Q3 2023 Norwegian Cruise Line Holdings Ltd Earnings Call

Good morning, and welcome to the Norwegian Cruise line Holdings third quarter 2023 earnings Conference call. My name is John and I'll be your operator at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions for the session will follow at that time.

If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone as a reminder to all participants. This conference call is being recorded and I would now like to turn the conference over to your host Jessica John This is John. Thank you. Please proceed.

Thank you John and good morning, everyone. Thank you for joining us for our third quarter 2023 earnings and business update call I'm joined today by Harry Sommer, President and CEO of Norwegian Cruise line Holdings, and Mark Kempa Executive Vice President and Chief Financial Officer. As a reminder, this conference call is being simultaneously webcast on the company's investor relation.

Its website at Www Dot NCL H L. P D Dot com slash investors. We will also make reference to a slide presentation. During this call which may be found on our IR website.

The conference call and presentation will be available for replay for 30 days. Following today's call before we begin I would like to cover a few items. Our press release with third quarter 2023 results was issued this morning and is available on our Investor Relations website. This call includes forward looking statements that involve risks and uncertainties that could cause our actual.

Results could differ materially from such statements. These statements should be considered in conjunction with the cautionary statements contained in our earnings release.

Our comments May also reference non-GAAP financial measures.

Reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation with that I'd like to turn the call over to Harry Sommer Harris well.

Well, thank you Jessica and good morning, everyone. Thank you all for joining us today.

Before we get into prepared remarks, if you haven't already heard the good news I would like to congratulate Jessica on her recent appointment to Chief strategy Officer for Regent seven Seas cruises I'd also like to welcome Sarah in men, who recently joined the company last week as our new head of Investor Relations and corporate communications.

Very pleased to have sat around the team and I'm sure. Many of you will have the chance to neither in the weeks and months ahead as she ramps up on the company Jessica will continue to be available in the interim to ensure a smooth transition congratulations sue Jessica congratulations to you Sarah.

Now turning to results I'm pleased to share with you. This morning that we achieved strong third quarter results generating record revenue and meeting or exceeding guidance on all key metrics I have to I have to attribute the success to the hard work and dedication of our incredible team members both on.

On our ships and our offices worldwide.

We also continue to make good progress on both defining our longer term strategic vision and executing on the near term priorities I shared last quarter, which are shown on slide five.

First our team is focused on capitalizing on the strong demand environment for crews to ensure we stay on our optimal booking curve, while maximizing pricing and onboard revenue generation.

On a 12 month forward basis, our book position continues to be at record levels within our optimal ranges and at higher prices. While we are very pleased with our progress so far in building our book for 2024 and beyond we are also keeping a close eye on the evolving macroeconomic and geopolitical landscape and are ready and able to adapt.

If needed.

The next priority is right sizing our cost base through our ongoing margin enhancement initiatives. Since we kicked off this initiative last year, we have seen sustained momentum with three consecutive quarters of improvement in our operating cost metrics and what's even more encouraging is that we have done this without impacting the guest.

Variance as evidenced by our continued strong guest satisfaction level continued strong onboard future cruise sales and guest repeat rates and continued high onboard spend.

These results have been driven by a palpable change in culture with team members across the globe shipboard and shore side embracing the challenge to find new and innovative ways to accelerate our margin recovery, while still preserving our long term brand equity.

Give me just one example last month, we took the time to tour and Norwegian Jewel ahead of the scheduled 2025 dry dock, we walk through each planned project, while onboard stopping to get real time guest feedback to help identify the highest value opportunities. The result of this more methodical approach resulted in not just lower costs.

Unknown Executive: Good morning and welcome to the Norwegian Cruise Line Holdings 3rd quarter of 2023 Earnings Conference Call My name is John and I will be your operator At this time all participants aren't a listen only mode Later we will conduct a question and answer session and instructions for the session will follow at that time If anyone who require assistance during the conference, please press star then zero on your touchstone telephone As a reminder to all participants, this conference call is being recorded And I would now like to turn the conference over to your host Jessica John, Mrs. John, thank you, please proceed Thank you John and good morning everyone Thank you for joining us for our 3rd quarter 2023 Earnings and Business Update Call I'm joined today by Harry Sommer, President and CEO of Norwegian Cruise Line Holdings and Mark Kempa, Executive Vice President and Chief Financial Officer As a reminder this conference call is being simultaneously webcast on the company's investor relations website at www.nclhltd.com We will also make reference to a slide presentation during this call which may be found on our IR website Both the conference call and presentation will be available for replay for 30 days following today's call Before we begin, I would like to cover a few items Our press release with 3rd quarter 2023 results was issued this morning and is available on our investor relations website This call includes forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from such statements These statements should be considered in conjunction with the cautionary statement contained in our earnings release Our comments may also reference non-gap financial measures, a reconciliation to the most directly comparable gap financial measure and other associated disclosures are contained in our earnings release and presentation With that I'd like to turn the call over to Harry Sommer. Harry? Well thank you Jessica and good morning everyone.

But also shortened the expected length of the dry dock itself by nine days, which will allow us to return the shift to revenue generation generating service that much faster all in all the changes we made to the Drydock plan are expected to result in over 20% Capex savings and a few million dollars of incremental revenue versus our original.

<unk> plans it was a day well spent.

While we have less of the lowest hanging fruit still available at this point several opportunities like this remain untapped I want to reassure you that we are committed to keeping the same relentless focus vigilant and balanced approach to identifying evaluating and executing on opportunities in a methodical manner. This is not a one off.

Exercise to us, but rather something we are embedding in the DNA of our entire organization.

This leads us to our next priority, which is to make strategic and intentional enhancements to our offerings and guest experience.

With the continued keen focus on costs, we are still making smart high return generating modification and investments in our product and service offerings. For example in the fourth quarter. We are launching are choice for Norwegian cruise line. This will allow guests to upgrade from our current bundled air offering and which guests are assigned.

Right at the lines discretion and allow them to choose their specific preferred flight for fee. This is expected to have a dual benefit of improving both guest satisfaction and generating incremental revenue. We are also making disciplined investments in technology from better websites and mobile apps to universal Starlink high speed <unk>.

Across our entire fleet by the end of 2024.

Harry Sommer: Thank you all for joining us today.

Harry Sommer: Before we get into prepared remarks, if you haven't already heard the good news, I'd like to congratulate Jessica on her recent appointment to Chief Strategy Officer for Region 7C Cruises.

Our high value targeted efforts to provide an excellent guest experience has not gone unnoticed in fact Norwegian cruise line was just named the top net Mega ship cruise line by <unk> Nast traveler and their 2023 Reader's Choice Awards readers voted for their top choices based on several key.

Harry Sommer: I'd also like to welcome Sarah Inman, who recently joined the company last week as her new head of investor relations and corporate communications We are very pleased to have Sarah on the team and I'm sure many of you will have the chance to meet her in the weeks and months ahead As she ramps up on the company Jessica will continue to be available in the interim to ensure a smooth transition Congratulations to Jessica and congratulations to you Sarah. Now, in turning to results, I'm pleased to share with you this morning that we achieved strong third quarter results generating record revenue and a meeting or exceeding guidance on all key metrics.

<unk>, including service food accommodations, and sustainability and Norwegian cruise line. One so it is clear that our product continues to resonate strongly with our guests.

Turning to the fourth priority on the list. After welcome Oceana. This in May in August we took delivery of the incredible Norwegian Veeva. The second ship in the game changing Prima class and we're not done yet. This year is the first year in our history in which we are introducing one ship for each brand all of which were built with our incredible.

Harry Sommer: I have to attribute the success to the hard work and dedication of our incredible team members both on our ships and on our offices worldwide. We also continue to make good progress on both defining our longer term strategic vision and executing on the near term priorities I shared last quarter which are shown on slide 5. First, our team is focused on capitalizing on the strong demand environment for crews to ensure we stay on our optimal booking curve while maximizing pricing and onboard revenue generation.

Partners, it's been Ken CRE in Italy.

Just a few weeks.

I will be heading back to Italy to take deliver delivery of regent seven seas grandeur, which you can see on slide six grandeur rounds out the highly successful explorer class for region, taking luxury cruising to another level. The reception for these ships continues to be overwhelmingly positive across the board, whether it's from our valued travel.

Agents are loyal past guests are trying one of our award winning brands for the very first time.

The disciplined edition of new builds continues to be a key cornerstone of our strategy as they are expected to be meaningful drivers of the company's future earnings growth and margin expansion, our newbuild pipeline, which you can see on slide seven represents a 5% capacity growth CAGR from 2019 to 2028 and.

Harry Sommer: On a 12 month forward basis, our book's decision continues to be at record levels within our optimal ranges and at higher prices. While we are very pleased with our progress so far and building our book for 2024 and beyond, we are also keeping a close eye on the evolving macro-canomics and geopolitical landscape and are ready and able to adapt if needed. The next priority is right sizing our cost-based through our ongoing margin enhancement initiatives.

We are confident in our ability to absorb this growth profitably. We may we remain in talks with our shipbuilding partners to embark on a new vision for all three of our brands and plan to continue to add new ships across our brands at the right time and at the right interval, but for now after the delivery of grandeur of this month, we have no.

Harry Sommer: Since we kicked off this initiative last year, we have seen sustained momentum with three consecutive quarters of improvement in our operating cost metrics. And what's even more encouraging is that we have done this without impacting the guest experience as evidenced by our continued strong guest satisfaction level, continued strong onboard future cruise sales and guest repeat rates, and continued high onboard spend. These results have been driven by a palpable change in culture, with team members across the globe, shipboard and short side embracing the challenge to find new and innovative ways to accelerate our margin recovery while still preserving our long-term brand equity.

Additional ship delivery schedules until spring of 2025 in the interim we expect to benefit from both organic growth as well as the annualized <unk> of the 2023, new builds next year.

The final priority under lift shown on slide eight is charting a path to reduce leverage and derisk the balance sheet, while the return to investment grade like financial position will be a multiyear process. We continue to expect a significant organic improvement in our net leverage in the intermediate term driven by our <unk>.

