Q1 2024 Carnival Corp & PLC Earnings Call
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Good morning. This is Beth Roberts SVP Investor Relations Carnival Corporation plc, welcome to our first quarter 2024 earnings Conference call.
Beth Roberts: I'm joined today by our CEO, Josh Weinstein, our Chief Financial Officer, David Bernstein, and our chair Macaire said.
Beth Roberts: Before we begin please note that some of our remarks on this call will be forward looking therefore, I will refer you to the forward looking statement in today's press release.
Beth Roberts: All references to ticket prices not for dam that yields and adjusted cruise costs without fuel will be in constant currency unless otherwise stated preference.
Beth Roberts: References to <unk> and he will be on a net basis.
Beth Roberts: Our comments May also reference cruise costs without fuel EBITDA net income that lost earnings per share free cash flow and ROIC D. All of which will be on an adjusted basis unless otherwise stated.
Beth Roberts: All of these references are non-GAAP financial measures defined in our earnings press release.
Beth Roberts: Reconciliations to the most directly comparable U S GAAP financial measures and other associated disclosures are also contained in our earnings press release and on our Investor presentation.
Beth Roberts: Please visit our corporate website, where earnings press release and Investor presentation can be found.
Beth Roberts: With that I'd like to turn the call over to Josh. Thank you Beth.
Josh Weinstein: Before we begin I would.
Josh Weinstein: I'd like to express my support and heartfelt sympathy for all those impacted by yesterday's event, that's a breath and Scott key bridge of Baltimore.
Josh Weinstein: Then our appreciation to the coast guard and all first responders.
Josh Weinstein: The city and the Port of Baltimore has been a longtime partners that are home to many oil and gas.
Josh Weinstein: Well as business and community College.
Josh Weinstein: When you sell your round out of Baltimore to one of our Carnival cruise line ships, which was scheduled to return this weekend.
Josh Weinstein: Our team is quickly secure a temporary hold and Oracle who has logged this needed which should help to minimize operational changes, but we look forward to getting back toward Baltimore as soon as possible.
Josh Weinstein: But given that this happened just yesterday as the situation is fluid we did not built this into our earnings materials or full year guidance.
However, we did provide a current perspective that we expect this situation to have less than a $10 million impact.
Speaker Change: Sure Doug.
Speaker Change: With that I'll turn to our prepared remarks, which address the accomplishments included in our strong results and outlook.
Speaker Change: The first quarter has been fantastic across the board and yes.
Speaker Change: Another set of record.
Speaker Change: We delivered record revenue.
Speaker Change: Record bookings and record customer deposits again this quarter.
Speaker Change: Great start to the year.
Speaker Change: I want to acknowledge our bogey.
Speaker Change: <unk> team right off the bat.
Speaker Change: Everyone has worked very hard to deliver another strong quarter and is there sure I'll wait.
Speaker Change: In fact, we outperformed our first quarter guidance by every measure.
Speaker Change: New cruise costs ex fuel and EBITDA, enabling us to take our expectations up for the full year.
Speaker Change: Yields increased over 17% year over year another record.
Speaker Change: At more than double the increase in unit costs.
Speaker Change: This was driven not only by closing the occupancy gap, but also solid mid single digit price increases.
Speaker Change: But deposits last.
Speaker Change: Last year's record by another $1 3 billion contributing to our strong cash flow and enabling us to prepay another $1 $8 billion of debt already this year, which is on top of the 4 billion prepaid last this.
Speaker Change: As meaningful progress on a return to investment grade credit. Most importantly, we achieved all time high booking volume at considerably higher prices.
Speaker Change: In fact, our North American and European brand folks set bookings records in the first quarter with pricing strong across all core deployments and across all quarters.
Speaker Change: Prices ran up double digits and limited inventory both for Q2.
Speaker Change: They rent considerably higher for our peak summer period Q3.
Speaker Change: And there were also considerably higher for Q4, well still building on our occupancy advantage.
Speaker Change: A record book position and activity did not just happen.
