Q3 2023 Royal Caribbean Group Earnings Call

Is January 20.

Good morning, My name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Royal Caribbean groups third quarter 2023, and the business update earnings call. All participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question during the.

Session, you will need to press star one on your telephone keypad I would now like to introduce Michael Mccarthy, Vice President of Investor Relations. Mr. Mccarty the floor is yours.

Good morning, everyone and thank you for joining us today for our third quarter 2023 earnings call joining.

Joining me here in Miami are Jason Liberty, Our Chief Executive Officer, Dr. Charlie holds our Chief Financial Officer, and Michael Bayley, 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 as our filings with the SEC for a description of these factors we do not undertake to update any forward looking statements as circumstances change also we will be discussing certain non-GAAP financial measures, which are adjusted as defined and a reconciliation of all.

non-GAAP items can be found on our Investor relations website and in our earnings release, unless we state otherwise all metrics are on a constant currency adjusted basis.

Jason will begin the call by providing a strategic overview and update on the business.

We will follow with a recap of our third 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 am pleased to turn the call over to Jason.

Thank you Michael and good morning, everyone before we begin today I would like to first acknowledge the devastating events taking place in the middle East.

Horrific terrorist attacks on Israel over two weeks ago have no place in a civilized society.

The scale and the barbarity of those attacks should shock us all and brings the situation in the middle East to a very dangerous alone.

Regina: Good morning, my name is Regina, and I will be a conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group, third quarter, 2023, and business update earnings call. All participants are in a listen only mode. After the speaker presentation, there will be a 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.

We are heartbroken at the loss of so many innocent lives than and an award that continues to this day.

Our thoughts are with all who have been impacted including many members of our own team.

I would also like to recognize the incredible effort from our shoreside teams and crew aboard Rhapsody of disease, we have been working tirelessly with the U S Department of state to help safely evacuate Americans from Israel.

Regina: Mr. McCarthy, the floor is yours. Good morning, everyone, and thank you for joining us today for our third quarter, 2023, earnings call. Joining me here in Miami are Jason Liberty, our chief executive officer, Naftali Holtz, our chief financial officer, and Michael Bayley, president and CEO of Royal Caribbean International. Before we get started, I'd 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.

Heartfelt gratitude goes out to all involved.

As it relates to the impact of these events on our business about one 5% of our capacity in the fourth quarter had a plan to visit Israel.

Most of the impacted deployment was quickly adjusted including a few sailings that were home porting in HIFU.

Regina: A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issue this morning, as well as our filings with the SEC for description of these factors. We do not undertake to update any forward-looking statements as circumstances change. Also, we will be discussing certain non-gap financial measures which are adjusted as defined in a reconciliation of all non-gap items can be found on our investor relations website and in our earnings release.

The evacuation services Rhapsody of the Seas will provided pro bono to the U S government and these costs are included in our financial forecast combined.

Combined with canceled and adjusted itineraries in the region for the remainder of the year the impact amounts to about a nickel in earnings per share.

Yeah.

Now moving onto the business our teams have done an outstanding job delivering on another strong quarter as we delivered a yield improvement of close to 17%.

And beat the midpoint of our EPS guidance by 12%.

Speed is further solidifying 2023, as a banner year and positioning us extremely well for 2024 and beyond.

Regina: Unless we state otherwise, all metrics are on a constant currency adjusted basis. Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our third quarter and an update on our latest actions and on the current booking environment. We will then open the call for your questions.

I want to thank the entire Royal Caribbean group team, whose enthusiasm and dedication enables us to deliver the very best vacation experiences responsibly, while generating strong financial results.

During the third quarter, all key itineraries exceeded our already elevated expectations as we delivered a record 2 million memorable vacation and exceptional guest satisfaction scores.

Michael Mccarthy: With that, I'm pleased to turn the call over to Jason. Thank you, Michael, and good morning everyone.

Jason Liberty: Before we begin today, I would like to first acknowledge the devastating events taking place in the Middle East. The horrific terrorist attacks on Israel over two weeks ago have no place in a civilized society. The scale and the barbarity of those attacks should shock us all and bring the situation in the Middle East to a very dangerous low. We are heartbroken at the loss of so many innocent lives, then, and in the war that continues this day.

As you can see on slide three.

We had record yields for the quarter, driven by new hardware record pricing in the Caribbean and Europe as well as onboard revenue rates that were up about 30%.

While the performance of our Caribbean Itineraries has been excellent throughout the year, we were particularly pleased with a double digit yield growth achieved on our European itineraries in the third quarter.

As we look to the full year the strong performance in the third quarter and continued acceleration in the booking environment is positioning us well to deliver over a 13% yield growth for the year and earnings per share that is twice our original guidance for the year.

Jason Liberty: Our thoughts are with all who have been impacted, including many members of our own team. I would also like to recognize the incredible effort from our Shoreside teams and crew aboard Rhapsody of the Seas, who have been working tirelessly with the U.S. Department of State to help safely evacuate Americans from Israel. My heart-felt gratitude goes out to all involved. As relates to the impact of these events on our business, about one and a half percent of our capacity in the fourth quarter had planned to visit Israel.

The unprecedented acceleration in demand and pricing for our leading brands combined with stronger demand for onboard experiences where certainly the main drivers of our outperformance.

Adding to that our strong focus on cost has been an important contributing factor to our elevated 2023 results.

Jason Liberty: Most of the impacted deployment was quickly adjusted, including a few sailings that were home porting in Haifa. The evacuation services a wrap to the U.S. Government and these costs are included in our financial report. Cast. Combined with canceled and adjusted itineraries in the region for the remainder of the year, the impact amounts to about a nickel and earnings per share.

The healthy demand environment is very encouraging as we continue to build the business for 2024 and beyond.

A year ago, we announced a three year financial performance program Trifecta, our teams have rallied around to try effected targets focusing on generating strong quality demand enhancing margins building for the future and most of all delivering the best vacations in the world.

Jason Liberty: Now moving on to the business, our teams have done an outstanding job delivering on another strong quarter as we delivered a yield improvement of close to 17% and beat the midpoint of our EPS guidance by 12%. This beat is further solidifying 2023 as a banner year in positioning us extremely well for 2024 and beyond. I want to thank the entire Royal Caribbean group team whose enthusiasm and dedication enables us to deliver the very best vacation experiences responsibly while generating strong financial results.

As you can see from our results, we are well on our way to achieving trifecta.

Our proven formula for success remains unchanged moderate capacity growth moderate yield growth, although I would not describe this year as moderate.

And strong cost controls lead to enhanced margins profitability and superior financial performance.

As I've said in the past trifecta creates a pathway back to what we internally described as base camp. However base camp is not our final destination and our ambitions go well beyond it.

Jason Liberty: During the third quarter, all key itineraries exceeded our already elevated expectations as we delivered a record 2 million memorable vacations and exceptional guest satisfaction scores. As you can see on slide three, we had record yields for the quarter driven by new hardware, record pricing in the Caribbean and Europe as well as onboard revenue rates that were up about 30%. While the performance of our Caribbean itineraries has been excellent throughout the year, we were particularly pleased with a double-digit yield growth achieved on our European itineraries in the third quarter.

As we think about 2024 for the Royal Caribbean Group from a consumer demand standpoint, we look to both macro trends and data points from the millions of daily customer interactions.

On a macro level some of the economic indicators continued to provide some conflicting signals.

However, when we look closer at these trends and indicators related to our customers and their related behaviors and strong propensity to cruise we see that many of these macro indicators are less relevant to our business.

We have more than 130000 guests sailing on our ships everyday and millions more who book or engage with us throughout our commercial platforms. While we continue to see across all markets brands and products is an exceptionally engaged consumer that is looking to book their dream vacations with us.

Jason Liberty: As we look to the full year, the strong performance in the third quarter and continued acceleration in the booking environment is positioning us well to deliver over 13% yield growth for the year and earnings per share that is twice our original guidance for the year. The unprecedented acceleration in demand and pricing for our leading brands combined with stronger demand for onboard experiences were certainly the main drivers of our outperformance. Adding to that, our strong focus on cost has been an important contributing factor to our elevated 2023 results. The healthy demand environment is very encouraging as we continue to build the business for 2024 and beyond.

The positioning of our brands attract guests across broad demographics psychographics and at a median household income of at least $125000.

Our customers sentiment is bolstered by strong labor markets high wages surplus savings and elevated wealth levels.

Even better for US is the fact that overall spend on experiences continue to grow and is currently up 25% compared to 2019 with twice the amount spent on goods.

Jason Liberty: A year ago we announced a three-year financial performance program TriFecta. Our teams have rallied around the TriFecta targets focusing on generating strong quality demand, enhancing margins, building for the future and most of all, delivering the best vacations in the world. As you can see from our results we are well on our way to achieving TriFecta. Our proven formula for success remains unchanged, moderate capacity growth, moderate yield growth, although I would not describe this year as moderate and strong cost controls lead to enhanced margins, profitability and superior financial performance. As I've said in the past, TriFecta creates the pathway back to what we internally describe as base camp. However, base camp is not our final destination and our ambitions go well beyond it.