Harry Sommer: To just one example, last month, we took the time to tour in Norwegian Jewel ahead of the schedule of 2025 dry dock. We walked through each planned project while on board stopping to get real-time guest feedback to help identify the highest value opportunities. The results of this more methodical approach resulted in not just lower costs, but also short in the expected length of the dry dock itself by nine days, which will allow us to return the ships to revenue generation's generating service that much faster.

The cash flow generation and normal course debt amortization payments with.

With new leadership and perspectives across our organization, we have embarked on a review of our entire business, taking a fresh look at all aspects of our strategy. We are embracing change while preserving what makes us special and we are committed to take back a leadership position not just in crews, but in the broader travel leisure and hospitality.

<unk> sector in our view no idea is too big or too small we have a bold vision for what the future holds for Norwegian So we're taking the time to be thoughtful and thorough as we identify opportunities to ultimately drive more value for our shareholders. Our goal is to share. This plan with all of you sometime in spring of next year along with the.

Harry Sommer: All in all, the changes we made to the dry dock plan are expected to result in over 20 percent Catholic savings and a few million dollars of incremental revenue versus our original plans. It was a day well spent. While we have less of the lowest hanging fruit still available at this point, several opportunities like this remain untapped. I want to reassure you that we are committed to keeping the same relentless focus, vigilant and balanced approach to identifying, evaluating and executing on opportunities in a methodical manner.

<unk> multi year financial targets.

Now turning to slide nine as we focus on closing out the year strong successfully executing on our near term priorities and defining our long term strategic plan and vision for the future. Our team is more 90 day energized now more than ever in fact earlier. This month, we held our global conference in Miami, The first time in several year.

Harry Sommer: This is not a one-off exercise to us, but rather something we are embedding in the DNA of our entire organization. This leads us to our next priority, which is to make strategic and intentional enhancements to our offerings and guest experience. With the continued team focus on costs, we are still making smart, high return generating modification and investments in our product and service offerings. For example, in the fourth quarter, we are launching air choice for Norwegian Cruise Line.

Here's that we've brought together leaders across all three of our amazing brands in person. This year seemed nextgen was all about the future and how we can reach further individually and collectively to accelerate momentum as we move into 2024 and beyond it was an opportunity to bring the team together to spur innovation and collaboration.

Harry Sommer: This will allow guests to upgrade from our current bundled air offering in which guests are assigned flight at the line's discretion and allow them to choose their specific preferred flights for a fee. This is expected to have a dual benefit of improving both guest satisfaction and generating incremental revenue. We are also making disciplined investments in technology from better websites and mobile apps to universal Starlink high-speed internet, of course, our entire fleet by the end of 2024.

And ensure that across the organization, we are all aligned and marching towards the same goals as we strengthen the foundation for sustained profitable growth. This served to further cement my confidence that we are taking the right steps today to best position the company for the future.

Now shifting our discussions current bookings demand and pricing trends shown on slide 10, we achieved record revenue of $2 5 billion in the third quarter, an increase of 33% over the same period in 2019, the strong consumer demand environment resulted in load factors of 106% in the third quarter, while growing net.

Harry Sommer: Our high-value targeted efforts to provide an excellent guest experience have not gone unnoticed. In fact, Norwegian Cruise Line was just named the top-net-megaship cruise line by Condi NAS Traveler in their 2023 Reader's Choice Awards. Readers voted for their top choices based on several categories, including service, food, accommodations, and sustainability, and Norwegian Cruise Line 1. So it's clear that our product continues to resonate strongly with our guests. Turning to the fourth priority on the list, after welcome Oshand Dixon May, in August, we took delivery of the incredible Norwegian Diva, the second ship in the game-changing prima class, and we're not done yet.

<unk> by nearly 8% all while absorbing a 20% growth in capacity before we get into operational details in recent months, we have seen the devastation caused by both the wildfires in Maui and the escalating conflict in Israel, our thoughts and prayers are with those impacted by these tragic events our priority remains the safety of <unk>.

Charity and well being of our guests team members and the communities, we visit and we have mobilized to modify impacted itineraries and help support relief efforts in both regions, starting with Hawaii, we were uniquely impacted compared to our crews peers, given our unique year round Inter island, Hawaii offering the only one in the industry with.

Harry Sommer: This year is the first year in our history in which we are introducing one ship for each brand, all of which were built with our incredible partners at Fin Canciari in Italy. In just a few weeks, I will be heading back to Italy to take delivery of Regents 7th C. Granger, which you can see on slide 6. Granger rounds out the highly successful Explore class for region, taking luxury cruising to another level.

Our U S flagged vessel Pride of America, when the wildfires began in August we quickly modified certain itineraries to avoid straining local resources with the guidance and encouragement of our responsible return from both the Hawaiian government, Josh The Hawaii Governor, Josh Dream, and the Hawaii Tourism Authority, we resumed our.

Schedule calls to Kalgoorlie Maui in early September.

Harry Sommer: The reception for these ships continues to be overwhelmingly positive across the board, whether it's from our value travel agents, our oil pass guests, or guests trying one of our award-winning brands for the very first time. The discipline and addition of new builds continues to be a key cornerstone of our strategy, as they are expected to be meaningful drivers of the company's future earnings growth and margin expansion. Our new gold pipeline, which you can see on slide 7, represents a 5% capacity growth cager from 2019 to 2028, and we are confident in our ability to absorb this growth profitably.

As it occurred in the past with events of this nature, which received significant attention and media coverage, we did experienced a temporary slowdown in close in bookings for Hawaii ceilings. This impacted not only pride of America, but also certain ceilings on Norwegian spirit also based in the region for much of the fall, which in total represent approximately <unk> <unk>.

6% of our capacity in the fourth quarter.

Demand has steadily improved in recent weeks and while not quite fully recovered yet it's on the right trajectory and now approaching normalized levels, while we expect some of them.

Some lingering impact in the first quarter, Hawaii only accounts for approximately 4% of capacity in this period as well as for the full year as Norwegian spirit Repositions outside of the region in December.

Harry Sommer: We remain in talks with our shipbuilding partners to embark on a new vision for all three of our brands and plan to continue to add new ships across our brands at the right time and at the right interval. But for now, after the delivery of Granger this month, we have no additional ship delivery scheduled until spring of 2025. In the interim, we expected benefit from both organic growth as well as the annualization of the 2023 new builds next year.

Turning to Israel once the conflict began to escalate we canceled all cost is throughout the remainder of the year. We recently made the preemptive decision to cancel course, Israel in 2024, as well and our brands are currently working diligently to modify its an honorary and communicate these changes to guests.

Harry Sommer: The final fire and the lift, shown on slide 8, is charting a path to reduce leverage and de-risk the balance sheet. While a return to investment grape-like financial position will be a multi-year process, we continue to expect a significant organic improvement in our net leverage in the intermediate term driven by our expected cash flow generation and normal course debt amurization payments. With new leadership and perspectives across our organization, we have embarked on review of our entire business taking a fresh look at all aspects of our strategy.

One of the benefits of our industry as the cruise ships are easily movable assets. So we can pivot as needed and still offer incredible itineraries for our guests to enjoy however, we are seeing both elevated cancellation activity and lower new bookings for this region, primarily for close in ceilings as the concept is ongoing and still front end.

Sent during the consumer psyche prior to the conflict of approximately 7% of capacity in the fourth quarter of 2023, and 4% of capacity for the full year 2024 had visits to the broader middle East region right in 2024 down a bit further very little capacity is in this region early in the year only about one.

Harry Sommer: We are embracing change while preserving what makes us special and we are committed to take back a leadership position, not just in crews, but in the broader travel, leisure and hospitality sector. In our view, no idea is too big or too small. We have a full vision for what the future holds for Norwegian, so we are taking the time to be thoughtful and thorough as we identify opportunities to ultimately drive more value for our shareholders.

Percent of capacity in Q1 that said we are encouraged by the strength in our book position for 2024 beyond which on a 12 month forward basis remains in a record position at our optimal levels and at robust pricing levels onboard revenue generation, which we view as our single best real time indicator.

Harry Sommer: Our goals to share this plan with all of you some time in spring of next year, along with associated multi-year financial targets. Now, turning to slide 9. As we focus on closing out the year strong, successfully executing on our near term priorities and defining our long-term strategic plan and addition for the future, our team is more united to energize now more than ever. In fact, earlier this month, we held our global confidence in Miami the first time in several years that we have what together leaders across all three of our amazing brands in person.

Consumer confidence also continues to knock it out of the park during the quarter gross onboard revenue per passenger cruise day was approximately 30% higher than the comparable 2019 period. This was driven not only by strong demand, but also through our multi year effort to enhance our bundled offerings and pull forward.

<unk> and pre sell more revenue before guests ever stepped foot on the ship effectively expanding the sales cycle and getting more of the consumer's wallet over time.

For the third quarter <unk> revenue on a per passenger basis was up over 8% higher than in 2019 with nearly all of our guests purchasing something pre cruise on their own or through our bundled offering not only does this lead to higher spend by guests over the course of their entire journey, but it also pulls forward.

Harry Sommer: This year's theme next gen was all about the future and how we can reach further individually and collectively to accelerate momentum as we move into 2024 and beyond. It was an opportunity to bring the team together to spur innovation and collaboration and ensure that across the organization we are global minds and marching towards the same goals as we strengthen the foundation for sustained, profitable growth. This served to further cement my confidence that we are taking the right steps today to best position the company for the future.

Cash inflows from the company. This is one of the reasons why as you can see on slide 11, our advanced ticket sales balance increased nearly 60% in the third quarter versus 2019 far outstripping capacity growth of 20%.

Before I turn the call over to Mark I'd like to provide an update on our global sustainability program ceiling sustain which slide 12 outlines key accomplishments and milestones since we last spoke we've.

Harry Sommer: Now shifting our discussions to current bookings, demand and pricing trends shown on slide 10, we achieved record revenue of 2.5 billion in the third quarter an increase of 33% over the same period in 2019. The strong consumer demand environment resulted in low factors of 106% in the third quarter, while growing nymphrogens by nearly 80% all while absorbing a 20% growth and capacity. Before we get into operational details, in recent months we have seen the devastation caused by both the wildfires in Maui and the escalating conflict in Israel.

