer. This year, we were particularly pleased with the strength and quality of closing demand for European itineraries.

This acceleration of demand for Europe contributed.

To the better than expected yield performance for the quarter.

Our continued focus on enhancing margins on our disciplined capital allocation resulted in more than 100 per cent of the revenue outperformance flowing to the bottom line.

We had record adjusted EBITDA and cash flow in the quarter and achieve significantly better than expected earnings.

[noise] booking volume since our last earnings call have continued to accelerate.

Both for 2023, sailings and even more so for 2024.

The majority of the bookings we are currently taking our for next year sandwiches.

The North American consumer remains incredibly strong and volumes from European consumers looking to book their summer vacations accelerated the.

The strength of our brands and quality of our vacation experiences combined with the value proposition of cruise is translating into double digit yield growth expectations versus 2019 for the year.

And low teens growth rate for the second half of 2023 are load factors are now back to normal so it'd be incredible yield growth is driven by strength in pricing and onboard spurn for both new and like for like hardware.

While it's still too early to provide any specific color for next year's outlook clearly the very healthy demand environment. We are seeing is quite encouraging.

There has been a lot of talk about the state of the consumer and I want to share what we are seeing for millions of daily interactions with our customers.

<unk> remains strong and is bolstered by strong labor markets high wages and excess savings our customers remain engaged in eager to vacation and build memories with us as they continue to shift preferences towards experiences over goods.

Over the last few months experience spend was up 25% compared to 2019 and double that of spend on goods.

Despite this increase spend on experiences remains lower than the longterm trend line, implying a multiyear catch up opportunity.

Our vacation platform is appealing to a broad range of vacationers and our addressable market continues to expand as we benefit from favourable demographics and wealth trends.

And the second quarter to percent of guests were either neuter brand or new to cruise surpassed 2019 levels by a wide margin and we have seen posts cruise repeat booking rates nearly double 2019 levels.

While we have made positive strides in narrowing the gap to land base vacations over the last several months cruising remains an exceptional value proposition, allowing us to outperform broader leisure travel SBC to further close the gap to land based vacations drive better revenue and welcome even more happy customers.

Future cruise consideration is near all time highs and a contributing factor to a doubling in website visits compared to 2019.

In addition, our travel partners are now fully back up and running and delivering more bookings than they did in 2019.

Are improved commercial capabilities have allowed us to capture this quality demand and expand our share of the guest wallet in the second quarter about two thirds of our guest booked.

Some of their onboard activities in advance of their crews translating into incremental spend once onboard.

While we have made a significant leap we are still in the early innings of our journey and we continue to add new features and capabilities to our app and commercial engines.

One thing is clear our guests continued to spend more on their vacation experience and our teams continue to deliver strong guest satisfaction and net promoter scores.

The robust demand, we see for our products is bolstered by our industry, leading brands innovative hardware enhanced destination offerings nimble global sourcing model and strong execution by our teams.

New hardware has been a great differentiator for us, allowing us to drive quality demand and attract new customers into our vacation ecosystem.

In 2023, we take delivery of three new ships that support our strategy and will deliver premium yield in 2024 and beyond.

This month Silversea welcomed silver Nova the first of the new evolution class.

Later this year celebrity cruises will welcome celebrity ascent and Royal Cream International will take delivery of the game changing icon on the seas way.

Q for with its revenue sailings, beginning and the end of January .

Looking ahead into 2024 Royal Caribbean International has recently revealed the ultimate weekend getaway Utopia of the seas, which will join our fleet mid next year.

You told me you will be the first to waste his class ship that will be entirely focused on short cruises in the Caribbean.

Supporting our strategy of competing with land based vacation alternatives and driving new to cruise customers into our vacation ecosystem as we seek to close the value gap.

Demand in pricing for Utopia has far exceeded our expectations.

Also.

2024, Silversea will walk on the second and the evolution class silver Ray delivering the future of ultra luxury cruising.

Demand for Ray is very strong and it is attracting the highest rates for the brand classic fleet.

We continue our efforts to deepen the relationship with the customer we are further enhancing our commerce capabilities to optimize our distribution channels build even more customer loyalty and lower our acquisition costs.

We continued to enhance our e-commerce and pre cruise capabilities and are seeing increased guest repeat rates and spend as well as further elevation and the overall guest experience.