And it is not the result of pent up demand gets built up during the pause which is now years and does your view there.
Speaker Change: It is because we have to create as board consideration and broad based demand for cruise travel and all of our source markets across our well balanced portfolio.
Speaker Change: And as a result, we are capturing more new guests ever before which coupled with our growing base of repeat guests delivers greater overall demand.
Speaker Change: Our brands are delivering sustainable revenue growth that hits the bottom line.
Speaker Change: At the same time, our brands are continuing to pull the booking curve forward and live with ideal management strategy to Baseload bookings and ultimately support tire overall pricing over the course of the booking curve.
Speaker Change: As you know before entering the year, we already had the best booked position on record with less 'twenty 'twenty four inventory remaining for sale after absorbing double digit guestroom half of which was from closing the occupancy gap and half from higher shipping capacity.
Speaker Change: Those efforts have enabled us to maintain price integrity on the remaining 24 inventory and sets us up nicely to deliver a nearly double digit improvement in deals this year.
Speaker Change: This also allows us to focus more of our efforts through ways further out bookings, helping to lay the foundation for early 2025.
Speaker Change: It is remarkable that we are even better positioned now for 2025 than we were last year at this time heading into what is shaping up to be a nominal 2024.
Speaker Change: To aid in that effort.
Speaker Change: We've been rolling out enhancements to yoga.
Speaker Change: Yield management tool.
Speaker Change: And to facilitate and you've been more optimal booking curve and which will continue to pay dividends well into the future.
Speaker Change: Of course, we have more in the pipeline to sustain our momentum and capitalize on this untapped revenue opportunity.
Speaker Change: Chris.
We have three fantastic new shifts driving increased consideration and demand to their respective brands.
Speaker Change: Do you believe.
Speaker Change: Carnival cruise lines third XL flagship was recently Kristian back once the funding federal adult real home Port in Galveston, Texas.
Chris: So Princess was recently delivered the first of its class and the real game changer for Princess.
Chris: And soon to be delivered this queen Anne.
Chris: New flagship for Qunar and its first new shifts in 14 years of course as you've heard me say before we do not need new ships increase you as we continue to position our brands to drive demand and excess of supply and address the reason the whole value gap.
Chris: Based alternatives.
Chris: We're also continuing to invest in the existing fleet without your evolution the largest modernization program that brand's history.
Chris: The planned enhancements to the guest experience are designed to deliver a meaningful revenue uplift across the brands, while further reducing our environmental footprint.
Chris: Bolster the performance of one of our highest returning brands.
Chris: And speaking of friends truly off before we are also continuing to strategically invest in growth for Carnival cruise line.
Chris: Celebration kit our exclusive destination purpose built for that brand targeted guests is really starting to capture the imagination as they launched a new marketing campaign right in the heart of wave season.
Chris: Although early days seller.
Chris: Celebration he is already delivering an initial halo with bookings in the second half of 2025 across 18 Carnival cruise line ships. The party 10 on imports.
Chris: We also announced the second phase of development for celebration kit with a peer extension second berth two additional shifts in future years further leveraging what will be best in class asset for US we expect ticket revenue uplift from this incredible destination as the guest experience delivers unmatched.
Chris: But as well as incremental in court spending.
Chris: And this will be coupled with cost benefits driven by considerable fuel savings as it won't be the closest destination of our seven owned and operated ports in the Caribbean.
Chris: This destination is designed to support the continued growth plan for Carnival cruise line, including with <unk>.
Chris: Two recently announced additions to its highly successful X L class for delivery in 2027 and 2028.
Chris: All of these investments demonstrate our disciplined capital allocation strategy.
Chris: Taking you to prioritize our investments towards our highest returning brands and biggest opportunities.
Chris: It includes investments to reduce our carbon footprint, which will not only have a measurable impact on the environment, but also improve our bottom line.
Chris: Our strategic investment in advertising is also paying dividend driving demand across our portfolio with several new campaign launched during wave and.