We partnered with the global Maritime Forum to advance our shared mission of driving a positive change for the industry environment and Society. We also joined its flagship initiative the getting to zero coalition, a powerful alliance with more than 200 organizations within the maritime energy infrastructure and finance SEC.

Harry Sommer: Our thoughts and prayers are with those impacted by these tragic events. Our priority remains the safety security and well-being of our guests, team members and the communities we visit, and we have mobilized to modify impacted itineraries and help support relief efforts in both regions. Starting with Hawaii we were uniquely impacted compared to our crews here, given our unique year-round inter-Island Hawaii offering the only one in the industry with our U.S, flag betflow pride of America.

<unk> committed to supporting the merits the maritime industry and its journey towards full decarbonization by 2050.

I'm also proud to share that we were recently recognized by Forbes world's best employers list for 2023, our team members are by far our most important resource.

And we are committed to their continued development and wellbeing.

With that I'll now turn the call over to Mark for his commentary on our financial results and outlook Mark.

Harry Sommer: When the wildfires begin in August, we quickly modified certain itineraries to avoid straining local resources. With the guidance and encouragement of a responsible return from both the Hawaiian Governor Josh Green and the Hawaii tourism authority, we resumed our scheduled calls to Calhulawi Maui in early September. As it occurred in the past, with events of this nature which received significant attention and media coverage, we did experience a temporary slowdown in close-and-bookings for Hawaii's sailings.

Thank you Harry and good morning, everyone. My commentary today will focus on our third quarter 2023 financial results 2023 guidance at our financial position.

Yes, otherwise noted my commentary on that per diem net yield and adjusted net cruise cost excluding fuel per capacity day metrics are on a constant currency basis and comparisons are to the same period in 2019.

Slide 13 highlights our third quarter results in which we are very pleased to report that we met or exceeded guidance for all key metrics.

Harry Sommer: This impacted not only part of America, but also certain sailings on our region's spirit, also based in the region for much of the fall, which in total represent approximately 6% of our capacity in the fourth quarter. Demand has steadily improved in recent weeks, and while not quite fully recovered yet, it's on the right trajectory and now approaching normalize levels. While we take some lingering impact in the first quarter, Hawaii only counts for approximately 4% of capacity in this period, as well as for the full year, as an region's spirit redesistions outside of the region in December.

Focusing on the top line results were strong with net per Dms, increasing nearly 8% and net yield increasing approximately 3% both coming in at the high end of guidance.

Turning to costs adjusted net cruise cost excluding fuel per capacity day was in line with guidance at $152 in the quarter, demonstrating our third consecutive quarter of improvement since we began our cost reduction efforts in earnest late last year as expected. This also included approximately <unk> <unk>.

$2 of certain nonrecurring benefits realized in the quarter.

Harry Sommer: Turning to Israel, once the conflict began to escalate, we canceled all calls to Israel for the remainder of the year. We recently made the preemptive decision to cancel calls to Israel in 2024 as well, and our brands are currently working diligently to modify itineraries and communicate these changes to guests. One of the benefits of our industry is that cruise ships are easily movable assets, so we can typically need it and still offer incredible itineraries for our guests to enjoy.

Adjusted EBITDA was approximately $22 million higher than our guidance at approximately $752 million in the quarter. In addition, adjusted EPS of <unk> 76.

Also beat our projection by <unk>.

Overall, we were very pleased with the strong results we generated in the third quarter.

Shifting our attention to guidance our outlook for the fourth quarter can be found on slide 14.

Harry Sommer: However, we are seeing both elevated cancellation activity and lower new bookings for this region, primarily for close-in sailings, as the conflict is ongoing and still front and center in the consumer psyche. Prior to the conflict, approximately 7% of capacity in the fourth quarter of 2023, and 4% of capacity for the full year 2024, had visits to the broader Middle East region. Great in 2024 down a bit further, very little capacity is in this region early in the year, only about 1% of capacity in Q1.

We are projecting very strong net per diem growth of approximately 15% to 16%.

And net yield growth of approximately $7 75 to 875.

Keep in mind as we laid out last quarter. There are several factors contributing to the exceptionally strong pricing growth, we're expecting in the fourth quarter as a result of more luxury and upper premium capacity operating with our new region at Oceana ships as well as the favorable comp from the rapid exit of Cuba in 2019.

Harry Sommer: That said, we are encouraged by the strength in our book decisions for 2024 beyond, which on a 12 month forward basis remains in a record position at our optimal levels and at robust pricing levels. Onward revenue generation, which we view as our single best real-time indicator of consumer confidence, also continues to knock it out of the park. During the quarter, growth onward revenue per passenger cruise day was approximately 30% higher than the comparable 2019 period.

<unk>.

While this is still a strong result on a core basis, we have tempered revenue expectations. Since we last spoke primarily on the back of lower occupancy.

As Terry touched on earlier, we are experiencing impacts during the quarter from exogenous events in Hawaii in Israel. The latter of which also had implications for parts of the broader middle east in the form of elevated cancellations and lower booking volumes. In addition, as Norwegian cruise line continues to fine tune its differentiate.

Harry Sommer: This is driven not only by strong demand, but also through our multi-year effort to enhance our bundled offerings and pull forward and presale more revenue before guests ever steps foot on the ship, effectively expanding the sail cycle and getting more of the consumers while over time. For the third quarter, presale revenue on a per passenger day basis was up over 80% higher than in 2019, with nearly all of our guests purchasing something pre-cruise on their own or through our bundled offering.

The strategy of longer more premium itineraries certain voyages late in the late season, eastern Mediterranean and parts of Asia.

Performed slightly below expectations.

While this resulted in a disconnect in the fourth quarter of 2023.

Our booking curves guest sourcing and marketing plans have already been recalibrated for similar sailings next year, resulting in a book position that is significantly better for the same period in 2024 compared to the same time last year.

Harry Sommer: Not only does this lead to higher spend by guests over the course of their entire journey, but it also pulls forward cash in both for the company. This is one of the reasons why, as you can see on slide 11, our advanced ticket sales balance increased nearly 60% in the third quarter versus 2019.

Shifting to operating cost adjusted net cruise cost excluding fuel per capacity day is expected to be approximately $151 in the fourth quarter.

This also includes certain nonrecurring benefits that partially shifted from Q3.

And that we do not expect to occur in 2024, and also partially offset by costs related to inaugural activities.

Harry Sommer: Before I turn the call over to Mark, I'd like to provide an update on our Global Sustainability Program Salon Sustain in which slide 12 outlines key accomplishments and milestones. Since we last spoke, we parted with the Global Narrow Time Forum to advance our shared mission of driving a positive change for the industry, environment, and society. We also joined its flagship initiative to get into zero coalition of powerful alliances with more than 200 organizations within the maritime energy, infrastructure, and finance sectors committed to supporting the maritime industry and its journey towards full decarbonization by 2050. I'm also proud to share that we were recently recognized by Forbes in its world best employers list for 2023. Our most important resource, and we are committed to their continued development and well-being.

On a normalized basis unit costs would have been approximately $153 in the quarter.

Taking all this into account adjusted EBITDA for the fourth quarter is expected to be approximately $360 million and adjusted EPS loss is expected to be approximately 15.

On a projected diluted share count of approximately $425 million keep in mind that we have for outstanding exchangeable notes, which will cause variability in the diluted weighted average shares outstanding used to calculate EPS. Following the if converted method slide 22 in our earnings deck has more informed.

<unk> to help you with modeling.

Now shifting our focus to our outlook for the full year 'twenty three we expect adjusted EBITDA of approximately $1 86 billion within the previous range of $1 85 to $1 95 billion. Despite the headwinds expected in the fourth quarter.

Mark Kempa: With that, I'll now turn the call over to Mark for his commentary on our financial results in Outlook. Mark? Thank you, Harry, and good morning, everyone.

This is expected to translate to adjusted EPS of approximately <unk> 73.

Mark Kempa: My commentary today will focus on our third quarter 2023 financial results, 2023 guidance in our financial position. Unless otherwise noted, my commentary on net per dem, net yield, and adjusted net cruise costs, excluding fuel per capacity day metrics are on a constant currency basis, and comparisons are to the same period in 2019.

Compared to prior guidance of <unk> 80.

Taking a closer look at the components of the full year outlook, our healthy net per diem growth of approximately nine and a quarter to nine and three quarters percent is slightly narrowed versus previous guidance net yield growth is now expected to be four in a quarter to four and three quarter percent with capacity up 18%.

Mark Kempa: Slide 13 highlights our third quarter results, in which we are very pleased to report that we met or exceeded guidance for all key metrics. Focusing on the top line, results were strong with net per dems increasing nearly 8%, and net yield increasing approximately 3%, both coming in at the high end of guidance. Turning to costs, adjusted net cruise costs, excluding fuel per capacity day, was in line with guidance at $152 in the quarter, demonstrating our third consecutive quarter of improvement since we began our cost reduction at percent earnest late last year.

Moving onto costs adjusted net cruise costs, excluding fuel per capacity day is expected to average approximately $150 $5 for the full year better than our prior guidance of $156.

This improvement is the result of the team's round the clock efforts to methodically right size our cost base.

The savings we have identified have been broad based and touching every aspect of the business, which you can see on slide 16.

I'm, particularly proud of what we've been able to accomplish so far this year in the area of food costs since the fourth quarter of 2022, we have reduced these costs per passenger day by nearly 30% significantly outpacing the easing in food inflation seen in the broader market.

Mark Kempa: As expected, this also included approximately $2 of certain non-recurring benefits realized in the quarter. Adjusted EBIT was approximately 22 million higher than our guidance at approximately 752 million in the quarter. In addition, adjusted EPS of 76 cents also beat our projection by 6 cents.

These are just a few of the many examples where we have been able to drive significant savings while still preserving the exceptional guest experience and superior service levels that our guests value.

Mark Kempa: Overall, we were very pleased with the strong results we generated in the third quarter.

As we look ahead to 2024, while we are not ready to give guidance yet there are a few moving pieces to keep in mind. For example, the timing of timing of expenses like Drydocks will cause variability in the NCC ex fuel metric when comparing periods in 2023, we have limited dry docks.