We will continue to excel in the Corps and drive business excellence in order to increase yields and capture efficiencies across our platform are proven formula for success remains unchanged moderate capacity growth moderate yield growth and strong cost control will lead to enhanced margins profitability and superior financial performance.

<unk>.

In conclusion, our business and our amazing team on and off the water are firing on all cylinders as we exceeded expectations in the second quarter and significantly increased our earnings and cash flow guidance for 2023, we.

We are well on our way to achieving our trifecta goals.

Differentiated platform that includes the best brands fleet destination people and global sourcing platform is winning and I'm very proud of our teams that go out everyday to deliver the best vacations responsibly.

And with that I will turn it over to Naftali <unk> <unk>.

Thank you, Jason and good morning, everyone.

Will begin by discussing our results for the second quarter.

Delivered another strong performance with adjusted earnings per share of $1.80, 217% higher than the midpoint of our may guidance.

We finished a second quarter with a load factor of 105% and with net yields that were up 12.9% versus 2019 about 260 basis points higher than the midpoint of our guidance.

Overall about half of the yield growth was driven by new hardware and have driven by a significant increase in rates are like for like hardware, despite being a bit behind unload factors.

Rates were up 17% in the second quarter compared to 2019.

N C C. Excluding fuel Perry P. C D increased 9% compared to the second quarter of 2019.

<unk> cost came inconsistent with our may guidance, the increase in our share price and a significant increase in our financial outlook for the year resulted in higher stock based compensation. This.

This cost, which contributed 220 basis points did a quarter was offset by favorable timing that will shift into the third quarter.

Our operational in commercial teams are doing an exceptional job driving strong top line growth and maintaining focus on operating expenses to expand margins are EBITDA margin in the second quarter has recovered to its 2019 levels and over 100 per cent of the revenue outperformance during this quarter dropped it.

Bottom line, leading to significant earnings speed versus our guidance.

As Jason mentioned booking volumes since our last earnings skull significantly exceeded 2019 for both North American and European consumers.

Caribbean Itineraries account for about 55 per cent of our full your capacity and about 37% in the third quarter <unk>.

Strong demand for Caribbean itineraries contributed to the strong performance in the second quarter and is one of the key drivers of the increase and expectations for the full year.

Europe sailings account for 17% of our full year capacity and 35% in the third quarter.

The acceleration in demand, it's resulting in an increase in our revenue expectations for Europe sailings.

Better than expected performance has mostly been driven by our European customers, which underscores or nimble and global sourcing model.

Alaska only accounts for 6% of our full your capacity, but represents 16% in the third quarter.

We have added three additional ships to the region with capacity up about 60% versus 2019 for this high yielding product similar to the Caribbean. We have seen very strong volume transfer Alaska sailings and load factors have been above 2019 since early this year and in line with our.

Patients.

Now, let's turn to slide six to talk about increased guidance expectations for the full year 2023.

We now expect net Neil growth of 11.5% to 12% for the full year about 450 basis point increase from the mid point of our prior guidance.

About 15% of the increase is driven by the strong second quarter results with the remainder did you two are significantly better business outlook for the rest of the year.

The further increase in yield expectations for the year as a result of higher pricing and further strength and onboard revenue, both new and like for like <unk> are driving higher pricing for our core products.

<unk> for both remaining quarters or expect it to be up in the low teens with third quarter yields up 13.75 at the mid point of our guidance range and an acceleration throughout the year.

Net Cruz cost excluding fuel I expect it to be up approximately 7% for the full year as compared to 2019.

Cause outlook reflects the continued benefit from all the actions we have taken over the last several years to support enhanced margins.

As I mentioned before the increase in full year 2023 cost is mainly as a result of increase in stock compensation expense.

We also recently announced a return to China in spring of 2024.

In anticipation of this return we plan to increase our cost in support of the restart.

As I noted on the last burning skull full year net Cruz cost also include 210 basis points of structural costs that we did not have in 2019, mostly related to operations of coke, Okay, and our Galveston terminal.

Our team's focus on delivering the best vacation experiences responsibly, while enhancing profitability is translating to the bottom line for.

For the second half of the year 90 per cent of the increase in revenue expectation flows through to earnings and increases our margin we.