Chris: In fact, our web business are up over a very strong 2020 with increases in both natural search and paid search.
Chris: We increased our advertising efforts around our strategic foothold in Alaska.
Chris: Alaska has long been the lifeblood for both Princess and Holland America, and they have much new campaigns to build even greater awareness for unmatched lands he experienced.
Chris: This initiative isn't just U S base.
Chris: We have stepped up our marketing efforts across Europe with new campaigns for all our major European brands.
Chris: I E. This new campaign experience yourself differently.
Chris: Launch in Germany to rave reviews.
Chris: Piano cruises, new campaign holidays like never before really hit home with its British pass base.
And cost is newly released campaign focusing on moments where guests are left speechless has been met with much success in its core markets of Italy, France and Spain.
Chris: These campaigns have contribute to the continued strength of our European brand, which has been a meaningful driver of our improved outlook.
Chris: It is particularly rewarding to see our European brands flexing their muscles across their core European deployment. It is a real testament to the strength of our portfolio.
Chris: The outperformance we've experienced this quarter has been a continuation of the strong demand.
Chris: All four departments, the Caribbean, Alaska, and Europe, all out to deliver over a point of incremental yield improvement.
Chris: This more than offset the impact of the Red Sea rerouting as well as changes in the price of fuel and currency exchange rates since our last update.
Chris: It has also enabled us to raise our full year guidance for EBITDA and net income.
Oh, proving operational performance, coupled with excess liquidity and the lowest order book in decades.
Chris: US well positioned to continue to opportunistically manage down debt and interest expense.
Chris: Reducing the complexity of our capital structure.
Chris: This is very much aligned with a return to investment grade credit over time.
Chris: And our Treasury team has been quick to capitalize on this trajectory.
Chris: Ongoing stream of well executed transaction to strengthen our balance sheet.
Chris: With a vast majority of this year's business now booked.
We had EBIT or conviction and delivering record revenues and EBITDA, along with a step change improvement in operating performance lasting well beyond 2024.
While we continue to optimize deal on the limited inventory.
Chris: And still manage down costs, we have been turning more of our attention to delivering an even stronger 2025.
Chris: We're gaining traction unimproved across the commercial space.
Chris: Longer path with continued margin enhancements and increased returns again I would like to thank our team members ship and shore the best and all the travel immature.
Chris: Deliberate unforgettable happiness to another 3 million guests this past quarter by providing them with the extra ordinary cruise vacations of course, we couldn't do it without the support from our travel agent partners and so many other stakeholders with that I'll turn the call over to Dave.
Dave: Thank you Josh.
Dave: I'll start today with a summary of our 2024 first quarter results next I will provide a couple of highlights about our second quarter and some color on our improved full year March guidance.
Then I'll finish up with an update on our refinancing and deleveraging efforts.
Speaker Change: Let's turn to the summary of our first quarter results.
Speaker Change: Bottom line exceeded December guidance by $100 million.
Speaker Change: <unk> outperformed once again.
Speaker Change: The improvement towards essentially driven by two things.
Speaker Change: ABB ability and the revenue from higher ticket prices are yields were up over 17%.
Speaker Change: Nearly three quarters of a point better than December guidance, whereas almost $30 million.
Speaker Change: Cruise costs without fuel per available lower birthday, or a L. B D came in over two points better than December guidance due to the timing of expenses between the quarters, which was worth over $50 million.
Premiums improved 5% with improvements on both sides of the Atlantic driven by considerably higher ticket prices at.
Speaker Change: At the same time, we saw outsized growth in occupancy of nearly 20 percentage points at our European brands on their path back to historical occupancy.
Speaker Change: Our North American brands occupancy increase strong mid single digits.
Speaker Change: The difference in occupancy growth on the two sides of the Atlantic resulted in a sizable mix impact on our consolidated onboard revenue premiums since as we have discussed in the past.
Speaker Change: North American brand customers naturally spend more on board than their European counterparts.