Mark Kempa: Shifting our attention to guidance, our outlook for the fourth quarter can be found on slide 14. We are projecting very strong net per dem growth of approximately 15 to 16 percent, and net yield growth of approximately 75 to 875. Keep in mind, as we laid out last quarter, there are several factors contributing to the exceptionally strong pricing growth we are expecting in the fourth quarter, as a result of more luxury and upper premium capacity operating with our new region and ocean of ships, as well as the favorable comp from the Rapid Exhibit Cuba in 2019.

We took the opportunity during the pandemic to optimize the schedule. While the ships were already out of service and 24, we expect roughly 170, Drydock days, which will impact <unk> by approximately 300 basis points on a year over year basis or approximately $4 on a unit cost basis.

Including both the impact of the dry dock expenses as well as the impact from reduced capacity days.

Mark Kempa: While this is still a strong result on a core basis, we have tempered revenue expectations since we last spoke. Primarily on the back of lower occupants. As Harry touched on earlier, we are experiencing impacts during the quarter from exogenous events in Hawaii and Israel, the latter of which also had implication for parts of the broader Middle East in the form of elevated cancellations and lower booking volumes. In addition, as Norwegian Cruise Line continues to fine tune its differentiated strategy of longer, more premium itineraries, certain voyages late in the late season Eastern Mediterranean and parts of Asia perform slightly below expectations.

Turning our attention to the balance sheet and our debt maturity profile on slide 17 year to date through the third quarter, we generated over $1 7 billion of cash flow from operations, we have repaid $130 million debt in the quarter and approximately $1 5 billion of debt over the first nine months of the year for the remainder of the year.

Mark Kempa: While this resulted in a disconnect in the fourth quarter of 2023, our booking curves, guest sourcing and marketing plans have already been recalibrated for similar sailing next year, resulting in a book position that is significantly better for the same period in 2024 compared to the same time last year. [inaudible] $153 in the quarter. Taking all this into account, adjusted EBITDA for the fourth quarter is expected to be approximately $360 million, and adjusted EPS loss is expected to be approximately $15 on a projected diluted share count of approximately $425 million.

We have approximately $330 million of scheduled debt payments the vast majority of which are related to our export credit agency backed ship financing.

In October we successfully completed the refinancing of our operating credit facility, extending our debt maturity profile and providing incremental liquidity.

Our revolving credit facility was upsized to $1 2 billion from $875 million with a three year term maturing in October 2026. In addition, the company issued $790 million of eight <unk> senior secured notes due 2029, the net proceeds together with the cash on hand were used to.

Fully replace repay the approximately $800 million on our term loan a which was to mature in January of 'twenty five.

We were particularly pleased with the demand we saw for the new notes issuance. In addition to being significantly oversubscribed. We also saw a substantial interest from new investors, reflecting increased confidence from the markets and our financial position and outlook.

Turning to net leverage we continue to expect significant improvement driven by our organic cash generation and scheduled payment of debt installments, excluding debt associated with our ships on order for future delivery trailing 12 months net leverage is expected to be meaningfully reduced versus current elevated levels. This does not adjust for ships that are delivering.

<unk> in 2023, which would have the full debt load in the numerator without a full year of contribution included in adjusted EBITDA.

Mark Kempa: Keep in mind that we have four outstanding exchangeable notes, which will cause variability in the diluted weighted average shares outstanding used to calculate EBITDA. In addition, the EPS following the IF converted method, slide 22 in our earnings deck has more information to help you with modeling.

Our liquidity position outlined on slide 18 remained strong and would have been approximately $2 5 billion at quarter end, if adjusted for the upsizing of our revolver in October we.

We continue to believe that our strong liquidity position, coupled with our ongoing cash generation at attractive growth.

Mark Kempa: Now shifting our focus to our outlet for the full year 23, we expect adjusted EBITDA of approximately $1.86 billion within the previous range of $1.85 to $1.95 billion despite the headwinds expected in the fourth quarter. This is expected to translate to adjusted EPS of approximately $0.73 compared to prior guidance of 80 cents. Taking a closer look at the components of the full year outlook, our healthy net per DM growth of approximately $9.25 to $9.3% is slightly narrowed versus previous guidance.

Growth profile provide a path to meet our near term liquidity needs.

Including scheduled debt amortization payments and capital expenditures with that I will turn it back to Harry for his closing comments.

Well, thank you Mark before turning the call over to Q&A I'd like to leave you with some key takeaways that you can find on slide 19 first we are focused on execution of the near term priorities outlined today.

Second we are committed to defining our vision for the future with a comprehensive strategic review we are currently undertaking.

Mark Kempa: Net yield growth is now expected to be $4.25 to $4.3% with capacity up 18%. Moving on to costs, adjusted net growth costs excluding fuel per capacity day is expected to average approximately $155 for the full year better than our prior guidance of $156. This improvement is the result of the teams round the clock efforts to methodically right size our cost base. The savings we have identified have been broad based in touching every aspect of the business, which you can see on slide 16.

Consumer demand for travel and experiences continues to be strong despite temporary regional disruptions. We continue to maintain a very strong record 12 month forward booked position and at higher prices.

Our advanced customer deposits also stand at $3 $1 billion.

59% higher than Q3 2019.

Fourth we have seen a fundamentally a fundamental shift in culture at our company as a result of our margin enhancement initiatives. We now had three straight quarters of sequential improvement in our key cost metrics and we will continue to identify and implement additional measures to accelerate our margin recovery while still.

Mark Kempa: I'm particularly proud of what we've been able to accomplish so far this year in the area of food costs. Since the fourth quarter of 2022, we have reduced these costs per passenger day by nearly 30%. Significantly outpacing the easing and food inflation seen in the broader market. These are just a few of the many examples where we have been able to drive significant savings while still preserving the exceptional guest experience and superior service levels that are guest value.

Delivering exceptional products and service offerings that our guests desire lastly, our liquidity position is very strong and we are committed to prioritizing restoration of our balance sheet and reducing leverage in the coming years, we've covered a lot today so <unk>.

Conclude our commentary here and open up the call to your questions.

Mark Kempa: As we look ahead to 2024, while we are not ready to give guidance yet, there are a few moving pieces to keep in mind. For example, the timing of expenses like dry docks, will cause variability in the NCCX fuel metric when comparing periods. In 2023, we have limited dry docks as we took the opportunity during the pandemic to optimize the schedule while the ships were already out of service. In 24, we expect roughly 170 dried up days, which will impact NCCs by approximately 300 basis points on a year-over-year basis, or approximately $4 on a unit cost basis. Including both the impact of the dry dock expenses, as well as the impact from reduced capacity days.

Yes.

Thank you Larry if you have a question at this time. Please press the Star then one key on your Touchtone telephone.

Order to get as many people through the queue. Please limit your time to one question. Thank you for your question has been answered or you wish to remove yourself from the queue. Please press star two.

Before we get to the questions on the line, we first want to address a top question from our online shareholder Q&A platform, which provides all of our investors. Another avenue to submit questions for management one of the top related questions. We received this quarter. What how are you navigating heightened geopolitical instability, Harry do you want to take that one sure.

Thank you Jessica I appreciate the question you know.

One of the main strengths and Differentiators in our industry is our ability to reposition our assets, which is what we've done with the heightened tensions in the middle East the safety and well being of our guests and crew members are without a doubt our number one priority and when the unrest in the region began in early October we immediately modified itineraries, starting first with sailings hurting.

Mark Kempa: Turning our attention to the balance sheet and our debt maturity profile on slide 17, year-to-date through the third quarter, we generated over 1.7 billion of cash flow from operations. We've repaid 130 million debt in the quarter and approximately 1.5 billion of debt over the first nine months of the year. For the remainder of the year, we have approximately 330 million of schedule debt payments, the vast majority of which are related to our export credit agency back to ship financing.

Or clothing in Israel, and the ensuing weeks than expanding modifications to include all sailing through 2024, I want to add that I'm extremely proud of how our marine commercial and brand teams came together quickly to make these modifications and proactively work on confirming alternative ports and communicating them to our guests.

Mark Kempa: In October, we successfully completed the refinancing of our operating credit facility, extending our debt maturity profile and providing incremental liquidity. Our revolving credit facility was upsized to 1.2 billion from 875 million with a three-year term maturing in October, 2026. In addition, the company issued 790 million of 818 senior secured notes through 2029. Then that proceeds together with the cash on hand were used to fully repay the approximately 800 million on our term loan A, which was to mature in January of 25.

We will continue to closely monitor and evaluate future <unk> and it just is needed we know that making changes such as these on short notice is never easy, but our organization has risen to this latest challenge in a way that demonstrates once again, while we are the best team in the industry.

Okay.

Operator questions.

Thank you Harry and our first question comes from the line of Dan The Pulitzer with Wells Fargo. Please proceed with your question.

Mark Kempa: We were particularly pleased with the demand we saw for the new notes issuance. In addition to being significantly oversubscribed, we also saw substantial interest from new investors reflecting increased confidence from the markets in our financial position and outlook.

Hey, good morning, everyone and thanks for taking my question.

I think that the key question and topic that I think us and investors are focused on this morning is your outlook for 2024, Unsurprisingly. So I mean, I think you gave a couple of different data points on costs as it relates to dry docks, but I guess as we think about the ongoing cost savings how do you think about that.

Mark Kempa: Turning to that leverage, we continue to expect significant improvement driven by our organic cash generation and scheduled payment of debt installments. Excluding debt associated with our ships on order for future delivery, trailing 12-month net leverage is expected to be meaningfully reduced versus current elevated levels. This does not adjust for ships that are delivered in 2023, which would have the full debt load in the numerator without a full year of contribution included in adjusted even debt.

Next year is adjusted cruise costs outside of the dry docks and then similarly in terms of the demand picture, which is obviously pretty.

It's a little bit TBD right now in terms of the eastern Mediterranean and the tensions there, but how would you think about the impact from Israel on yields just obviously, it's a it's probably a higher yielding type itinerary. Thanks.

Mark Kempa: Our liquidity position outlined on slide 18 remains strong and would have been approximately 2.5 billion at quarter end if adjusted for the up sizing of our revolver in October. We continue to believe that our strong liquidity position coupled with our ongoing cash generation and attractive growth profile provided path to meet our near term liquidity needs, including scheduled debt amortization payments and capital expenditures.