We also expect record adjusted EBITDA or a P. C D for the year and then EBITDA margin that is an eyelash away from our previous record in 2019.

So in summary, based on the current business outlook, along with current fuel pricing currency exchange rates and interest rates, we expect adjusted earnings per share of $6 to $6.20.

Now turning to slide seven I will discuss our third quarter guidance.

Net yields are expected to be up 13.5% to 14% compared to 2019.

Exceptional strength and Caribbean itineraries and accelerating demand for Europe itineraries is driving the increase in yields.

N C C. Excluding fuel is expected to be up approximately 11.2%.

About half of the cost increase compared to 2019 relates to structural costs timing shift of operating expenses from the second quarter and an increase in stock based compensation expense.

Many factors contributed to variability in cause growth within quarters, and our focus is on full year cost management.

With that said, we expect costs and the second half to normalize did a yearly average with fourth quarter benefiting from a more favorable comparable mainly due to increased dry dot days in 2019.

So in summary, based on current currency exchange rates fuel rates and interest rates, we expect adjusted earnings per share of $3.38 to $3.48 for the third quarter.

Turning to our balance sheet we.

We ended the quarter with $3.7 billion in liquidity and generated $1.4 billion in operating cash flow during the second quarter.

Our liquidity remains very strong and strengthening of the balance sheet continues to be a top priority.

Better than expected cash flow generation and are disciplined capital allocation is allowed us to accelerate reduction and leverage and death levels with a goal of achieving the investment grade balance sheets metrics.

Utilizing cash flow from operations, we repaid $1.6 billion of debt during the quarter, including $392 million of our 11 and a half senior secured notes due June 2025.

Also during the quarter, we settled the four and a quarter convertible notes that were due in June with $337 million of cash and 370000 shares but.

Then in July we have redeemed an additional 300 million of our 11 and a half senior secured notes due June 2025, as a result, we only have $700 million of those notes currently outstanding.

That paid on actions will reduce interest expense in 2023 and beyond and contributed to further increase in earnings as we chip away at our high cost debt.

As for leverage this year, we will have $3.2 billion of debt related to new ship deliveries that are contributing minimal to no EBITDA in 2023.

When excluding this debt from the calculation, we expect our leverage ratio to be in the mid four times by the end of the year a significant progress toward our goal of achieving investment grade balance sheet metrics.

As our business accelerates and generates more cash flow, we will continue to proactively and methodically pay down debt and pursue opportunistic refinancing and supportive Arturo effect of goals.

In closing our business continues to accelerate and we remain committed and focused on executing our strategy and delivering our mission, while achieving artra effect of goals with that I will ask our operator to open to call for question and answer session.

Uh-huh.

Ask a question.

Followed by the number one on your telephone keypad, we ask that you limit yourself to one question and one follow up then reenter the queue for any additional questions. You may have our first question comes from the line that's Steven with empty with Stifel. Please go ahead.

Yeah, Hey, guys good morning.

First of all congratulations another very very strong quarter.

So so Jason.

We think about the trifecta targets.

It seems to us based on the trajectory of the business.

They're now is probably someone a high probability that some of these targets could be achieved.

Possibly a full year in advance of your.

Your current 2025 timeframe so.

Based on the strong demand you're seeing all ready for 24 is it is it fair to assume that achieving somebody's targets.

Much earlier than you were expecting us it was a fair statement and I look I know that's kind of a quasi 24 guidance question, but based just based on the current trends. It does just seem like you guys are on that path.

Well, thanks, Steven and good morning, good morning to everybody hope everybody is doing well.

So first I would say, Steve as we as we pointed out would try effect <unk>.

Effective was as we described it as base camp, we think there's a lot of value to unlock here in the company as we as R. As our people and our branches continued to execute them as we grow our business and so as you pointed out you know the current trends that we have been seeing uhm a <unk>.

Especially in the booking environment points too many of these metrics being able to be achieved earlier than we had anticipated them to be.

And of course, we believe very much as we have in the past that setting coordinates and pointing the organization to those coordinates.

Very important to make sure that we that we execute on them and beyond.

As we get closer to those metrics, we will certainly look to to talk about what's the next base camper base camp too.

That will be pointing the organization too, but as you said when we look at these at the trends the booking environment, how we're executing the preference for our brands.