Cruising remains an exceptional value proposition with strong demographics, and secular tailwind, allowing us to outperform the broader leisure travel industry.

Our goal is to further narrow the gap to land based vacations as we attract even more satisfied customers to our vacation ecosystem.

I believe that is why when people are raising concerns in other industries like hotel airline real estate.

Our commercial apparatus is firing on all cylinders with visits to our websites in the third quarter doubling that of 2019.

Our travel partners are also delivering meaningfully more bookings in 2019 levels and even beating our elevated expectations our brands global appeal and nimble sourcing model allows us to attract the highest yielding guest and partially mitigate the impact from the stronger dollar.

Jason Liberty: As we think about 2024 for the Royal Caribbean Group from a consumer-demand standpoint, we look to both macro trends and data points from the millions of daily customer interactions. On a macro level, some of the economic indicators continue to provide some conflicting Reynolds. However, when we look closer at these trends and indicators related to our customers and their related behaviors and strong propensity to cruise, we see that many of these macro indicators are less relevant to our business.

Now I'll focus on 2024, which is shaping up to be another incredible year for the Royal Caribbean Group.

Our capacity is growing by 8% and our deployment across markets is relatively consistent with 2023 with slightly more Caribbean slightly less Europe and they returned to China for the first time in four years.

Demand for 2024 has continued to accelerate with bookings consistently outpacing 2019 levels.

Jason Liberty: We have more than 130,000 guests sailing on our ships every day in millions more who book or engage with us throughout our commercial platforms. What we continue to see across all markets, brands and products is an exceptionally engaged consumer that is looking to book their dream vacations with us. The position of our brands attract guests across broad demographics, psychographics, and at a median household income of at least $125,000. Our customers' sentiment is bolstered by strong labor markets, high wages, surplus savings, and elevated wealth levels.

Wide margin there.

This has resulted in a booked position that is ahead of all prior years at higher rates further positioning us for another year of strong yield and earnings growth.

While still early we anticipate making significant progress towards our trifecta goals in 2024 and based on current fuel FX and interest rates, we anticipate earnings that we'll start with at least a $9 handle.

Our operating platform is larger and stronger than it has ever been with the best brands and the most innovative fleet and destinations and the best people.

Jason Liberty: Even better for us is the fact that overall spend on experiences continue to grow and is currently up 25 percent compared to 2019, which twice the amount spent on goods. Cruising remains an exceptional value proposition with strong demographics and secular tailwinds, allowing us to outperform the broader leisure travel industry. Our goal is to further narrow the gap to land-based vacations as we attract even more satisfied customers to our vacation ecosystem. I believe that is why when people are raising concerns in other industries like hotel, airline, real estate, our commercial apparatus is firing on all cylinders with visits to our websites in the third quarter, doubling that of 2019.

Each of our brand as the leader within their category.

Royal Caribbean International dominates the contemporary market celebrity cruises has redefined the premium travel space and no one delivers ultra luxury and expedition etsy like Silversea.

By combining their unique strengths, we have created an attractive vacation ecosystem in which the sum is greater than the parts.

Essentially we are turning our delivery of a vacation or a lifetime into a lifetime of vacations. We will continue to ensure that each brand has what it needs to continue doing what it does best while leveraging our enhanced commercial capabilities to capture and keep customers in our ecosystem from young families to <unk>.

T nesters as they seek to return to us time and time again for the best vacation experiences.

Jason Liberty: Our travel partners are also delivering meaningfully more bookings than 2019 levels and even beating our elevated expectations. Our brand's global appeal and nimble sourcing model allows us to attract the high-seating guests and partially mitigate the impact from the stronger dollar.

Our innovative new ships and onboard experiences allow us to continue to differentiate our offerings as well as deliver superior yield and margins.

In August we welcomed silver Nova the first of the new evolution class for our Silversea brand.

And the next few weeks celebrity cruises will take delivery of celebrity.

Jason Liberty: Now I'll focus on 2024, which is shaping up to be another incredible year for the growing by 8 percent, and our deployment across markets is relatively consistent with 2023, with slightly more Caribbean, slightly less Europe, and a return to China for the first time in four years. The man for 2024 has continued to accelerate with bookings consistently outpacing 2019 levels by a wide margin. This has resulted in a book position that is ahead of all prior years at higher rates, further positioning us for another year of strong yield and earnings growth.

And Royal Caribbean International will take delivery of the game changing icons of the seas later this quarter.

With revenue sailings, beginning at the end of January.

In 2024, we plan to take delivery of your Toby overseas for Royal Caribbean International and Silver Ray for Silversea.

With each new ship, we raise the bar in the travel industry, while enhancing what our guests already know and love.

Also debuting in January 2020 for just in time for the arrival of icon of the Seas is hideaway Beach hideaway beaches, our newest adult only ultimate beachfront Paradise at perfect day at Croke Okay.

Jason Liberty: While still early, we anticipate making significant progress towards our trifecta goals in 2024, and based on current fuel effects and interest rates, we anticipate earnings that will start with at least a $9 handle. Our operating platform is larger and stronger than it has ever been, with the best brands, the most innovative fleet, and destinations, and the best people. Each of our brand is the leader within their category. Royal Caribbean International dominates the contemporary market.

Pre cruise sales for Hideaway beach, and premium offerings are exceeding our expectations.

We are further enhancing our e-commerce capabilities to optimize our distribution channels.

Even more customer loyalty and lower our acquisition costs.

<unk> seen a significant increase in new to brand new to cruise customers. This year.

In fact in the third quarter approximately two thirds of our guests were new to cruise or new to brand all while also doubling the repeat booking rate, indicating strong loyalty and satisfaction.

Jason Liberty: Celebrity Cruises has redefined the premium travel space, and no one delivers ultra-luxury and expedition at sea like silvers, by combining their unique strengths. We have created an attractive vacation ecosystem in which the sum is greater than the parts. Essentially, we are turning our delivery of a vacation of a lifetime into a lifetime of vacations. We will continue to ensure that each brand has what it needs to continue doing what it does best while leveraging our enhanced commercial capabilities to capture and keep customers in our ecosystem.

We've continued to remove friction and make it easier than ever for guests to pre book their activities with about a third of those purchases now coming through the mobile App and.

In the third quarter about 70% of guests made pre cruise purchases at much higher <unk> than in prior years.

In the third quarter customers purchased onboard experiences before their crews spent two five times more than those who only bought once on board.

As we look into 2024, we have booked over double the amount of pre cruise revenue compare to this year.

Jason Liberty: From young families to empty nesters as they seek to return to us time and time again for the best vacation experiences. Our innovative new ships and onboard experiences allow us to continue to differentiate our offerings as well as deliver superior yield and margins. In August, we welcomed Silver Nova, the first of the new evolution class for our Silver Sea brand. In the next few weeks, celebrity cruises will take delivery of celebrity essence.

More guests engaging before their crews and at higher prices.

We will continue to excel in the core and drive business excellence in order to increase yield and capture efficiencies across our platform.

I said it before but it's worth mentioning again, our formula for success remains unchanged.

Moderate capacity growth moderate yield growth and strong cost controls will lead to enhanced margins profitability and superior financial performance.

Jason Liberty: And Royal Caribbean International will take delivery of the game-changing icon of the seas later this quarter with revenue sayings beginning at the end of January. In 2024, we plan to take delivery of utopia of the seas for Royal Caribbean International and Silver Ray for Silver Sea. With each new ship, we raise the bar in the travel industry while enhancing what our guests already know and love. Also debuting in January 2024, just in time for the arrival of icon of the seas.

Our sustainability ambitions help inform our strategic and financial decisions on a daily basis, ensuring that we always act responsibly, while achieving our long term profitability goals, we are making progress on our seed our future commitments to sustain the planet energized communities and accelerate innovation.

We are also progressing towards a double digit reduction in carbon intensity versus 2019 by 2025.

And are exploring multiple options for low carbon based solutions for our existing fleet, while we design the fleet of the future with flexibility in mind.

Jason Liberty: This is Highway Beach. Highway Beach is our newest adult-only ultimate beachfront paradise at perfect day at Coco K. Pre-Cruise sales for Highway Beach and premium offerings are exceeding our expectations. We are further enhancing our commerce capabilities to optimize our distribution channels, build even more customer loyalty and lower our acquisition costs. We have seen a significant increase in new to brand and new to cruise customers this year. In fact, in the third quarter, approximately two thirds of our guests were new to cruise or new to brand.

This past quarter, we concluded a 12 week biofuel trial program in Europe, a first in the industry to cover multiple fuel types and multiple operating areas. The trials resulted in a 20% carbon reduction while also helping to better understand supply chain dynamics that.