Again, thanks for the question and good morning, So listen I'll take the the yield demand question and I'll, let mark comment on cost guidance for next year.

Of course this was a tragic event hearts go out to the to the victims and in that part of the world.

But we're hopeful that this will be a reasonably short term event. So while we we've.

We've seen obviously some impact on Q4, we had very little of our inventory there in Q1 in fact, we don't meaningfully get backs the region until Q4 of next year. So so far absent the handful of ceilings, we have in Q1 and Q2 and it's a very very small percentage of our overall inventory, while we continue to be very very well booked.

Harry Sommer: With that, I'll turn it back to Harry for his closing comments. Well, thank you, Mark.

Harry Sommer: Before trimming the coal over to Q&A, I'd like to leave you with some key takeaways that you can find on slide 19. First, we are focused on execution of the near-term priorities outlined today. Second, we are committed to defining our vision for the future with the comprehensive strategic review we are currently undertaking. Third, consumer demand for travel and experiences continues to be strong. Despite temporary regional disruptions, we continue to maintain a very strong record 12 months forward book position and at higher prices.

In fact I was looking at the reports this morning and every month every individual months next year is booked at a higher rate than the same month was at this time last year for 2023. So we're not going to provide guidance today, we talked about that a little bit in the script, but demand for next year continues to look well and.

Dan I'll take the question on the cost.

Harry Sommer: Our advance customer deposit will withstand at $3.1 billion, $59% higher than Q3 2019. Fourth, we have seen a fundamentally fundamental shift in culture at our company as a result of our margin enhancement initiative. We now have three straight quarters of sequential improvement in our key cloth metrics and we will continue to identify and implement additional measures to accelerate our margin recovery, while still delivering the exceptional products and service offerings that are guessed desired. Lastly, our outputting position is very strong and we are committed to prioritizing restoration of our balance sheet and reducing leverage in the coming years.

As we have stated we have been razor focused on our cost base trying to right size. It and I think we've been very successful in demonstrating that with three sequential quarters of decreased unit cost as.

As we translate to 2024.

There is going to be some pressures, we talked about the dry dock impact both from the the actual dry dock cost itself as well as the reduced capacity days, that's going to add about 300 basis points or about $4 to the unit cost. So if you think of where our exit rate at 2023 is somewhere in the zone of $1 53.

Three to $1 54 on a normalized basis and you add in about $4 to that then the piece. We're looking at is where does inflation come come into play I can tell you. We have a lot of programs underway as part of our margin enhancement initiative and we're going to keep calling back at all of our cost base too early to say.

Harry Sommer: We've covered a lot today so I'll conclude our commentary here and open up the call to your questions. Thank you, Harry.

Unknown Executive: If you have a question at this time, please press the star then one key on your touchtone telephone.

How much of the inflationary pressures, we can mitigate but again I think our demonstration of what we've been able to do over the last three quarters from specifically from the back half of 2022.

Unknown Executive: In order to get as many people through the Q, please limit your time to one question. Thank you.

Unknown Executive: If your question has been answered or you wish to remove yourself from the Q, please press star two.

Think presents some some very solid data points to start thinking about from a modeling standpoint.

Jessica John: Before we get to the questions on the line, we first want to address a top question from our online shareholder Q&A platform, which provides all of our investors another avenue to submit and upload questions for management. One of the top voted questions we received this quarter was how are you navigating heightened geopolitical instability? Harry, do you want to take that one? Sure. Thank you Jessica. Appreciate the question. You know one of the main strengths and differentiators in our industry is our ability to reposition our assets, which is what we've done with our intentions in the Middle East.

Got it that's helpful and then just.

For my follow up Harry your predecessor was pretty adamant about maintaining pricing discipline and avoiding discounting.

I guess as you think about next year and all the moving pieces and what seems like a pretty fluid environment and you just added three new ships and you're entering wave season.

Is there any change in your approach to pricing and as you think about the trade off between load and load in yields there.

Jessica John: The safety and well-being of our guest and crew members are without a doubt, our number one priority, and when the unrest in the region began in early October, we immediately modified itineraries starting first with sailing, turning, or calling in Israel in the ensuing weeks, then expanding modifications to include all sailing through 2024. I want to add that I'm extremely proud of how our marine commercial and brand teams came together quickly to make these modifications and proactively work on confirming alternative ports and communicating them to our guests.

No.

I am a firm believer of maintaining pricing discipline, obviously, that's the key to long term yield growth, it's really hard to come back from significant price discounting because your guests.

<unk> come to expect it.

That being said, we're in a fortunate position to be so well booked for next year record levels. The commentary we've given previously on the call and in the script that we really don't need to turn in that direction, even if I wasn't a believer but to be clear I am.

Jessica John: We will continue to closely monitor and evaluate future sailings and adjust the zealot. We know that making changes such as these on short notices never easy, but our organization has risen to the latest challenge in a way that demonstrates once again why we're the best team in the industry. Thank you, Harry.

Got it thanks, so much.

And the next question comes from the line of Steve <unk> with Stifel. Please proceed with your question.

Yeah, Hey, guys good morning.

So wanted to stay on the cost side, if I could maybe ask about your margin opportunity moving forward and maybe just how you balance that margin opportunity versus <unk>.

Daniel Politzer: Our first question comes from the line of Dan Politzer with Wells Fargo. Please proceed with your question. Hey, good morning, everyone, and thanks for taking my question. I mean, I think that the key question and topic that I think often investors are focused on this morning is your outlook for 2024, unsurprisingly. So, I mean, I think you gave a couple different data points on costs as it relates to dry dogs. But, you know, I guess as we think about, you know, the ongoing cost savings, how do you think about the, you know, next year's adjusted cruise costs, you know, outside of the dry dogs.

Trying to protect the customer experience on board.

And then I guess to follow up on that I mean, if you were to encounter some type of slowdown from a booking or onboard perspective, how do you guys think about the flow through and maybe what that would look like under a more.

Stressed topline environment.

Sure. So let me let me take the part about balancing cost against customer experience and I'll, let mark talk margin opportunities and what may happen in a slowdown environment listen we have great data point.

Daniel Politzer: And then similarly in terms of the demand picture, which is obviously pretty, you know, it's a little bit TBD right now in terms of the Eastern Mediterranean and the tensions there. But how would you think about, you know, the impact from Israel on yields, just obviously it's probably a higher yielding type itinerary. Thanks.

At any given point in time, we had 60 or 70000 guests on some part of their vacation experience. So we get real time immediate impact as we make changes in fact, we talked to guests and study changes before we make them to begin with and I think with this robust view towards guest satisfaction scores.

Harry Sommer: Stan, thanks for the question and good morning. So listen, I'll take the yield demand question and I'll let Mark comment on cloth guidance for next year. Listen, you know, of course, this is a tragic event. Hearts go out to the victims in that part of the world. But we're hopeful that this will be a reasonably short term event. So while we, we've seen obviously some impact on Q4, we have very little of our inventory there in Q1.

Onboard bookings repeat rate in onboard revenue generation, we know right away, whether it's something that we've done is positive or negative now Steve I'm not going to say, we always get it right, but because we have such a methodical approach to making these changes we get it right much much more often than we get it wrong and that's why despite.

The fact that inflation continues in the world. We've now had three straight quarters of cost reduction I share market cash we're not now I can't promise that we're going to continue to have cost reductions mark talked about a few of the headwinds related to.

Harry Sommer: In fact, we don't meaningfully get back to the region until Q4 of next year. So, so far, absent the handful of savings we have in Q1 and Q2 and it's a very, very small percentage overall inventory. Well, we continue to be very, very well booked. You know, in fact, I was looking at the reports this morning and every month, every individual month next year is looked at a higher rate than the same month was at this time last year for 2023. So, you know, we're not going to provide guidance today. You know, we talked about that a little bit in the script, but demand for next year continues to look well.

Drydocks for next year and inflation is real but I can promise that we have a continued focus this is not a short term initiative, where we're not halfway there. This is a permanent sea change in the way we view the business that we are constantly going to be attacking every single cost in the business.

Just to make sure that it's right sized and balanced against giving guests great experiences listen across our fleet at any given time something like half of our guests are past, yes, we would be foolish to do something that would that would take away from that that being said, we're still optimistic about the opportunities out there mark and Steve and related to the Mark.

Mark Kempa: And Dan, I'll take the question on the cost. You know, as we have stated, we have been razor focused on our cost based trying to write size it. And I think we've been very successful at demonstrating that with three sequential quarters of decreased unit cost.

Mark Kempa: As we translate to 2024, there is going to be some pressures. We talked about the dry dock impact both from the actual dry dock cost itself as well as the reduced capacity days. That's going to add about 300 basis points or about $4 to the unit cost. So, if you think of where our exit rate at 2023 is somewhere in the zone of 153 to 154 on a normalized basis. And you add about $4 to that, then the piece we're looking at is where does inflation come come into play.

Improvement in flow through let me highlight what Harry just said on the cost side, we really are changing the DNA of the company. This is not a one time opportunity. This is a continued culture change. So we want to stress that and we are committed to it I think one of the things that sets us apart on in terms of whether if there's a slowdown what are there are opportunities.

To try and mitigate that look I think first and foremost we have perfected.

Almost perfected the bundling strategy and I think thats been a very good tailwind for us in.

In addition to that when you think about the onboard spend we continue to get smarter and we continue to get better at getting more of the customers' wallet over time from the point they enter our ecosystem.

Mark Kempa: I can tell you we have a lot of programs underway as part of our margin enhancement initiative. And we're going to keep clawing back at all of our cost base to early to say how much of the inflationary pressures we can mitigate. But again, I think our demonstration of what we've been able to do over the last three quarters from specifically from the back half of 2022, I think presents some very solid data points to start thinking about from a modeling standpoint.

Unknown Executive: Got it. That's helpful.

And we talked about in our prepared remarks that our pre cruise revenue sales were up over 80% versus same time in 19. So I think that is a that is a strategy that will continue to fine tune, we never get it exactly right, but I think that provides us some additional.