And again being able to further close the gap here to what we see is really be competitive set with land based vacation.

The outlook looks really bright and so I.

I think we would say that it looks these trends would point to an earlier arrival at Basecamp, but we are not in a position you guys too early for us to say exactly what that timing is gonna be.

Okay Gotcha.

Thanks for that and then the second question I guess just around your booking visibility today, which seems like it's it's probably as good as it's ever been and I guess My question is you know I think historically you've turned the.

The calendar year, let's say.

50, 560 per cent kind of books <unk> I know, it's still early on but based on your.

Burnt marketing plans the current strong demand it's out there not only from the North American side of things, but now it seems like your European customers are getting stronger do you expect if we.

Fast forward to the end of December moving into January .

You could turn the calendar year at a higher position versus where you've been historically.

Well I think what Ah so obviously in our in our commentary about how the us being booked you'll have booked head on reed and volume and our booking environment, especially and most of these bookings are relating to 2024, we feel really strong are really good about the demand environment and that very.

Much points to 2024.

What I would say is it is very possible that there weren't any more.

Alright, I'm more book position than we have been in the past, but I would just we've said this in the past you know our our goal is to optimize revenue.

So you could be plus or minus 5% on a on a book position standpoint.

As we kind of crossed periods cause we're looking to optimize revenue not just optimize how much you have on the books at a certain point in time and I think our teams have demonstrated I'm, even as you see as we cross you here are your ability to you utilize when we would say <unk> state of the art tools.

To to manage and optimize our revenue not just on ticket, but also on on board is is once helping us helping us lead to optimizing are are are your profile.

Okay Gotcha, Thanks, guys really appreciate it congratulations.

<unk>.

Your next question comes from the line of Robin Finally, with you B S. Please go ahead.

Great. Thanks, obviously strong results just looking at your expense guidance outside of just the you know the compensation that's tied to performance it hasn't really changed it looks like the <unk>.

Out there in general so I know, it's early to talk about 2024, but.

If you're hired expense hasn't sort of worsened over the last two quarters does that give you the visibility that maybe 2024 expense could look kind of like a normal here in terms of the inquiry here over here is if the outlook hasn't been you know worsening for you is it is it maybe has for some others. Thanks.

Hi, Robyn good morning, So yes first of all the the expects guidance.

We've we've we've sure today is really the result of all the options that we talked about and really our teams exceptional job of managing managed and expenses and expanding margin is our yield is growing.

And obviously.

2000, 2003, but we're comparing to 2019 that was four years ago. So I should be looking into 2024, there's anything nothing that as a extra ordinary there are a couple of things that are going to be a little bit structural for example, we are opening hideaway beach, but generally it should be.

A normal year.

Yeah Robin.

I just wanted to add into it because I I do think it's.

It's important to recognize.

If you're kind of string together the calls through through the pandemic and all the actions that we took to position ourselves to to really kind of outperformance grow our margins a lot of all that work really helped absorb.

The vast majority pretty significant inflation that we saw across a lot of the items that impact our product and and so we we we we were able to really absorb that and and still produce significant net promoter score so very very thoughtful not impacting the product.

The experience, which could be easily done to help something on the short term, but in the long term.

It has really paid off for us as there's clear and very strong preference on a vacation standpoint to to travel with with the group and and the and the great brands that are inside of it.

Oh, that's great. Thanks, and then just one clarification on you mentioned you know restarting China in in April 2024 can you give us a sense of what that might you know obviously, some startup costs to that any way to sort of clarify the magnitude of that thanks for.

For me.

Good morning, Robyn, it's Michael and.

I happen to be very fortunate today, because I'm, calling you from ER beautiful allure of the seas sitting in a conference room used.

Using styling technology.

Two video conference with my colleagues and participate in the cold weather on the the President's cruise, we have of a screen and a half thousand of a loyal gas along with two and a half thousand other guests on this.

Great voice, so I'm actually sitting here in my swimwear.

See that's what I have to tell you that huckleberry.

[laughter] I need to say that it's just an amazing thing to be back with a loyal guests on the product and the brand and it was quite amazing when you kind of emotions self with the customer, but kind of incredible feedback they give you and the loyalty that so many of our guests have royal Caribbean, It's really.