The decision that we're making now will help position us to deliver a net zero shipped by 2035 and achieve our climate strategy of destination net zero.

Jason Liberty: All while also doubling the repeat booking rate, indicating strong loyalty and satisfaction. We have continued to remove friction and make it easier than ever for guests to pre-book their activities with about a third of those purchases now coming through the mobile app. In the third quarter, about 70% of guests made pre-cruise purchases at much higher APDs than in prior years. In the third quarter, customers who purchased onboard experiences before their cruise spent two and a half times more than those who only bought one onboard.

Our business is performing exceptionally well and we are making significant progress towards achieving trifecta goals.

Future of the Royal Caribbean Group is bright with our strong platform and proven strategies, we are creating a lifetime of vacation experiences for our customers. While also delivering long term shareholder value that allows us to reach new financial records with that I will turn it over to Naftali <unk>.

Thank you, Jason and good morning, everyone.

Let me start with third quarter results. Our teams delivered another strong performance with adjusted earnings per share of $3 85.

Jason Liberty: As we look into 2024, we have booked over double the amount of pre-cruise revenue compared to this year with more guests engaging before their cruise and at higher prices. We will continue to excel in the core and drive business excellence in order to increase yield and capture efficiencies across our platform.

12% higher the midpoint of our July guidance.

We finished the third quarter with a load factor of 110% and with net yields that were up almost 17% versus 2019 about 300 basis points higher than the midpoint of our July guidance.

Overall about 50% of the better than expected yield performance was driven by European itineraries with the remainder mainly driven by Caribbean and Alaska rates were up approximately 18% in the third quarter compared to 19 and onboard apd's have been consistently higher even as load factors would be turned to his.

Jason Liberty: I said it before, but it's worth mentioning again, our formula for success remains unchanged. Moderate capacity growth, moderate yield growth, and strong cost controls will lead to enhanced margins, profitability, and superior financial performance.

Jason Liberty: Our sustainability ambitions help inform our strategic and financial decisions on the daily basis, ensuring that we always act responsibly while achieving our long-term profitability. Goals. We are making progress on our seed of future commitments to sustain the planet, energize communities, and accelerate innovation. We are also progressing toward a double-digit reduction in carbon intensity versus 2019 by 2025 and are exploring multiple options for low carbon-based solutions for our existing fleet while we design the fleet of the future with flexibility in mind.

Oracle levels.

I N C C. Excluding fuel increased 10, 3% compared to the third quarter of 2019, a 100 basis points lower than our July guidance, lower operating costs as well as favorable timing contributed to the better than expected costs.

Our teams continued to deliver strong top line growth, while maintaining focus on costs to expand our margin.

We delivered an EBITDA margin of nearly 42% in the third quarter on par with 2019 levels.

Over 100% of the revenue outperformance during the quarter dropped to the bottom line, leading to higher adjusted EBITDA and earnings versus expectations.

Jason Liberty: This past quarter we concluded a 12-week biofuel trial program in Europe, a first-in-the-industry to cover multiple fuel types and multiple operating areas. The trials resulted in a 20% carbon reduction while also helping to better understand supply chain dynamics. The decision that we are making now will help position us to deliver a net zero ship by 2035 and achieve our climate strategy of destination net zero.

We continue to see strong demand and pricing for both 2023 and 2024 sailings. This has resulted in higher than expected load factors and record yields into third quarter, along with a record booked position on a forward looking basis.

Now did we are in the fourth quarter. Many of our ships have transitioned from their summer to the winter itineraries.

Jason Liberty: Our business is performing exceptionally well and we are making significant progress towards achieving trifecta goals. The future of the Royal Caribbean Group is bright with our strong platform and proven strategies we are creating a lifetime of vacation experiences for our customers while also delivering long-term shareholder value that allows us to reach new financial records.

In the fourth quarter about 55% of our capacity will be in the Caribbean, 11% in Europe and about 13% in the Asia Pacific region.

The remaining capacity is spread across a number of other itineraries, including repositioning South America and expedition cruises.

Naftali Holtz: With that, I will turn it over to NAFTAWI. NAFTAWI. Thank you Jason and good morning everyone.

Now, let's turn to slide six to talk about our guidance for the full year 2023, we now expect.

Naftali Holtz: Let me start with third quarter results. Our teams delivered another strong performance with adjusted earnings per share of $3.85. The wealth percent higher the midpoint of our July guidance. We finished the third quarter with a load factor of 110 percent and with net yields there were up almost 17 percent versus 2019, about 300 basis points higher than the midpoint of our July guidance. Overall, about 50 percent of the better than expected yield performance was driven by European itineraries with a remainder mainly driven by Caribbean and Alaska.

Specced net yield growth of 12 nine to 13, 4% for the full year of 140 basis points increase from the midpoint of our prior guidance.

Net cruise costs, excluding fuel are expected to be up 7% to seven 5% for the full year as compared to 19, our cost outlook has not changed from our July guidance. We do however have slightly fewer a P. C. D's due to the canceled sailings that included Israel impacting NCC ex by approximately.

30 basis points.

Yeah.

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

Naftali Holtz: Rates were of approximately 18 percent in the third quarter compared to 19 and onboard APDs have been consistently higher even as load factors return to historical levels. NCC, excluding fuel increased 10.3 percent compared to the third quarter of 2019. A hundred basis points lower than our July guidance. Lower operating costs as well as favorable timing contributed to the better than expected costs. Our teams continue to deliver strong top line growth while maintaining focus on costs to expand our margin with delivered an EBITDA margin of nearly 42 percent in the third quarter on par with 2019 levels.

We continue to expect record adjusted EBITDA or a P. C D for the year and an EBITDA margin that is back to our previous record in 2019.

So in summary, we expect adjusted earnings per share of $6 68 to $6 63.

And it includes approximately 21 cents.

Negative impact from FX and fuel rates as well as sailings that included Israel.

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

Fourth quarter yields are expected to be up approximately 16, 2% to 16, 7% driven by our incredible new hardware and a significant increase in rates, both ticket and chipboard for like for like ships.

Naftali Holtz: Over a hundred percent of the revenue outperformance during the quarter dropped to the broad bottom line leading to higher adjusted EBITDA and earnings versus expectations. We continue to see strong demand and pricing for both 2023 and 2024 failings. This has resulted in higher than expected load factors and record yields in the third quarter along with a record booked position on a forward looking basis.

This range also includes about 200 basis points negative impact from the elimination of the reporting lag related to Silversea.

NCC, excluding fuel is expected to be up three 9% to four 4%, including 60 basis points impact from sailings that included Israel related to reduced APC DS.

Naftali Holtz: Now that we are in the fourth quarter, many of our ships have transitioned from their summer to their winter itineraries. In the fourth quarter, about 55 percent of our capacity will be in the Caribbean, 11 percent in Europe, and about 13 percent in the Asia-Pacific region.

As for adjusted earnings per share, we expect a range of $1 <unk> to $1 10 for the fourth quarter.

This also includes 18 cents negative impact from FX and fuel rates as well as sailings that included Israel.

Naftali Holtz: The remaining capacity is spread across a number of other itineraries, including repositioning, South America, and expedition cruises Now let's turn to slide six to talk about our guidance for the full year 2023 We now expect net yield growth of 12.9 to 13.4% for the full year 140 basis points increase from the midpoint of our prior guidance net cruise costs excluding fuel are expected to be up at 7 to 7.5% for the full year as compared to 19 our cost outlook has not changed from our July guidance we do however have slightly fewer APCDs due to the cancelled sailings that included Israel impacting NCCX by approximately 30 basis points Our cost outlook reflects the continued benefit from all the actions we have taken over the last several years to support enhanced margins We continue to expect record adjusted EBITDA for APCD for the year and an EBITDA margin that is back to our previous record in 2019 So in summary we expect adjusted earnings per share of $6.58 to $6.63 and it includes approximately 21 cents negative impact from effects and fuel rates as well as sailings that included Israel Now turning to slide seven I will discuss our fourth quarter guidance Fourth quarter yields are expected to be up approximately 16.2 to 16.7% driven by our incredible new hardware and a significant increase in rates both ticket and ship board for like for like ships This range also includes about 200 basis points negative impact from the elimination of the reporting lag related to silver sea NCC excluding fuel is expected to be up 3.9% to 4.4% including 60 basis points impact from sailings that included Israel related to reduced APCDs As for adjusted earnings per share we expect a range of $0.05 to $0.10 for the fourth quarter This also includes 18 cents negative impact from effects and fuel rates as well as sailings that included Israel Now I will share insights for 2024 which while still early is shaping up to be another exciting year for the company 2024 capacity is expected to be up 8% as we introduce icon utopia and silver ray and benefit from a full year of ascent and silver nova Capacity growth is most pronounced in the first and the third quarters due to the timing of new ship deliveries and timing of dry docs Our Caribbean capacity is growing about 13% in 2024 and will represent about 55% of overall deployment We are adding a full year of icon of disease and about seven months of short Caribbean sailings on utopia We also expect to increase the number of guests experiencing perfect date cocoa K with the addition of hideaway beach As a result we expect a total of 3 million guests will experience perfect day in 2024 up from 2.5 million this year European itineraries will account for 15% of our capacity in 2024. Alaska will account for about 6%, and Asia Pacific itineraries will account for 10%, marking our return to China with spectrum of disease in Q2 of next year.