Protection again to get that wall over over a longer period of time, we are very focused on margin improvement. We've said this will be in our case. This will be a multiyear effort. We don't see anything structurally in the business that would preclude us from getting back to 2019 margins and better.

Harry Sommer: And then, you know, just for my follow up, Harry, your predecessor was pretty adamant about maintaining pricing discipline and avoiding discounting. I mean, I guess as you think about next year and all the moving pieces and what seems like a pretty fluid environment, and you just added three new ships and you're entering wave season, is there any change in your approach to pricing? And as you think about, you know, the trade-off may be between loading yields there.

But given our fleet and our deployment mix I think it's going to take us a little bit longer on a path to do that but we are ultra ultra committed to do so.

Harry Sommer: You know, I too am a firm believer of maintaining price and discipline. Obviously that's the key to long-term yield growth. It's really hard to come back from significant price discounting because your guests come to expect it. I'm a firm in that direction, even if I wasn't a believer, but to be clear I am.

That's great color I appreciate that market, Harry and then second question.

Maybe if you could give some more color around how 2024 is really kind of shaping up from a booking perspective and look at it.

Unknown Executive: Thanks so much.

I fully understand you guys talked about in the release that you booked in a in an optimal position, but wondering if you could maybe give some more color around the brands themselves, meaning are you seeing any material differences between let's say, the Norwegian brand and the and the two luxury brands into next year.

We don't we don't typically comment on brand specific basis I can just reiterate some of the color. We gave already where we are at a record book position for the next 12 months. We're at a record booked position for 2024. If you just want to look at at that time period.

Steve Wasinski: And the next question comes from the line of Steve Wasinski with Steve Full. Please proceed with your question. Yeah, hey guys, good morning.

Steve Wasinski: So, want to stay on the the the cost side if I could and maybe ask about your margin, you know, opportunity moving forward. And maybe just how you balance that margin opportunity versus, you know, trying to protect the, you know, the customer experience on board. And then I guess the follow up on that. I mean, if you were into encounter some type of slowdown from a booking or on board perspective, how do you guys think about the flow through and maybe what that would look like under a more, you know, distressed top line environment? Sure.

And pricing is high so I think I think past that we're going to take some time over the next few months to develop this long term strategy, which will.

Packed everything from our choices on the deployment of investments Capex onboard product and at the end of the process will be in a good position to get not just guidance for 'twenty four but.

Clear the clear financial Guideposts, if you will for 'twenty, five 'twenty six and beyond.

Harry Sommer: So, let me let me take the part about balancing cost against customer experience and I'll let Mark talk to up margin opportunities and what may happen in the slowdown environment. Listen, we have great data point, you know, at any given point in time, we have 60 or 70,000 guests on some part of their vacation experience. So, we get real time immediate impact as we make changes. In fact, we talk to guests and study changes before we make them to begin with.

Okay got you thanks, guys appreciate it.

As a reminder, please limit yourself to one question. Thank you. The next question comes from the line of Vince <unk> with Cleveland Research. Please proceed with your question.

Okay.

Great. Thanks, so within the updated for key yield guide seems like pricing is probably more in line with what you were thinking 90 days ago, while more of the change has been occupancy.

Im curious how much of that is kind of related to Israel, Hawaii and then as you think into 'twenty four I believe that previously was a view maybe a one to two points kind of a structural headwind from changes in the fleet since pre Covid times.

Harry Sommer: And I think with with this robust view towards get satisfaction scores on board bookings, repeat rate and on board revenue generation. We know right away whether something that we've done is positive or negative. Now, Steve, I'm not going to say we always get it right. But because we have such a methodical approach to making these changes, we get it right much, much more often than we get it wrong. And that's why despite the fact that inflation continues in the world, we now have three straight quarters of cost reduction.

<unk>.

Is that still kind of a good way to think about the occupancy recovery path in the next year.

Yes, hi events I think.

When you when you think about the occupancy I think that is still a good way to think about it on a normal annualized basis that it will be down somewhere.

Harry Sommer: I share Mark's passion. We're not done. Now, I can't promise that we're going to continue to have cost reductions. Mark talked about a few of the headwinds related to drybacks for next year. You know, an inflation is real, but I can promise that we have a continued focus. This is not a short term initiative where we're not halfway there. This is a permanent sea change in the way we view the business that we are constantly going to be attacking every single cost in the business to make sure that it's right size and bounce against giving guests great experience.

Two to 300 points about in the zone of 105 to 106, when you think about Q4. It really is all about.

All about occupancy if you look at our metrics, we were guiding or expecting somewhere about 101 to 102 for the fourth quarter and right now we're forecasting roughly 98 and that really is the vast majority related to Israel and the broader middle East region. We have seen as we said an elevated number of <unk>.

Relations as well as a lower volume for the closer in sailings, which essentially top off the ship.

Harry Sommer: Listen, across our fleet at any given time, something like half of our guests are passed. Yes. We would be foolish to do something that would take away from that. That being said, we're still optimistic about the opportunities out there.

As well as as we talked about we did see some minor hiccups.

Late season, Asia, Itineraries, which we believe we fixed from a structural standpoint.

Mark Kempa: Mark and Steve and related to the margin improvement and flow through. Let me highlight what Harry just said on the cost side. We really are changing the DNA of the company. This is not a one time opportunity. This is a continued culture change. So we want to stress that and we are committed to it. I think one of the things that sets us apart on in terms of whether if there's a slow down, what are there opportunities to try and mitigate that?

But on the pricing side look Q4 pricing was strong we're still expecting to deliver 15% to 16% pricing. So when you think about the the.

The change in Q4 revenue it really is the vast majority on the back of the load which results in about somewhere in the zone of $40 million to $50 million as a result of these these isolated conflicts and against the only thing I'd add is just to sort of tightened for a question earlier today.

Mark Kempa: Look, I think first and foremost, we have perfected almost perfected the bundling strategy. And I think that's been a very good tail in for us. In addition to that, when you think about the onboard spend, we continue to get smarter and we continue to get better at getting more of the customers wallet over time from the point they enter our ecosystem. And we talked about in our prepared remarks that our pre-pruise revenue sales were up over 80% versus the same time in 19.

Enforces our commitment to the price integrity, because we didn't chase trying to steal these close in cancels with low yielding business. It makes no sense for us to divert our attention away from 24 to chase another 100 basis points of occupancy of guests, who won't necessarily be high yielding guests and will likely come.

Back we prefer to keep our focus on 2024, which we've now repeatedly said is shaping up.

Mark Kempa: So I think that is a strategy that will continue to fine tune. We never get it exactly right. But I think that provides us some additional protection again to get that wall over over a longer period of time. We are very focused on margin improvement. We've said this will be in our case. This will be a multi year effort. We don't see anything structurally in the business that would preclude us from getting back to 2019 margins and better. But given our fleet and our deployment mix, I think it's going to take us a little bit longer on our path to do that. But we are ultra committed to do so.

Quite well with a record book position on both a forward 12 month basis and for 24 on a standalone basis.

Thanks, and best of luck.

Thank you.

And the next question comes from the line of Robin Farley with UBS. Please proceed.

Great.

Hi, how are you.

I Wonder if you could give a little more color.

You mentioned.

Some of it product outside of the Middle East.

And Hawaii, having sort of softer closing you mentioned Asia and maybe other exotics as well.

Can you talk a little bit about what you think may be happening there because.

Unknown Executive: That's great color, appreciate that, you know, Mark and Harry.

Unknown Executive: And then second question, if, you know, maybe if you give some more color, you know, around how 2024 is, is really kind of shaping up from a booking perspective. And look, I, you know, I fully understand you guys, you know, talk about in the release that you're booked in an optimal position. But wondering if you could maybe give some more color around the brands themselves, meaning, you know, are you seeing any material differences between, let's say, the Norwegian brand and the two luxury brands.

Clearly well understood what's happening with.

Hawaii in the Middle East.

A little less clear on what you think maybe happening at some of those other destinations.

I would say that Hawaii and Middle East was was widespread the other areas.

It was more what I would say.

What I'm looking for it was just a partial.

It was not as widespread so for example, we've seen a couple of cruises that goes through Turkey. When we talk about eastern med that have had a few more than normal close and cancelled not so much a suppression of demand for next year more on the close and cancel and similarly, we've had some cruises as an example that go from Dubai the Nzf.

Unknown Executive: Into next year, you know, we don't, we don't see typically common on a brand specific basis. I can just reiterate some of the color we gave already, you know, we're, we are in a record book position for the next 12 months, we're in a record book position for 2024. If you just want to look at that time period, and pricing is high. So I, I think, I think past that, you know, we're going to take some time over the next few months to develop this long term strategy.

Or in those type of regions. This is also seen slightly more close in cancels, but clearly Hawaii middle East are the ones that were widespread across all three brands in most of our Q4 departures theres other ones were more sporadic.

Unknown Executive: Which will, you know, impact everything from, you know, our choices on deployment, investments, catbacks on board product. At the end of the process, we'll be in a good position to give, you know, not just guidance for 24, but clear, but clear financial guide post, if you will, for 25, 26 and beyond. Okay. Gotcha. Thanks guys. Appreciate it.

Okay.

That's helpful. Thanks, and just a fact.

Unknown Executive: As a reminder, please limit yourself to one question. Thank you.

Follow up if I can.

Just circling back to the expense question just looking at your exit rate in Q4 expense being up about 19% versus 2019 levels and I think your fleet mix is pretty similar to 2019 are there probably are that sort of.

Expense increases relative to 19 that are still kind of holding on there and is there any opportunity to get rid of any of those.

Vince Ciepiel: The next question comes in the line of ZINC CPU with Cleveland Research. Please proceed with your question. Great. Thanks. So within the updated 4 key yield guide seems like pricing is probably more in line with what you were thinking 90 days ago, while more of the change has been occupancy. Curious how much of that is kind of related to Israel Hawaii, and then as you think into 24, I believe there previously was a view of maybe a one to two point kind of structural headwind from changes in the fluke since pre-COVID times. You know, is that still kind of a good way to think about the occupancy recovery path in the next year? Yeah.

Costs that you know driving that 19% increase like that that would bring the base down outside of sort of normal inflation. There. It seems like there may still be some unusual things in that 19% increase thanks.