A beautiful thing.

Uhm on China, Yeah, we we've we've open so we we had a kind of a thoughtful process as it relates to bringing back our employees overtime. So as we move through twenty-three. We obviously taken will SG&A expense and we have accommodated that in.

And the full cast obviously and we also mitigated some of that expense.

And then we we look into 2024 it'll be a full year of typical operations for one ship operation with a lotta <expletive> services provided by our Singapore office.

I can tell you that the it's early early days, yet, but the signals look pretty positive we feel good about what we're seeing in terms of bookings and we feel pretty comfortable with operations in how we scaled back teams to to sell and market operate to China operation.

Yeah, and and just Robinson. Your question you know the the the increase between our may guidance and and costs and what you have today is entirely as a result of the stock based compensation, which is the majority of that increase in a little bit of that China expensive. We said Michael was talking about.

Yeah.

Okay. Thank you thanks.

Please Robert.

Your next question comes from the line of brand my door with Barclays. Please go ahead.

Hey, good morning, everybody an excellent quarter.

So first on European consumer demand you mentioned it several times and it was clearly one of the surprising positive takeaways here just just maybe if you could give us a sense of how you measure the European consumers recovery.

Versus how you measure the U S consumers recovery index to 19, just trying to get a sense, how how far back the European consumer ears. So that we can kind of get a sense of your sort of further further recovered from that from that source to go.

Yep brand I I, I, I think I would I would position and less about their recovery in terms of what their willingness is to spend because their willingness to spend was very competitive with the north American consumer I think the differences is that they were delayed.

And kind of activating their vacation and so you know they were.

We we talked a little bit about on the May call. You know, we we we expected Europe to be a little bit lighter versus 19 in terms of load factor and it came roaring backing massive story of one of the North American consumer just feeling that they needed to for certainly certainly.

Vacation in Europe , but also the European consumer kind of was very much part of that story. So I think it's it's less about what they can afford to spend or what they are spending I think it was more that they were they were delayed by calling 45 to 60 days to what we typically would see in a in a normal booking window and again. These are things that are.

On the margins.

Because we are we you know we were substantially book, obviously going into the summer for Europe .

Okay. That's super helpful and then.

On 24, you guys have it exciting docket here with the.

Icon and a coke, okay expansion in China, reopening and Uhm, how would you sort of stack of those three things in terms of.

Tailwind to yield in the year of 24, if they're all something meaningful eventually quantifiable and then is there anything diluted to yields and 24, I'm I'm trying I guess to be diluted it cause it's sort of a restart ear and then and then Utopia is a brand new ship. It it's in a short market. So so how did.

We think about that thank you.

Hi, Brian is Michael we don't see China as being dilutive, we feel very positive about China, and we certainly see Utopia is a big strong game changer, and what we've seen so far from our bookings, but volume and rate.

Are incredibly encouraging and we've been very thoughtful as Jason mentioned earlier about the strategy of putting really outstanding hardware combined with.

Excellent destination.

Into the short product market because it truly is the on ramps and you to cruise and also first to brand. So indications as it relates to new product lineup coming online in 24, an exceptionally positive and I I'd also like to add that icon in Utopia and in fact wonder.

When you look at this gap between land base resorts and Lambastes experiences. This is some of our top products, particularly these products. We're talking about there really is no cap. The gas has been quite significantly and we feel very positive about where are we going to go on that journey. So.

You know the the as we as we think about 24 as we look at these products as we as we see what's occurring in terms of the booking activity both from a volume and rate perspective, and the excitement we see for these products, we feel very positive about their impact in 24.

Yeah.

One one other quick comment on the on the yield side of things and it's just goes into the booking commentary.

You clearly, there's there's incredible demand for our new ships and you'll you'll icon.

Well, we'll certainly break and has broken I think probably every record in the book, but I think it's important when we when we when we look at at at the date of an inside of our bookings that it's not just the new hardware. The like for like is also very strong and growing and and that commentary as I said is is you know some of it is 2002.

Three and what we have left a book so it most of that commentary really relates to 2024.

Yep and Brent I'll, just add two more things one is obviously we have this year. We we are not returning to normal load factors, but that the first half of the year was a little bit lower so that that should I'll also contribute to yield next next year on the other hand, we are now in the planning process, obviously for 24.