Now I will share his insights for 2024, which while still early is shaping up to be another exciting year for the company.

2024 capacity is expected to be up 8% as we introduce icon Utopia, and silver Ray and benefit from a full year of ascent and silver NOLA.

<unk> growth is most pronounced in the first and third quarters due to the timing of new ship deliveries and timing of dry docks.

Our Caribbean capacity is growing about 13% in 2024 and will represent about 55% of overall deployment.

We are adding a full year of icon of disease and about seven months of short Caribbean sailings on Utopia. We also expect to increase the number of guests experiencing perfect day at Coke, Okay. With the addition of Hideaway Beach.

As a result, we expect a total of 3 million guests will experience perfect day in 2024 up from $2 $5 million this year.

European Itineraries will account for 15% of our capacity in 2024.

Lascar will account for about 6% and Asia Pacific Itineraries will account for 10%, marking a return to China with spectrum of the seas in Q2 of next year.

Capacity for itineraries that visit Israel account for less than one 5% in 2024.

As Jason mentioned, both our book load factors and <unk> are higher than all previous years. This is despite having more short Caribbean itineraries in China, which typically book closer in.

There are a few factors that are expected to influence the cadence of our yield growth throughout 2024 and.

In addition to the typical variability driven by the timing of new ship deliveries the return to normal load factors in the first half of the year will bolster our year over year yield growth in comparison to the back half.

The first quarter, we will also benefit from the annualized nation of pricing power that accelerated during wave this year.

Now moving to costs.

Our focus remains to control costs as we seek to grow our revenue and margins. We also continued to benefit from all the actions that we have taken in the last few years to reshape our cost structure.

In 2024, we expect to have double the dry dock days compared to this year because of timing of dry docks throughout the pandemic.

In addition, we are launching Hideaway beach at perfect day at Coke, Okay did wildly accretive to margin is no a P. C d's associated with it further impacting cost comparisons.

We expect the increased Drydock days and the opening of Hideaway beach to negatively impact <unk> by approximately 300 basis points next year.

Outside of that we expect cost to increase very low single digits consistent with our proven formula We will provide more details on the financial impact of these items during our fourth quarter earnings call.

The combination of our strong book position and an accelerating demand environment is certainly pointing to another year of solid yield growth and a step change in earnings growth as we accelerate towards our trifecta goals.

Turning to our balance sheet, we ended the quarter with $3 $3 billion in liquidity.

Strengthening the balance sheet continues to be a top priority better than expected cash flow generation and our disciplined capital allocation has allowed us to accelerate reduction in leverage and debt levels with the goal of achieving investment grade balance sheet metrics.

Naftali Holtz: Capacity for itineraries to visit Israel account for less than 1.5% in 2024. As Jason mentioned, both our book load factors and APDs are higher than all previous years. This is despite having more short Caribbean itineraries in China, which typically book closer in. There are a few factors that are expected to influence the cadence of our yield growth throughout 2024. In addition to the typical variability driven by the timing of new ship deliveries, the return to normal load factors in the first half of the year will bolster our year over year yield growth in comparison to the back half. The first quarter will also benefit from the annualization of pricing power that accelerated during wave this year.

Utilizing cash flow from operations, we repaid $775 million of debt during the quarter, including $500 million of our 11 five senior secured notes due June 2025.

October we refinanced our 3 billion revolving credit facility and $500 million term loan into a new $3 5 billion multiyear revolving credit facility.

The successful execution of the new credit facility, demonstrating the continued support and confidence in the company's financial position and credit improvement.

Also in October we issued a redemption notice for the remaining $500 million of our 11 and a half secured notes due June 2025. This redemption will be funded with existing liquidity.

Naftali Holtz: Now moving to costs. Our focus remains to control costs as we seek to grow our revenue and margins. We also continue to benefit from all the actions that we have taken in the last few years to reshape our cost structure. In 2024, we expect to have doubled the dry dock days compared to this year because of timing of dry docks throughout the pandemic. In addition, we are launching Hydaway Beach at Perfect Day at Coco K. Today, the while is accretive to margin, has no APCDs associated with it, further impacting cost comparisons.

With that we expect to pay off over $3 $5 billion of debt.

And reduced leverage to mid four times by the end of the year.

Yeah.

Debt Paydown actions reduced interest expense by close to $100 million in 2023 compared to our initial expectations and contribute to further increase in earnings going forward as we chip away at our high cost debt.

Our commitment to strengthening the balance sheet is also being recognized by the credit agencies in the third quarter S&P upgraded our credit rating by two notches to double B minus and Moodys upgraded our credit rating by one notch to be one with a positive outlook.

Naftali Holtz: We expect to increase dry dock days and the opening of Hydaway Beach to negatively impact NCCX by approximately 300 basis points next year. Outside of that, we expect cost to increase very low single digits consistent with our proven formula.

Naftali Holtz: We will provide more details on the financial impact of these items during our fourth quarter earnings call. The combination of our strong book position and an accelerating demand environment is certainly pointing to another year of solid yield growth and a step changing earnings growth as we accelerate towards our trifecta goals.

As the business accelerates and generates more cash flow, we will continue to proactively and methodically pay down debt and pursue opportunistic refinancings and supportive Archer effector goals.

In closing, we remain committed and focused on executing on our strategy and delivering our emission while achieving our trifecta goals with that I will ask our operator to open the call for a question and answer session.

Naftali Holtz: Turning to our balance sheet, we under the quarter with $3.3 billion in liquidity. Strengthening the balance sheet continues to be a top priority, better than expected casual generation and our disciplined capital allocation has allowed us to accelerate reduction in leverage and debt levels with the goal of achieving investment grade balance sheet metrics. Utilizing casual from operations, we repaid $775 million of debt during the quarter, including $500 million of our 11.5 senior secured notes due to 2025.

At this time, if you'd like to ask a question press star 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 will come from the line of Stephen <unk> with Stifel. Please go ahead.

Excuse me Hey, guys good morning.

Morning.

So Jason you essentially just provided us with some kind of guidance for 2024, which is.

Much appreciated and I would also say probably much better I think than anybody would have expected given the higher fuel costs and kind of those fears out there around your cost structure.

Naftali Holtz: In October, we refinanced our $3 billion revolving credit facility and $500 million term loan into a new $3.5 billion multi-year revolving credit facility. The successful execution of the new credit facility demonstrate the continued support and confidence in the company's financial position and credit improve. Department. Also, in October, we issued a redemption notice for the remaining 500 million of our 11.5 secured notes due June 2025. This redemption will be funded with existing liquidity.

So as we so as we think about that spread between the yields and costs I mean normally we'd be expecting that spread to be whatever 200, 300, maybe 400 basis points.

But you guys are on pace this year to see your yields outpace your costs by let's call. It close to 900 basis points. So I guess, what I'm getting at here is as we think about next year based on our math to get to that that EPS number north of $9.

You probably need to see that spread be pretty wide again, given the fact that <unk> just talked about cost being up let's call. It three to 400 basis points. So saying all that another way is that I'm guessing your yield expectations for next year must be must be pretty high at this point, so hopefully that makes sense.

Naftali Holtz: With that, we expect to pay off over $3.5 billion of debt and reduced leverage to mid-four times by the end of the year. That pay-down actions reduced interest expense by close to $100 million in 2023 compared to our initial expectations and contribute to further increase in earnings going forward as we chip away at our high cost debt. Our commitment to strengthening the balance sheet is also being recognized by the credit agencies.

Well good morning, Steve.

And thanks for the question.

So obviously, we are feeling very good.

About.

The business the demand for our brands the demand for our ships.

And destinations and we're seeing that as I noted in my remarks, not only in terms of the daily interactions with our guests, but also just the high level of booking activity in.

Naftali Holtz: In the third quarter, S&P upgraded our credit rating by two notches to double B minus, and Moody's upgraded our credit rating by one notch to B1 with a positive outlook. As the business accelerates and generates more cash flow, we'll continue to proactively and methodically pay down debt and pursue opportunistic refinancing in support of our affected goals.

And the strength, we're seeing in bookings where.

We have been booking at an accelerated pace really since early of this year and of course as we've been booking not just for 2023, but we've also been booking for 2024 and when we look at our book of business you will see a lot of strength in volume.

Naftali Holtz: In closing, we remain committed and focused on executing on our strategy and delivering our emission while achieving our affected goals.