Hi, Good morning, Robin when you look at 19, Q4 and versus 2019 2019 for myriad a myriad of different reasons was a bit lower than our than our usual run rate. Even when you look at all the quarters in 19.

Yes. This is a seasonal business, but generally speaking our cost are not really exposed to seasonal issues. There was just some a lot of noise going on in 2019, I think the more important metric to look at is if you look at the run rate and the consistency over the course of 2023 versus <unk> 22, we continue to move downward and Youre.

Harry Sommer: Hi, Vince. I think, you know, when you when you think about the occupancy, I think that is still a good way to think about it on a normal annualized basis that it'll be down somewhere, you know, two to 300 points about in the zone of 105 to 106. When you think about you for it really is all about all about occupancy. If you look at our metrics, we were guiding or expecting somewhere about 101 to 102 for the fourth quarter.

Comment about the fleet mix.

I would like to clarify that a bit because I think when we look where we are today, we absolutely have a higher mix of luxury and ultra luxury product from Oceana and region that we didn't have back in 2019. So that is playing a part but I would not focus so much on the absolute number in <unk>.

Harry Sommer: And right now we're forecasting roughly 98 and that really is the vast majority related to Israel and the broader Middle East region. We have seen, as we said, an elevated number of cancellations, as well as a lower volume for the close in sailings, which essentially top off the ship. As well as as we talked about, we did see some minor hiccups in our late season, Asia itineraries, which we believe we fixed from a structural standpoint.

2019, because I think it just was not a representative run rate going forward.

Okay. Thanks, sorry, I meant the fleet mix on a full year basis, but yeah, Q4, certainly higher higher luxury okay. Thank you. Thank you very much. Thank you.

As a reminder, please limit yourself to one question and the next question comes from the line of Brent <unk> with Barclays. Please proceed.

Harry Sommer: But on the pricing side, look, few for pricing was strong. We're still expecting to deliver 15 to 16% pricing. So when you think about the change in Q4 revenue, it really is the vast majority on the back of the load, which results in about somewhere in the zone of 40 to 50 million dollars as a result of these isolated conflicts. Yeah, I'm going to see the only thing I'd add, and just to sort of tie this in for a question earlier today, you'll just reinforces our commitment to price integrity.

Hey, good morning, everybody. Thanks for taking my question. So I just wanted to follow up on Robin's first question and talk about those <unk>.

<unk> close and hiccups that you mentioned and I want to differentiate between.

Maybe turkey, which could be construed as indirect.

Impact from what's going on in Israel and that of what's going on in Asia, which sounds like it's more specific to.

To the strategy the longer term strategy of moving things to more exotic and longer and longer dated itineraries. So I guess on that ladder stuff that seems like something that was put in place a while back. So we've been talking about for many quarters now and so I guess the question is is that something that was <unk> specific based on the destinations and won't roll into the <unk>.

Harry Sommer: Because we didn't chase trying to fill these close-in cancel with low yielding business. It makes no sense for us to divert our attention away from 24 to chase another 100 basis points of occupancy of guests who won't necessarily be high yielding guests and will likely come back. We prefer to keep our focus on 2024, which as we've now repeatedly said is shaping up quite well with a record book position on those with over 12 month basis and for 24 on standalone basis.

<unk> or is that.

Or could there be sort of some leakage into next year on that situation.

Well I think the <unk> situation.

First let me start by saying good morning brand the.

Unknown Executive: Thanks, and best of luck. Thank you.

The fourth and 14th situation was limited was really limited to Q4 and related to the fact that we didn't quite get the booking curve right.

Robin Farley: And the next question comes from the line of Robin Farley with UBS, please proceed. Great. Hi, how are you? I wonder if you could give a little more color. You mentioned some of the products outside of the Middle East and Hawaii having sort of softer clothes. And you mentioned Asia and maybe other exotics as well. Can you talk a little bit about what you think may be happening there? I'm clearly well understood what's happening with Hawaii in the Middle East, but just a little less clear on what you think may be happening in some of those other destinations.

Lots of things right, we didn't get this quite right, but when I look at Q4 of next year and comparing it to.

Q4, this year, we are significantly.

Push ahead for Q4 of next year, both for Asia, Itineraries, specifically and in general across the fleet and that gives us confidence that this short term dislocation as Mark mentioned has been solved for next year I'm not as concerned about Q1, because if you remember our Q1 comp will now be back against 2023 and 2002.

'twenty three we had all types of issues in Q1 in Asia because of Covid restrictions and the like so that is one of the meaningful tailwind going into next year.

Robin Farley: I would say that Hawaii in Middle East was widespread. The other areas was more what I say on what I'm looking for. It was just partial. It was not as widespread. So for example, we've seen a couple of cruises that go through Turkey. When we talk about Eastern Med that have had a few more than normal clothing cancels, not so much a suppression of demand for next year, more on the clothing cancels.

Okay. That's helpful. Sorry, John everyone else Scott two questions, so I'm going to take a shot here.

The hedge book at 36%.

Yeah.

<unk>.

The hedge book it at 36%.

He is a little bit it's still a bit below where you would've been at I think at this time and 19 for 2020 or something like 50, 556%. So I guess just update us on the strategy.

Robin Farley: And similarly, we've had some cruises as an example that go from Dubai to India or in those type of regions, which is also seen slightly more clothing cancels. But clearly, Hawaii in Middle East are the ones that were widespread across all three brands. And most of our Q4 departure, those other ones were more sporadic.

The way you see it for fuel heading into next year.

Yes, Brent there is no there is no change in strategy.

Yes, when you look at 2024, we are 36% hedged and like we've always said our goal is we'd like to be about 50% hedged going into a year and we are just very opportunistic on that front. So when there is dips in the marketplace, we take advantage of that.

Mark Kempa: Okay, now that's helpful. Thanks. And just if I have to follow up if I can just circling back to the expense question, just looking at your exit rating queue for expenses being up about 19% versus 2019 levels. And I think your fleet mix is pretty similar to 2019. What would are the sort of biggest expense increases relative to 19 that are still kind of holding on there? And is there any opportunity to get rid of any of those costs that driving that 19% increase, like that would bring the base down outside of sort of normal inflation there.

Mark Kempa: It seems like there may still be some unusual things in that 19% increase. Thanks. Yeah, hi, good morning, Robin. You know, when you look at 19 Q4 and versus 2019 there 2019 for a myriad, a myriad of the different reasons was a bit lower than our than our usual run rate, even when you look at all the quarters in 19. Yes, this is a seasonal business, but generally speaking, our costs are not really exposed to seasonal issues.

There was there was a little bit of a dip yesterday and we took advantage of some position. So no fundamental change in strategy, just really timing of the market and when when.

When we feel there's a good opportunity to place some additional positions on the books.

Makes sense thanks, everyone.

Yeah.

And the next question comes from the line of James Hardiman with Citi. Please proceed.

Hey, good morning, Thanks for taking my question.

So I just want to make sure I understand how you guys are thinking about.

The impact.

In the middle from the Middle East beyond the close of an impact for the fourth quarter I guess as you talk about removing.

Israel for me itineraries in 2024, obviously, you are replacing that with something do you think that impacted your your outlook.

Meaningful way.

Mark Kempa: There was just some a lot of noise going on in 2019. I think the more important metric to look at is if you look at the run rate and the consistency over the course of 2023 versus 22, we continue to move downward. And your comment about the fleet mix, you know, I would like to clarify that a bit because I think when we look where we are today, we absolutely have a higher mix of luxury and ultra luxury product from ocean and region that we didn't have back in 2019.

For 2024, and then you talked about 4% of your visits being to the middle East.

Next year.

How do we think about how that business is impacted.

You said Harry.

Youre hopeful and obviously it's.

Difficult right right now obviously in our Hearts go out to all the people that are that are effective in the region.

But this will be a.

Short term event reasonably short term event is that with regards to.

Mark Kempa: So that is playing a part, but I would not focus so much on the absolute number in 4 to 19 because I think it just was not a representative run rate going forward. Okay, thanks. I met the sleep mix on a full-year basis, but yeah, Q4 certainly, yeah, higher, higher electricity. Okay, thank you, thanks very much. Thank you.

Hopefully the conflict itself was short lived.

And then your business can go back to normal or even in sort of a state of elevated tensions in the region.

Just based on history booking beyond that epicenter.

Ultimately returned to normal just just want to make sure I understand how to how to compartmentalize all of that.

Unknown Executive: Is there a reminder, please let me yourself do one question.

So James let me try to.

Brandt Montour: The next question comes in line of Brandt Montour with Barclays, please proceed.

Deconstruct, because you sort of touched upon a couple of points.

Brandt Montour: Hey, good morning, everybody. Thanks for taking my question. So, I just want to follow up on Robin's first question and talk about those 4Q close-in hiccups that you mentioned. And I want to differentiate between maybe Turkey, which could be construed as indirect impact from what's going on in Israel, and that of what's going on in Asia, which sounds like it's more specific to, you know, to the strategy, the longer-term strategy of moving things to more anxieties and longer and longer data to turn around.

Sort out by saying that.

This 4% that we talk about for next year is mostly skewed to Q4, so it's 1% of our capacity in Q1, 1% in Q3, 3% in Q2 and 10% in Q4.

And because it is skewed so far in the future. We are optimistic that the alternative itineraries that we're going to put in place that will go to other places instead of Israel have reasonable time to book at normal levels, and just sort of a half pushing in their U S assets.

Brandt Montour: So I guess on that ladder stuff, that seems like something that was, you know, put in place a while back, that we've been talking about for many quarters now. And so I guess the question is, is that something that was 4Q specific based on the destinations and won't roll into the 1Q, or is that, or could there be sort of some leakage into next year on that situation? Thanks.

If it's if it's correct to assume that anytime we remove Israel will replace it with something else to answer that question. Yes, we are not planning to fully cancel or lay up any of our ships because of this disruption I think when we talk about think about this a little bit longer term I think it'll be a while before people are comfortable going back to Israel.