And we're we're considering older the dry docks that we need to do next year and could be more elevated than than than this year, which obviously will will impact some of the costs and a little bit on the yield yeah.

And the elevation on the dry dock is just a reflection of of ships ever came out of Covid that had had miss those windows and so it will be a little bit more elevated in in in 2024, but.

Just the point [noise].

Alright, that's it for me congrats again.

Thank you. Your next question comes from the light CPR with Cleveland Research Company. Please go ahead.

Thanks, and nice to see on the results I wanted to dig into the yield upset a little bit more I know you mentioned it was a mix of onboard and ticket.

But when you think about I think on T V by four points to Q beat by almost three points and when you consider the volume of business kind of on the books, you know going into the quarter.

It seems to speak to price maybe on a leading edge basis really exhibiting a nice trajectory. So curious if you could kind of comment on that and and how that informs kind of your approach to 2024 as you are thinking about finding the balance in the broken curve.

Well, Hey, Vince good morning, and hope you're doing well.

As as as nothing he commented in his opening remarks.

As as we look at what what what kind of drove one of the key drivers of a difference from the may guidance till today.

Really all price right. So you know load factor if for the back half of the year, we had expected to be.

Normalized and so I think what has been a surprise to US has just been our ability to continue to raise price and demand continuing to come in at higher levels significantly higher levels than we have seen in previous periods and so I think it <unk>. It just talks too I think one just preference for our brands.

Well, our commercial teams have been executing and also keeping our customers more and more in our in our ego system has been a huge tailwind for us and I think that that kind of broader combination of things. When you add that to you know just the the the value gap.

To Lambaste vacation is driving our ability to raise prices and so as we as we said earlier our a P DS.

For the full year are up over double digits.

For the back half of the year, they are going to be in the low to mid teens in terms of rate increase relative to 2019 that is significantly better than we had anticipated. When we gave guidance earlier this year and it's really a reflection of even as we as we take on the bookings and as we increase pricing. We're not we're not really seeing that point where.

There prices is impacting are are.

A demand and then the other component of this is just onboard spend which is.

<unk> is obviously a combination of two a degree of price, but really the main driver of that has been our ability to be much more effective to curate and take friction out of the process for our customers to book their activities on the ship and of course, we have a great commercial reasons of doing that there is also an incredible.

Uhm guest experience benefit of doing that as you are our ultimate goal here is to try to give a day back to our to our guests to come on our ships and instead of them having to spend a day booking their restaurants and booking their spa appointments and short surgeons, they're able to do that ahead of time and we are really in the early innings of that especially.

<unk> sure rating they stole a lot of friction points for us to resolve but our teams are really just done an exceptional job of moving that forward, which you can also see supporting an even more elevated customer deposit balance as as we are able to take on those those onboard spend bookings.

Great that that's really helpful color and I wanted to zoom in a little bit more on coke. Okay. I think that you guys were on track to take about two and a half million passengers. There. This year kind of with a path towards $3.5 million in 2025 curious kind of where <unk>.

Anti for maybe falls within that window, if it's closer to 25 or 23 and then.

Just what you guys are seeing in terms of customer feedback around desire.

To repeat visits to coke, Okay, and maybe you know how you think about the decision to send Utopia icon.

Two.

Coke, Okay as well.

[noise] well since.

Thank you for the question.

One of the reasons, we called perfect a perfect day is it it really is perfect and [noise]. It is driving a lot of the demand and people are booking the ships in the I tunes recent sale to perfect day. It really is delivering an exceptional customer experience and people value that immensely and we see the repeat.

Rates going back to perfect day accelerating cause.

As we look at the volume of guess, who got a perfect day in 23 24, 25, obviously, we plan to open Hideaway Beach at the end of this year in time for icon in Utopia, That's gonna increase our ability to add more guest too perfect day.

Probably about 3000 people and that'll come online at the literally in December of this year. So that allows US then to continue to increase our capacity into perfect day. We've also got.

The Royal Beach club in Nassau, which is moving through its various approval processes environmental and governmental permits and what have you. That's looking as if it's a promising and with with planning on opening the Royal Beach club and in the summer of 25, So when you when you.