And of course with strength in volume allows us to continue to improve on the rate side and you combine all of that with incredible hardware.

Regina: With that, I will ask our operator to open the call for question and answers session. At this time, if you'd like to ask a question, press star followed by the number one on your telephone keypad. We ask that you limit yourself to one question and one follow-up, then re-enter the queue for any additional questions you may have.

Coming into place next year, especially icon of the CS as.

As well as more volume onto places like perfect day, because of Hideaway, we feel very good about our yield projections for next year now it's still early.

So we're not in a place where we're going to guide, but as our general internal ambition is always to make sure that our yields are are meaningfully outpacing our costs and of course most of our costs is not pointed out.

Steven Wieczynski: Our first question will come from the line of Stephen Wiesensky with Steeple. Please go ahead. Excuse me. Hey guys, good morning. Morning. Jason, you just provided us with some guidance for 2024, which is much appreciated. I would also say much better than anybody would have expected given the higher fuel costs and those fears out there around your cost structure. As we think about that spread between yields and costs, we'd be expecting that spread to be whatever, 200, 300, maybe 400 basis points.

<unk> growth next year on a per unit basis is really just driven by additional dry dock days.

And of course, hideaway, which delivers incredible margins soon.

Which will improve our yield profile, but also has cost with OAP Cds. So all in all we feel very good and I think it's important to just stress that Mike.

My comment on the earnings side was that we expect it to at least start with a nine.

And <unk>.

Not only that we also expect to continue to improve on an ROIC basis.

Steven Wieczynski: You guys are on pace this year to see your yielded out pace, your cost by, let's call it close to 900 basis points. I guess what I'm getting at here is we think about next year based on our math to get to that EPS number north of $9. You probably need to see that spread be pretty wide again. Given the fact that NAP just talked about cost being up, let's call it 300 to 400 basis points.

On the.

The overall organization.

Great that's great color. Thanks for that Jason and then and then again as we as we kind of think about.

As we as we kind of think about next year.

Clearly there is a lot of disruption going on.

Israel right now and I think <unk> talked about you know its less than or you talked about that's less than one 5% of capacity for next year, but as we think about the rest of the med.

Steven Wieczynski: It's a saying all that in other way is that I'm guessing your yield expectations for next year must be pretty high at this point. So hopefully that all makes sense. Good morning, Steve. And thanks for the question. So obviously we are feeling very good about the business, the demand for our brands, the demand for our partnerships and destinations. And we're seeing that as I noted in my remarks, not only in terms of the daily interactions with our guests, but also just the high level of booking activity.

Just maybe how you guys are thinking about customer.

Demand for the rest of Europe next year, and obviously, it's probably a little bit too early to really understand that but do you expect to see some kind of pullback whether its eastern med western med or a combination of both or have you pretty much kind of moved your shifts in your capacity around enough, where you don't think they're really will it be much pushback.

From your from your customer base.

Steven Wieczynski: And the strength we're seeing in bookings where we have been booking at an accelerated pace really since early of this year. And of course, as we've been booking not just for 2023, but we've also been booking for 2024. And when we look at our book of business, you'll be seeing a lot of strength and volume. And of course, with strength and volume allows us to continue to improve on the rate side.

Well well next year, we will have a little bit less capacity in Europe, you have about half of our guests for European sailings come from the U S and the other half come from around the world.

We've commented on.

On the one 5% and we will continue to look at that I think we need to remember we have a pretty nimble sourcing platform.

If we're worried about that risk I do think it's a little bit too early and all of this to have any kind of outlook on on what we're seeing.

Steven Wieczynski: And you combine all that with incredible hardware coming into place next year, especially icon of the seas, as well as more volume onto places like perfect day because of hideaway. We feel very good about our yield projections for next year. Now it's still early. So, you know, we're not in a place where we're going to guide, but as our general internal ambition is always to make sure that our yields are meaningfully outpacing our costs.

Our expectations for Europe next year, but our commentary around the strength in the acceleration in demand is not just about one market. It's really about all of our markets. It's not just about one product, it's really about all of our products.

And.

Obviously as we are.

If these horrific.

Situations situation continues to occur that could potentially weigh on consumer psyche, but that's not something that we're we're seeing at this point in time and historically when we see that we typically just see our guest shift.

Steven Wieczynski: And of course, most of our costs has not pointed out growth next year on a per unit basis is really just driven by additional dry dock days. And of course, hideaway, which delivers incredible margins, which will improve our yield profile, but also has cost in the WAPCDs. So all in all, we feel very good. And I think it's important to just stress that, you know, my comment on the earning side was that we expected to at least start with a nine, and, and, and, and not only that, we also expect to continue to improve on an ROIC basis on, you know, on the, the overall organization.

In terms of where they want to go.

And of course, the vast majority of our capacity.

In 2024 is going to be in North America.

And sorry, Jason one more just and just to be 100% clear your cost guidance for the remainder of this year is unchanged from an APC.

Actually all Thats happening here, it's just the APC DS are dropping.

Correct.

Thank you guys very much thanks, Dave.

Steven Wieczynski: Great, that's great color. Thanks for that, Jason. And then, and then again, as we kind of think about, you know, as we kind of think about next year, you know, clearly there's, there's a lot of disruption going on, you know, with, with Israel right now, and, and I think NAF talked about, you know, it's less than, or, or you talked about that's less than, and one and a half percent of capacity for next year.

Your next question comes from the line of Robin Farley with UBS. Please go ahead.

Great. Thank you and my two questions are actually on the on the same.

Topics.

Just circling back to changes I know you mentioned you told me that one 5% that touches on.

Steven Wieczynski: But, you know, as we think about the rest of the med, you know, just, just maybe how you guys are thinking about customer, you know, demand for, you know, the rest of Europe next year. And obviously it's, it's probably a little bit too early to really understand that. But, you know, do you expect to see, you know, some kind of pullback, whether it's, you know, Eastern Med, Western Med, or combination of both, or have you pretty much kind of, you know, moved your ships and your capacity around enough where you don't think they're really good.

I think so.

Some out there where it's a tiny but it's still obviously just single digit for for all the major companies, but are you seeing any ships.

We're not necessarily dealerships that other ships moving into your markets and it was just a port of call getting dropped you wouldn't have to redo an itinerary, but if there are shifts in where you have existing supply that youre seeing any kind of impact or would you say that you're still continuing to see.

Steven Wieczynski: And hopefully will be much pushback from your, from your customer base. Well, well, next year we'll have a little bit less capacity in Europe, you know, about half of our guests for European tailings come from the US and the other half come from around the world. We've, we've commented on, on, on the one and a half percent and we'll continue to look at that. I think we need to remember, we have a pretty nimble, sourcing platform.

For Europe next year at the same levels kind of regardless of what's going on with others.

Yeah, I'd, probably just start off Robyn with how you started that off which is released from what we can tell this is pretty low single digit.

What percent of capacity not just us, but also our competitors some have a little bit more than we do.

Steven Wieczynski: If, if we're worried about that risk, I do think it's a little bit too early in all of this to, to have any kind of outlook on on what we're seeing, or our expectations for Europe next year. But our commentary around the strength and the acceleration and demand is not just about one market. It's really about all of our markets. It's not just about one product. It's really about all of our products.

A shift of that magnitude is pretty immaterial.

So if a ship is moving further maybe into the eastern med in terms of heading west towards heading into the western Mediterranean or Theres some change in a.

A few modified in the deployment, it's a pretty immaterial shift.

For the broader industry.

And I think for US I mean, just our commentary about.

First to cruise first to brand.

Steven Wieczynski: And, you know, obviously as we, if, you know, if these horrific situation, situation continues to occur, you know, that could potentially weigh on a consumer psyche, but that's not something that we're, we're seeing at this point in time. And historically, when we see that, we typically just see our guest shift in terms of where they want to go. And, of course, the vast majority of our capacity in 2024 is going to be in North America.

Power, we're getting out of our ecosystem and our loyalty base.

Well, we are actually much much more focused on how do we close the gap to land based vacation.

Then we think that things that make small shifts like this would impact our business.

Great. Thank you.

And just on.

On the expense piece for next year and that's very helpful. Thank you for sort of breaking out the.

I don't know if there's any further breakout of the dry dock and what that pieces of the 300 basis points just because in some ways. The timing of that is sort of it you have a nonrecurring kind of increase I don't know if theres any more breakdown on that 300, that's and then and then if there's any way to sort of help quantify I know, you're not giving full year yield guidance, but the.

Steven Wieczynski: And, and, and sorry, Jason, one more just, and just to be 100% clear, your cost guidance for the remainder of this year is unchanged from an APC, I mean, essentially all that's happening here is just the APCDs are dropping. That's right. Okay. Thank you guys very much. Thank you.

To whatever degree the there's some bits there.