Harry Sommer: So, I think the 4Q situation, and first let me start by saying good morning, Brandt, the 4Q situation was limited, was really limited to Q4 and related to the fact that we didn't quite get the booking curve, right? I mean, you know, we do lots of things, right? We didn't get this one quite right. So when I look at Q4 of next year, and comparing it to Q4 this year, we are significantly booked to head for Q4 next year, both for Asia, it's in hurry specifically, and in general across the fleet.

Which is why we are canceling all Israel holds in 2004, even if the complex was and we hope it does and in reasonably short amount of time.

We are more bullish about the ability to return to places.

Like Egypt, and other places in the Middle East and quite frankly, we don't go to that many places in the middle East as part of our our normal proves its just normally part of our transitions when ships come in lead Europe at the beginning and end of each season, so that being said, while obviously, it's a little early to tell and this is somewhat dependent.

Harry Sommer: And that gives us confidence that this short-term dislocation, as Mark mentioned, has been solved for next year. You know, I'm not as concerned about Q1 because if you remember, the RQ1 comp will now be back against 2023, and 2023, we have all types of issues in Q1 and Asia because of COVID restrictions and the light. So that is one of the meaningful tailwinds going into next year. Okay, that's helpful. Sorry, John.

On how long the conflict goes.

We're relatively optimistic that the scope and nature of this will not in any way meaningfully impact our 2024 targets.

Got it that makes a lot of sense, obviously its difficult, but that's really good color. Thank you.

And the next question comes from the line of Conor Cunningham with <unk> Research. Please proceed.

Brandt Montour: Everyone else got two questions, so I'm going to take a shot here. The hedge book at 36%. I mean, the hedge book at 36% is a little bit, still a bit below where you would have been. I think at this time in 19 for 2020, something like 55 or 56%. So I guess just update us on the strategy as the way you see it for fuel heading into next year.

Hi, everyone. Thank you just back to costs for a quick second sorry about that.

Just you have a lack of new deliveries in 'twenty, four and you've talked about your strong book position.

I'm curious on how that might change your marketing spend into next year. It just seems like there'll be natural stair stepped on it and then just like the lack of overall deliveries and that's really what sticks out to me relative to some of your peers in 'twenty of course, just curious on how youre thinking about that specific line item. Thank you.

Mark Kempa: Yeah, Brand, there is no there is no transient strategy. You know, yeah, when you look at 2024, we are 36% hedge. And like we've always said, our goal is we'd like to be about 50% hedge going into a year. And we are just very opportunistic on that front. So when there's dips in the marketplace, we take advantage of that. You know, there was there was a little bit of a dip yesterday, and we took advantage of some position. So no fundamental change in strategy, just really timing of the market. And when when we feel there's a good opportunity to place some additional positions on the box.

Unknown Executive: Thanks, guys.

Thanks, Connor, yes, Youre absolutely right, we don't take after regions Grand During December we don't take our next delivery until spring time of 25. So we do have a little bit of opportunity there, but I think when you. When you think about the cost and specifically your question around marketing there will be we do expect a reduction in that area.

Unknown Executive: Thanks, everyone.

I would not classify it as a significant reduction because obviously you are still selling for new capacity, that's coming on in 'twenty, five and you sell that well in advance.

The delivery date, but of course, we would expect to find some efficiencies on that front simply is.

James Hardiman: And the next question comes to the line of James Hardiman with city. Please press. Thank you for taking my question. So I just want to make sure I understand how you guys are thinking about the impact from the Middle East beyond the close-in impact for the fourth quarter. I guess, as you talk about removing Israel from the itineraries in 2024, obviously you're replacing that with something. Do you think that's impacted your outlook in any meaningful way for 2024?

As a result of that timing between between deliveries.

James Hardiman: And then, you know, you talked about 4% of your visits being to the Middle East next year. How do we think about how that business is impacted? I think you said, Harry, that you're hopeful, and obviously it's difficult right now, obviously, and our hearts go out to all the people that are affected in the region, but that you're hopeful that this will be a short term event, a reasonably short term event.

Yes keep in mind, just as a follow up to that we do have two ships coming into the fleet in 2025.

One for Oceana and one for NCL, both in the first half of the year.

James Hardiman: But is that with regards to hopefully the conflict itself is short-lived, and then your business can go back to normal, or even in sort of a state of elevated tensions in the region, just based on history, booking beyond that epicenter, ultimately returned to normal, just want to make sure I understand how to compartmentalize all of that.

Great.

Okay.

I think we have time for one more question John.

Thank you and the final question comes from the line of Patrick <unk> with <unk> Securities. Please proceed.

Great. Thank you good morning.

Mark.

Certainly there is.

Some new luxury higher end capacity with Ritz Carlton brand four seasons.

Coming in the market next year and 25 are.

Have you seen any impact from.

From that new competitive supply.

Your to higher end brands.

They are mostly smaller shifts and it's not.

A meaningful increase.

In capacity in the overall scheme of things. So the short answer to that question is no Patrick we have not seen any change in the trajectory of bookings.

For either region or oceana.

Okay. Thanks. Thank you and then just a quick follow up question here.

In the press release, you used the word optima.

Optimal booked position I want to focus on the word optimal.

What exactly is optimal.

Harry Sommer: James, let me try to deconstruct, because you sort of touched upon a couple of points. You know, I'll start out by saying that this 4% that we talk about for next year is mostly skewed to Q4. So it's 1% of our capacity in Q1, 1% in Q3, 3% in Q2, and 10% in Q4. And because it is skewed so far in the future, we're optimistic that the alternative by tenderaries that we're going to put in place that will go to other places instead of Israel have a reasonable time to look at normal levels.

In your mind.

Does that mean.

I mean in this case.

Yeah.

At a high level, we've defined optimal is being booked 60% to 65% for voyages departing in the next 12 months.

It's not a hard and fast rule. We've also said that we're at a record level. So you can put those to the other.

Whatever extrapolation, you like but but but it's really much more than that we like to look at every single voyage, where they are in the booking curve make sure that we're managing demand pricing marketing expense.

Harry Sommer: And just there's sort of a half question in there, you add assets, if it's correct to assume that any time we remove Israel, we'll replace it with something else. The answer to that question is yes, we are not planning to fully cancel or lay up any of our ships because of this disruption. I think when we talk about this a little bit longer term, I think it will be a while before people are comfortable going back to Israel, which is why we are canceling Israel hold in 24, even if the conflict was, and we hope it does, and reasonably short amount of time.

Way that maximizes our bottom line margins and.

And that's what we mean by optimal so there is a macro concept in a granular concept on a voyage basis.

Okay. Thank you thank.

Thank you Patrick so once again I want to thank everyone for joining us today will be around to answer any questions and you get both Jessica and Sarah today, a two for one so with that I'd love to wish you a good day stay safe and all the best Thank you.

Harry Sommer: We are more bullish about the ability to return to places like Egypt and other places in the Middle East. And quick frankly, we don't go to that many places in the Middle East as part of our normal proof that it's just normally part of our transitions when ships come and leave Europe at the beginning and end of each season. So that being said, while obviously it's a little early to tell, and this is somewhat dependent on how long the conflict goes, we're relatively optimistic that the scope and nature does not in any way meaningfully impact our 2024 targets.

Ladies and gentlemen. This concludes today's conference call you may now disconnect. Thank you.

Okay.

[music].

Okay.

James Hardiman: Got it, that makes a lot of sense, obviously it's difficult, but that's really good color. Thank you.

Okay.

Okay.

Conor Cunningham: And the next question comes in the line of Conor Cunningham with Melius Research. Please proceed. Everyone, thank you. Just back to cost for a quick second. Sorry about that. You have a lack of new deliveries in 24 and you've talked about your strong book position. It just curious on how that might change your marketing spend into next year. It just seems like there will be natural step down and just like the lack of overall deliveries is really what sticks out to me relative to some of your peers in 24.

[music].

Yes.

[music].

Yeah.

Yeah.

Conor Cunningham: So just curious on how you're thinking about that specific way. Thank you. Thanks, Conor. Yes, you're absolutely right. We don't take after Regent Granger in December. We don't take our next delivery until spring time of 25. So we do have a little bit of opportunity there. But I think, you know, when you think about the cost and specifically your question around marketing, there will be we do expect a reduction in that area.

Yeah.

[music].

Okay.

Conor Cunningham: I would not classify it as a significant reduction because obviously you are still selling for new capacity that's coming on in 25. And you sell that well in advance of the delivery date. But of course, we would expect to find some efficiencies on that front simply as a result of that timing between between deliveries.

Mark Kempa: Yeah, he keep in mind just as a follow up that the two that we do have two ships coming in the fleet in 2025, one for Oshana and one for NCL both in the first half of the year. Okay.

Patrick Sholi: I think we have time for one more question, John. Thank you. And the final question comes in the line of Patrick Sholi's with two securities. Please proceed. Great. Thank you. Good morning, Harry and Mark. You know, certainly there's some new luxury higher end capacity with risk Carlton brand for seasons coming in the market next year in 25. Are you seeing any impact on from that new competitive supply on your two higher end brands?

Patrick Sholi: Patrick, you know, they are mostly smaller ships and it's not a meaningful increase in in capacity and the overall theme of things. So the short answer to that question is no, Patrick, we have not seen any change in the trajectory of looking pretty the region or Oshana. Okay. Thank you. And just a quick follow up question here in the press release you use the word optimal book position. I want to focus on the word optimal, you know, Harry, what exactly is optimal in your mind?

Patrick Sholi: What, what, what does that mean in this case? You know, at a high level, we have defined optimal as being booked 60 to 65% for voyages to partying in the next 12 months. You know, it's not a hard and fast rule. You know, we both said that we're at a record level. So you can put those two sentences together and, you know, make whatever extrapolation you like. But, but, you know, it's really much more than that.

Patrick Sholi: You know, we like to look at every single voyage where they are in the booking curve, make sure that we're managing, you know, demand pricing, marketing expense, you know, in a way that maximizes our bottom line margins. And that's what we mean by optimal. So there's a macro concept and a granular concept and a voyage. Thank you, Patrick.

Harry Sommer: So once again, I want to thank everyone for joining us today. We'll be around to answer any questions and you get both Jessica and Sarah today, a two for one.

Unknown Executive: So with that, I'd love to wish you a good day. Stay safe and all the best. Thank you.

Unknown Executive: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.