Add that experience the Royal Beach club, along with perfect day, we feel like we genuinely have the ultimate Big weekend and that's of course, why we've got Utopia coming on line and going straight into the show up market. So it's a great product. It it's combined with incredible assets the ships.

Sailing too perfect day, I don't think perfect day without the ships would be the complete perfect vacation, but we really do feel like we've got it right and we continue to focus on delivering excellent guests experiences it's somewhat of an obsession within the the team and it costs more recently celebrity.

[noise] announced that they're also selling to perfect day. So that's great for the celebrity brands as well. So we we see it as a great success and we continue to refine it and to develop it and we continue to plan to bring a curse to perfect day.

That all mixed thank you. Thank you.

Yeah.

And your next question comes from the line of Matthew both with J P. Morgan. Please go ahead.

Great Thanks, and congrats on another nice corner.

Thank you.

So maybe to elaborate on the acceleration and trends that you're seeing in both passenger ticket and onboard spend relative to 2019, I guess, how best to think about sustainability multiyear as you breakdown trends between new to cruise that you are seeing versus the existing cohorts and are there any lead indicators.

At all that point to any future softening on any metrics.

Yeah well.

Well, thanks, Matt well first I would say that I think the acceleration that we're seeing is is on a few points. One I think we're getting more sure of the wallet. Because you know, we're helping you a better kind of cure rate and take friction out of the out of the experience and and you can see that in just the volumes of gas that are that are willing to book.

Directly with us online.

Because we're able to cure rate the the actual cruise the actual cruise booking also all the things that we're doing pre cruise to get them to book ahead of time and so a lot of it some of it is price driven but a lot of it is just the friction that we've taken out of it and the and the commercial tools, we put in place.

You make it easier for them to to book those experiences.

And so I think that's a big part of the acceleration the other part I think the acceleration is that we have.

We really do feel that we have the best brands. The best ships. The best destinations kind of in play here, which we think is is is really excelling celebrating the preference.

For the vacation experiences that we're offering to to our guests. So I think that's also a very important thing, but really and everything that we've talked about today and what we said in a release in the storyline. There are no indicators of softness there's really only indicators of acceleration and what we're seeing.

As we continue to have the ability to to raise pricing and and when we of course, when we put out our guidance. It's really based off of what we're seeing today and the booking environment and of course, we we've seen a continued set of acceleration from periods of period. So I think just allow.

Having a lot of what you're seeing is execution and I think a lot of what you are seeing as long term strategies coming into play versus you know just you just kind of necessary riding the market and so I think that's important but I just want to emphasize at this point, whether it's in the booking environment on the ticket side, whether it's on the onboard side we.

Don't see any indicator of weakness.

Yeah, and that's all just said Yeah go ahead, yeah <unk> I'll just add also you know obviously, we made great progress on closing the gap too to land base vacation, but the value gap is still there and we see this as a as a great opportunity to continue to to to grow yields and then just taking market share from the global.

Leisure market right and you can see some of that success with new to cruise, that's really core to our strategy.

Right and then just on the bottom line is a follow up so as we think about EBITDA margins multi year and just looking back and prior peak level is there any reason to consider that trifecta plan as a feeling or just any unlocks to consider which would point to this model is accretive relative to pre pandemic profitability.

Yeah, So as you know.

Perfect for Us as Jason said was Basecamp and if you look at the the Triple EBITDA per ABCD triple digits Ebert upper a b C D, which.

Obviously has at least 100 it does have a margin expansion beyond 2019, as we continue to grow that we see a lot of opportunities on on multiple levels right growing yields lower acquisition cost you know.

Just scaling the business as we grow and our ambitions are are are above 2019 levels that's for sure.

But I would just add there is nothing structural.

That I'd say put that at risk I think what we need to focus on and we notice about our our business model is moderate yield growth.

I would not call this year moderate but moderate yield growth good cost control.

Leads to expanded our margins as we grow our business and you know every every 1% change in our yield is $110 million plus and one per cent change in our cost is about $50 million. So you grow your yields faster than you grow your costs and and you're going to continue to expand your margins.

Congrats again.

I will now turn the call back over to you know probably hold C. S. L for a closing remark.

Well. Thank you everyone for your participation and interest in the company Michael will be available for any follow ups. We wish you all a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

You get.

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