Robin Farley: Your next question comes from the line of Robin Farley with UBS. Please go ahead. Great. Thank you. My two questions are actually on the on the same two topics. One is just circling back to changes, but, you know, I know you mentioned it's only that one and a half percent that touches on. I think there are some out there where it's a tiny, but it's still obviously just single digit for, for all the major companies, but are you seeing any ships where not necessarily your ships, but other ships moving into your markets.

From highway.

You would expect he offsetting I would think you would be more than offsetting that so just to sort of help investors think about.

What's the ongoing here, which is I guess closer to the 100 different thanks.

Hey, Robyn it's snuffed Holly so just on the cost so as I mentioned, roughly 300 basis points related to dry docks and hideaway. The vast majority so think about like 80% of it is.

The dry docks and the remainder is really about hideaway beach.

Robin Farley: I know it's just a port of call getting dropped. You wouldn't have to redo an itinerary. But if there are ships moving in where you have existing supply that you're seeing, you know, any kind of impact or would you say that you're still continuing to see. Demand for Europe next year at the same levels, kind of regardless of what's going on with other shipments. Yeah, I would probably just start off Robin with how you started that off, which is, you know, at least from what we can tell, this is pretty low single digit.

It's a nice way to ask it again, but I'll just.

Say, what Jason said, we're very excited about next year, you know our formula we always.

Strive to.

Drive and grow yields more.

Then cost and definitely that's that's what we're intending to do next year.

Okay, great. Thank you very much thanks.

Hey, Robyn.

I have to jump in for a second it's Mike.

Just to update you on highway because I was obviously this last weekend and I have to tell you. We are incredibly impressed as spectacular new destination for Royal Caribbean and we opened for sale for this one products about three weeks ago, and that's going gangbusters and we were delighted with the product it's going to be really a <unk>.

Robin Farley: There's some change in the thing modified in the deployment. It's a pretty immaterial shift for the broader industry. And I think for us, I mean, just our commentary about first to cruise, first to brand, the power we're getting out of our ecosystem and our loyalty base. Yeah, that's not, you know, but we are actually much, much more focused on how do we close the gap to land base vacation. Then we think that things that make small shifts like this would impact our business.

Name change.

And the demand has been exceptional we've already started pushing up the pricing for that experience. So.

So all of that comes online with icon of the seas, which is by far the best selling product we've ever launched in the history of our business and it continues to perform at an exceptionally high level. So the combo of icon with highway is really for us exceptionally exciting and then of course, we've got utopia going straight into the <unk>.

To perfect day in the summer and that again is already selling at record rates and record volume. So we're kind of pretty switched on about what's happening in the next year in 'twenty four.

Robin Farley: Okay, great. Thank you. And then just on the expense piece for next year, it was very helpful. Thank you for sort of breaking out the, I don't know if there's any further break out of the dry duck and what that piece is of the 300 basis points just because in some ways, the timing of that is sort of a, you know, a non-recurring kind of increase. So I don't know if there's any more breakdown of 300 bits.

Oh, great. Thank you.

Your next question will come from the line of Brandon <unk> with Barclays. Please go ahead.

Robin Farley: And then, and then if there's any way to sort of help quantify, I know you're not giving full year yield guidance, but the, to whatever degree, there's some bits there that have expense in a higher way, what you would expect the offsetting, I would think you would, you know, clearly be more than offsetting that. So just to sort of help investors think about what's really ongoing here, which is, I guess, probably closer to the 100-bit brain.

Hey, good morning, everybody.

Thanks for taking my question and congratulations on the strong report.

I'll take a shot at the second part of the 2024 cost comments from Qunar.

I think when we think about very low single digits.

Cut and dry.

I'll know your history of what you were doing pre COVID-19 on the cost line. When we think about what is in there though right there's.

Robin Farley: So thanks. Hey, Robin, it's Naftali. So just on the cost of, so as I mentioned, you know, roughly 300 basis points related to dry dogs and and hideaway the vast majority. So think about like 80% of it is, is the dry dogs and the remainers really about hideaway beach. It's a nice way to ask it again, but I'll just say what Jason said. We're very excited, but next year, you know, our formula, we always strive to drive and grow yields more than cost. And that's definitely that's what we're intending to do next year. Okay. Great. Thank you very much. Thanks.

There is China, and then Theres icon I would think icon is push it down right because of all the APC as they come on with icon, but but China I would expect to have to have a rollout of a more sort.

Cost base over there how should we sort of think about those two factors when we try and model very low single digits.

Yes, I just think there's other things too right first of all icon actually is.

There's a lot of venues on it so yes, theres a lot of <unk>, but we also offer a lot of experiences on board.

And you're right China is is it a market that we did.

Coming back and obviously, we're not there today, we're just ramping up but theres a lot of things that are going into it in the commentary as we we manage our cost across the board.

Michael Bayley: Robin, I have to jump in for a second. It's Michael. I just update you on hideaway because I was there last weekend, and I have to tell you we are incredibly impressed. It's a spectacular new destination for Royal Caribbean. And we open for sale for this one product about three weeks ago, and it's going gangbusters. I mean, we're delighted with the product. It's going to be really a game changer. And the demand has been exceptional.

And we're very comfortable with the very low single digits and we go into next year.

And Brian It's Jason I, just wanted to I just want to add in.

Obviously, our capacity is growing at 8% next year and so that's certainly helping.

Making sure we're getting more and more efficient which is a critical.

Objective of the organization will also be getting very much to benefit from new new disruptive technology and employing them in different parts of our business that can lower.

Michael Bayley: We've already started pushing up the pricing for that experience. So, and of course, all of that comes online with icon of the seas, which is by far the best selling product we've ever launched in the history of our business. And it continues to perform at an exceptionally high level. So the combo of icon with hideaway is really for us exceptionally exciting. And then, of course, we've got utopia going straight into the short market to perfect day in the summer. And that again is already selling at record rate. So and record volume. So we're kind of pretty switched on about what's happening in the next year in 24.

Michael Bayley: Oh, great. Thank you.

Service calls in and.

<unk> improved process efficiencies and Thats kind of an overall objective is how do we get better each and every year and that's why we believe that excluding the dry docks and hideaway, which are structural.

You were able to continue to produce low single digit.

Costs.

Alright, that's very sorry, very very low single digits, yet not just reminded me.

Great. That's helpful. And then just as a follow up the $9 sort of starting point for the EPS figure tells US a lot obviously just to get a sense of of getting your guys. As heads. When you are in your budget processes and Youre thinking about that figure do you want do you think you are starting at $9 in any current <unk>.

Brandt Montour: Your next question will come from the line of Brandt Montour with Barclays. Please go ahead. Hey, good morning, everybody. Thanks for taking my question and congratulations on a strong report. I think I'll take a shot at the second part of the 2024 cost comments from you, not. You know, I think when we think about very low single digits, that's pretty cut and dry, and we all know your history of what you were doing pre-COVID on the cost line.

On the environment or do you think your.

Starting at $9 in the current.

The economic environment.

Yes, so I think one of the things I would say Brian is that we're saying it's going to start with it.

Brandt Montour: When we think about what is in there, though, right? There's China and then there's Icon. I would think Icon is going to push it down right because of all the APCs that come along with Icon. But China, I would expect to have to have a rollout of more sort of cost space over there. I should we sort of think about those two factors when we try and model very low single digits.

Well, we start with the nine so I wouldn't necessarily peg it to $9.

It's just that we're seeing at the nine.

Nine handle which I think is just an important thing.

And I I mean, obviously, it's impossible to predict what the the environment will look like six months from now or a year from now or five years from now.

But we have a pretty nimble platform there was a significant.

Brandt Montour: Yeah, I just think that there's other things to write. First of all, Icon actually is there's a lot of venues on it. So yes, there's a lot of APCs, but we also offer a lot of experiences on board. And you write China is in market that we coming back and obviously we're not there today. We're just ramping up. But there's a lot of things that go into it. And the commentary is we manage our cost across the board.

Value proposition or value differential to land based vacation pre COVID-19, we were call it 10 or 15% today, we're somewhere around 35, 40%. So theres a lot of value for the consumer to get if there are changes in the <unk>.

And the operating theatres.

Theaters that were that were in I would also keep in mind that you are we're pretty well booked and we will cross this year in a very strong book position and so we have we will have a lot of that already on our books, a consumer who has already made those decisions.

Brandt Montour: And we are very comfortable with the very low single digits that we go into next year. And Brandon, Jason, I just want to add in, you know, our capacity is growing at 8% next year. And so that's certainly helping making sure we're getting more and more efficient, which is a critical objective of the organization. We're also beginning very much to benefit from new disruptive technology and employing them in different parts of our business, that you can lower service calls and improve process efficiencies.

But I will say what you think is an important thing when we look at the consumer is as we're here on the call we have thousands of people making bookings.

For experiences that are at least six to eight months from today.

Theyre, making bookings into 2025 that you've been making bookings into 2026, so our visibility in terms of how the consumer is looking at things going forward.

At least on a vacation experience on on our incredible brands.

Brandt Montour: And that's kind of an overall objective is how do we get better each and every year. And that's why we believe that excluding the dry docs and hideaway which are structural, you were very, very, very, very, very low single digits. Not just reminded me. Great. That's helpful. And then this is a follow up, the $9 sort of starting point for the EPS figure tells us a lot obviously just to get a sense of getting your guys's heads when you are in your budget process and you're thinking about that figure.

As pretty good based off of where the consumer is standing today.

Excellent. Thanks I'll.

Sure.

Your next question comes from the line of N CTO with Cleveland Research. Please go ahead.

Great. Thanks Big Picture question curious your perspective on the supply demand dynamic in this industry over the next few years, what youre seeing in the order book and then on the demand side. It seems like you and some peers as well are really seeing strong performance out.

The new to cruise.

Brandt Montour: Do you want to, do you think you're starting at $9 in any current economic environment where do you think you're starting at $9 in the current economic environment? Yeah. So I think one of the things I would say, Brent, is that we're saying it's going to start with that it will at least start with the $9. So I wouldn't necessarily pay it to $9. It's just that we're saying it's a $9 handle, which I think is just an important thing.

So what that could mean for the trajectory of demand growth in years ahead as well.

Hey, Vince Hope hope all is well so on the order book side at least what we can see kind of five years out here is the industry is going to grow on a gross basis around 4%.

It could potentially be a little bit lighter that if theres going to be some some potential more exits over time.

That's not a number that can really be changed at this point in time, and we really haven't seen a lot of new orders come on the books.

Brandt Montour: And I mean, obviously it's impossible to predict what the environment will look like six months from now or year from now or five years from now. But we have a pretty nimble platform. There was a significant value proposition or value differential to land-based vacation. You know, pre-COVID, we were called 10 or 15 percent. Today we're somewhere around 35, 40 percent. So there's a lot of value for the consumer to get if there are changes in the operating theaters that we're, you know, that we're in.

As of as of late so I think we have a pretty good view on the supply side.

I think when we think about on the demand side I don't think it's just new to cruise I mean, new to cruise has been very strong us being index more into the short brings in a lot more new to cruise, but I also think the point about new to brand I think is really significantly grown coming.

Coming here out of cobalt, which we think is another strength.

And then I think our point about how focused we are about getting more reps out of our guests.

Brandt Montour: I would also keep in mind that you are, you know, we're pretty well booked and we will cross this year in a very strong book position. And so we have, you know, we will have a lot of that already on our books. The consumer has already made those decisions. But I will say, which I think is an important thing when we look at the consumer, is, you know, as we're here on the call, you know, we have thousands of people making booking.

Through loyalty through having a recognition of our family of brands. We think as it's also really strong.

And the last point I'll make is I know, we really we focus these conversations on the industry, but I really think we need a more and more focus the conversation on on land.

Brandt Montour: Williams, for experiences that are at least six to eight months from today. They're making bookings into 2025. They're even making bookings into 2026. So our visibility in terms of how the consumer is looking at things going forward, at least on a vacation experience on our incredible brands is pretty good. Based off of where the consumer is standing today. Excellent, thanks all. Sure.

Or just overall vacation experiences the cruise industry has a sliver.

Overall, our vacation and travel and leisure.

1%.

Shifting towards towards cruise is worth I think it's like 10 or 11 Oasis class ships. So we're focused on how do we continue to be.

More competitive.

With land.

And we're seeing that with the younger generations, who really look at us very much similar to how they would look to go to Orlando or vegas, or skiing et cetera, and we.

Vince Ciepiel: Your next question comes from the line, Vince Ciepiel with Cleveland Research. Please go ahead. Great, thanks.

We can close that gap because half of that gap and get back to where we were that's also worth probably about 10 Oasis class ships. So we're we're heavily focused on on I'm trying to do that.

Vince Ciepiel: A big picture question. Curious your perspective on the supply demand kind of dynamic in this industry over the next few years? What you're seeing in the order book, and then on the demand side, it seems like you and some peers as well are really seeing strong performance out of the new to cruise. So what that could mean for the trajectory of demand growth in years ahead as well?

Great. Thanks, and then just digging a little bit deeper into this year on the yield side I think he started around two to four or something like that and now you are looking for yield up about 13. So.

Kind of two part whats been the biggest positive surprise that has led to that and then how would you slice up that 13 ish percent growth in terms of.

Jason Liberty: Hey, Vince, I hope all is well. So on the order book side, at least what we can see kind of five years out here is the industry is going to grow on a growth basis around four percent. It could potentially be a little bit lighter that there's going to be some potential more exits over time. That's not a number that can really be changed at this point in time. And we really haven't seen a lot of new orders come on the books as of late.

New hardware contribution Coco K and core price.

What youre really seeing kind of across the board right onboard spend is meaningfully higher than we expected demand for our new ships is certainly.

There, but of course that would have been in our original guidance for the year our expectations on that and then like for like is up significantly. So it's not it's not one thing I think there's just there's been really starting in the wave of this year.

Jason Liberty: So I think we have a pretty good view on the supply side. I think when we think about on the demand side, I don't think it's just new to cruise. I mean, new to cruise has been very strong. Us being indexed more into the short brings in a lot more new to cruise. But I also think the point about new to brand, I think, is has really significantly grown coming here out of Kobe, which we think is another strength.

Demand for our brands has been at an exceptional level demand for ships going to places like perfect day had been at exceptional levels and has put us in a position to be able to continue to incur.

Increase.

Right.

Bringing us closer to that value gap.

Jason Liberty: And then I think our point about how focused we are about getting more reps out of our guests through loyalty, through having a recognition of our kind of family of brands we think is it's also really strong.

That's that's out there versus land based vacation.

No I think keep in mind, Mike crews kind of lagged everybody else coming back from Covid and so I think we're also benefiting.

From that.

Jason Liberty: And the last point I'll make is, I know we really focus these conversations on the industry, but I really think we need to more and more focus the conversation on land, or just overall vacation experiences. The cruise industry is a sliver of overall vacation and travel[inaudible] What you're really seeing, I mean, kind of across the board, right? On board spend is meaningfully higher than we expected. The man for our new ships is certainly there, but of course that would have been in our original guidance for the year our expectations on that and then like for like is up significantly.

Great. Thanks.

Yeah.

Your next question will come from the line of Dan <unk> with Wells Fargo. Please go ahead.

Hey, good morning, everyone.

I was wondering if you could talk maybe a little bit about pricing trends.

Maybe the difference between contemporary and luxury brands and what you are saying and you know similarly, as we think about Europe and next year I know, it's only 15% of your capacity, but you are coming off a pretty strong year.

Obviously that skews a little bit more luxury and then as we think about <unk>.

Consumer willingness to book.

Our European or Mediterranean cruise.

Any kind of thoughts as we should think about 2024 as it relates to those kind of two sub segments.

Sure well.

At least in terms of what we've been experiencing is there's been strong demand on a pricing standpoint, whether it's contemporary whether it's in the premium space luxury your expedition space.

Theres been a little I would say more elevated demand that we have seen especially for royal.

And in chips, especially going to perfect day has been at an elevated level, but the yield improvement that you've seen through the course of this year, which is.

Significant has really been across all of our brands and I'd also add that our load factor expectations also rose through the course of this year. We returned to normal load factor is much earlier than we had we had anticipated for that.

You are right that on the European side, it does skew a little bit more on the premium and luxury side of things.

But I think we think overall at least what we have seen demand pattern wise that continues to be very strong.

And we typically as we start to get towards the end of this year and early January is when we start to really see the elevation and European bookings as it gets into that six to eight months.

Jason Liberty: So it's not it's not one thing. I think there's just there's been really starting in the wave of this year. The man for our brands has been at an exceptional level. The man for ships going to places like perfect day have been at exceptional levels and has put us in a position to be able to continue to increase rate, bring us closer to that value gap that's you know that's out there versus land based vacation. Now I think keep in mind like you know cruise kind of lagged everybody else coming back from COVID and so I think we're also benefiting you know from that.

Jason Liberty: Great thanks.

Booking window, which is what we have historically seen.

Got it and then I'll just add just that something that also across the markets, where we've seen this year.

Pretty strong demand Caribbean as we said it's been it's been stronger all along but we were very very pleased with the summer season in Europe, right with double digit yield growth.

Got it and then.

Anything to China, a bit and I know you don't have full capacity, having returned that yet yet there relative to 2019, but as you think about the Baltic capacity coming off.

Daniel Politzer: Your next question will come from the line of Dan Pulitzer with Wells Fargo is go ahead. Hey, good morning everyone. I was wondering if you could talk maybe a little bit about pricing trends, you know, and maybe the difference between contemporary and luxury brands and what you're saying. And you know similarly as we think about Europe and next year, I know it's only 15% of your capacity, but you're coming off a pretty strong year.

Eastern Med is there a willingness or maybe incentive at this point to shift more of your capacity in China and maybe can you just give an update on demand trends there.

Hey, Dan it's Michael.

China product spectrum selling other Shanghai in April of next year, and so far the bookings both volume and rate.

Very good much better than 2019 performance, which of course was a record for the brand.

Daniel Politzer: Obviously that's using a little bit more luxury and then as we think about you know consumer willingness to book a met you know a European or Mediterranean cruise any kind of thoughts as we did think about 2024 as it relates to those kind of two sub segments.

So we're feeling quite optimistic about the China product I'm not sure there's any need to shift any capacity at this point from the from the Baltic go from the Eastern Med. So I think where we are in a good position with our China product will be one of the first brands operating western brands operating in China.

Daniel Politzer: Sure. Well, at least in terms of what we've been experiencing is there's been a strong demand on a pricing standpoint, whether it's contemporary, whether it's in the premium space, luxury or expedition space. I think there's been a lot more elevated demand that we have seen, especially for royal and and ships, especially going to perfect day has been at an elevated level. But the yield improvement that you've seen to the course of this year, which is, you know, significant has really been across all of our brands and I'd also add that our load factor expectations also rose to the course of this year.

And the indications are very positive so we'll see how it goes for for next year.

Got it thank you.

Your next question will come from the line of Matthew Boss with Jpmorgan. Please go ahead.

Great Thanks, and congrats on another nice quarter.

So Jason maybe on the accelerating demand for book position and the pricing relative to prior years as you cited as we looked at 'twenty four I guess, maybe larger picture. How are you balancing pricing power relative to the multiyear market share opportunity relative to land based alternatives and then just in.

Daniel Politzer: We returned to normal load factors much earlier than we had we had anticipated for that. You are right that on the European side it does skew a little bit more on the premium and luxury side of things. But I think we think overall at least what we have seen demand pattern wise that continues to be very strong. And we typically, you know, as we start to get towards the end of this year in early January is when we start to really see the elevation in European bookings as it gets into that six to eight month booking window, which is what we have have a story we've seen.

The strength in bookings that you cited have you seen any near term moderation to note related to the recent overseas conflict.

Yes sure so.

Yeah, we we feel of course, they're always getting better that we have the best kind of yield management systems and the best revenue managers in the World and then and so they are very much looking at volume versus price.

Daniel Politzer: Guy, I also said just that something that, you know, also across the markets, what we've seen this year is a pretty strong demand Caribbean, as we said, it's been a strong little long, but we were very, very pleased with the summer season. And you're upright with double digit yield growth. Got it. And then pivoting to China a bit, I know you don't have full capacity, having returned that yet there relative to 2019.

We have significantly automated that using.

<unk> AI and so forth to be able to make sure that we have an understanding on the elasticity and the behaviors of the consumer.

Minute by minute.

And so what we do try to do is obviously continue to increase price.

Daniel Politzer: But as you think about, you know, the Baltic capacity coming off, you know, Eastern Med, you know, is there a willingness or maybe incentive at this point to shift more your capacity to China and maybe can you just give an update on demand trends there. Hey, Dan, it's Michael. You know, we have a China product spectrum selling at a Shanghai in April of next year and so far the bookings both volume and rate are very good much better than our 19 performance, which of course was a record for the brand.

And then build volumes and historically, there's been questions about on the book position.

You plan will be at the same level when you turned the year as previous years.

We want to be higher do you want to be lower the answer really is it all depends on our ability to.

To drive.

Pricing.

And then optimizing our yields and so optimizing our yields is key.

And of course, we're in these yield management tools. We're also very focused on what we're seeing in behavior behavior.

On the land based vacation side.

Going on the European side.

I think we are.

Daniel Politzer: So we're feeling quite optimistic about the China product. I'm not sure there's any need to shift any capacity at this point from the from the Baltic or from the Eastern Med. So I think we're we're in a good position. With a China product will be one of the first brands operating Western brands operating in China and the indications are very positive. So we'll see how it goes for next year. Got it.

Again, we're just coming out of the Europe season, we are beginning to book for next year trends continue to be very strong.

Matthew Boss: Thank you.

But it is.

It is early in the European season for us to start calling out that Theres no impact from from Israel, It's not something that we're seeing today and of course, we don't know how long. This war conflict is going to go on for which could very much inform where the consumer wants to go next year I think what's important is what we're getting is a very sticky consumer who wants to.

Matthew Boss: Your next question will come from the line of Matthew Boss with J. P. Morgan.

It'd be sailing with us staying within our ecosystem and so sometimes it's not a question of where they're going to go well it could be a question of where theyre going to go, but but theyre going to go somewhere with us and that's what we're focused on making sure they are doing.

Matthew Boss: Please go ahead. Great. Thanks and congrats on another nice quarter. So Jason, maybe on the accelerating demand, the book position and the pricing relative to prior years as you cited as we looked at 24. I guess maybe larger picture. How are you balancing pricing power relative to the multi year market share opportunity relative to land based alternative and then just in the strength and bookings that you cited. Have you seen any near term moderation to note related to the recent overseas conflict?

Great and then maybe just a follow up.

Ali on that EBITDA margin profile, as we think multiyear and just looking back to prior peak levels.

How would you size up where we stand today relative to the Trifecta plan, which I think calls for low 30, maybe as we think about the puts and takes as you see it today, yes.

So.

I think I said it in my prepared remarks, but our goal first of all is to obviously increase the profitability as we continue to grow the business.

Matthew Boss: Yeah, sure. So you know, we we feel of course they're always getting better that we have the best kind of yield management systems and the best revenue managers in the world. And so they are very much looking at volume versus price. And we have significantly automated that using AI and so forth to be able to make sure that we have an understanding on the elasticity and the behaviors of the consumer. And so what we do try to do is obviously continue to increase price and then build volumes and historically there's been questions about on the book position, you know, you plan to be at the same level when you turn the year as previous years.

But this year, we will be back basically to our margin that we had in 2019, which was a record year.

But if you kind of do the math, we're not yet in our trifecta go and by the way to effective for US is just base GAAP right. So we our ambitions are beyond that so that just leads you to in our ambitions are to continue to grow the margin much more than we had in 2019 and that will go through with our proven formula right. We continue to grow the business through <unk>.

The city growth.

Moderate yield growth and really strong control cost controls and disciplined capital allocation, we think will deliver more margin.

Great color best of luck.

Matthew Boss: You want to be higher, you want to be lower, you know, the answer really is it all depends on your ability to continue to drive pricing. And then optimizing our yields. And so optimizing our yields is key. And of course, we're in these yield management tools. We're also very focused on what we're seeing in behavior behavior on on on land based vacation side. Going on the European side, you know, I think, you know, we again, you know, we're just coming out of the Europe season.

Thank you.

Yeah.

With that I will turn the conference back over to <unk> CFO for closing remarks.

Thank you we thank you all for your participation and interest in our company Michael will be available for any follow up I wish you all a great day.

Ladies and gentlemen, this concludes today's call.

Matthew Boss: We're beginning to book for next year. Trends continue to be very strong, but it is, you know, it is early in the European season for us to start calling out that there's no impact from, you know, from Israel. It's not something that we're seeing today. And of course, we don't know how long this war conflict is going to go on for, which could very much inform, you know, where the consumer wants to go next year.

Matthew Boss: I think what's important is what we're getting is a very sticky consumer who wants to be sailing with us staying within our ecosystem. And so sometimes it's not a question of where they're going to go. It could be a question of where they're going to go, but they're going to go somewhere with us. And that's what we're focused on making sure they're doing.

Jason Liberty: Great. And then maybe just to follow up. No, no, no, no, on the EBITDA margin profile that we think multi-year and just looking back to prior peak levels, how would you size up where we stand today relative to the trifecta plan, which I think calls for low 30s, just maybe as we think about the puts and takes as you see it today? Yeah, so I think I said it in my prepared remarks, but our goal, first of all, is to obviously increase the profitability as we continue to grow the business.

Jason Liberty: But this year, we will be back basically to our margin that we had in 2019, which was a record year. But if you kind of do the math, we're not yet in our trifecta goal, and by the way, trifecta for us is just base camp, so our ambitions are beyond that. So that just leads you to, and our ambitions are to continue to grow the margin much more than we had in 2019, and that will go through with our proven formula, right? We continue to grow the business, through capacity growth, moderate year growth, and really strong cross-controls and discipline capital allocation. We think we'll deliver more margin. Great color, that's a lot. Thank you.

Naftali Holtz: With that, I'll turn the conference back over to Natali Holtz, CFO for closing remarks. Thank you. We thank you all for your participation and interest in the company. Michael will be available for any follow-up.

Naftali Holtz: I wish you all a great day.

Regina: Ladies and gentlemen, this concludes today's conference.