Speaker Change: However, the underlying fact is that we saw an increase in onboard revenue premiums on both sides of the Atlantic driven in part by the acceleration of strong pre cruise sales grows.
In fact, we saw a continuation of strong consumer behavior by Gershon borders trip much like our booking trend this past quarter.
Speaker Change: As Josh indicated first quarter was fantastic across the board with strong demand for our brands delivering record revenues record yields and record pre deal.
Speaker Change: Before I discuss our second quarter and full year guidance I would like to add that given the timing of yesterday's event shimbun to more that Josh mentioned our guidance does not include the current estimated impact of up to $10 million for the full year 2024 from the temporary change.
Speaker Change: Jim Homeport.
Speaker Change: Now a couple of things to highlight about our second quarter March guidance.
Speaker Change: The positive trends, we saw in the first quarter are expected to continue in the second.
Speaker Change: Your guidance for the second quarter was shattered a strong tenant may have pushed out.
Speaker Change: The difference between the yield guidance for the second quarter and the first quarter yield improvement of over 17% is simply the result of the greater opportunity we had in occupancy in the first quarter 2024.
Speaker Change: With the improving trends, we experienced during the first half of last year.
Speaker Change: 2023 second quarter occupancy was already seven percentage points higher than the first quarter.
Speaker Change: In addition, I did want to point out that nearly three quarters of the full year impact from the red to rerouting is expected to occur in the second quarter with the remainder expected in the fourth quarter.
Speaker Change: Turning to our improved full year March guidance.
Speaker Change: We are now forecasting a capacity increase of four and a half Christian compared to 2023.
Speaker Change: March guidance for net income of 1.28 billion isn't 80 million dollar improvement over our December guidance.
Speaker Change: <unk> was driven by two things.
Speaker Change: More than a point increase in yields to approximately 9.5% based upon the considerably higher prices, we have seen in booking trends. So far this year and the continued strength in demand, we anticipate going forward, where it's about $200 million.
Speaker Change: In addition, we are forecasting a collective improvement in all our cost lines, excluding fuel of over $50 million, including an improvements in cruise costs without fuel.
Speaker Change: This improvement of over $250 million is partially offset by the rack shoe rerouting impact of $130 million and the net impact from higher fuel price and currency I'm homeless $45 million.
Speaker Change: The strong 95% improvement in 'twenty 'twenty four yields as a result of an increase in all the component parts.
Speaker Change: Higher ticket prices higher onboard spending and higher occupancy at historical levels with all component parts improving on both sides of the Atlantic.
Speaker Change: I did want to point out that cruise costs, excluding fuel is expected to be better than December guidance due in part to cost savings related to read she rerouting as certain shifts reposition without gas as well as other efficiencies. We identified that are included in our March guidance.
Speaker Change: While absolute cost so lower the changing cruise costs without fuel per available lower birthday of a half a point from December to March guidance.
Speaker Change: Please I'm behalf of spreading all costs over the lower <unk>, resulting from the Red Sea rerouting as certain ships reposition without gas.
Speaker Change: We recognize that even within our industry, leading cost structure, there are opportunities, which we can focus on and harvest over time.
Speaker Change: A great example is our maritime asset strategy transformation system, or what we referred to internally as Nash.
Speaker Change: As previously mentioned Nash is a centralized system developed to optimize the management of equipment and machinery across all brands and all of our ships.
Speaker Change: As we continue to rollout Nash it will allow us to leverage spare parts more effectively across the entire fleet and optimize on maintenance schedules and practices.
Speaker Change: All of which will strengthen our efficiency and reduce costs from unplanned maintenance overtime.
Speaker Change: I will finish up with a summary of our refinancing and deleveraging efforts.
Speaker Change: During the first quarter, we generated cash from operations of $1 8 billion and free cash flow of $1 4 billion.
Speaker Change: We took delivery of two spectacular new ships and utilized to export credit facilities, continuing our strategy to finance our Newbuild program.
Speaker Change: Preferential interest rates.
Speaker Change: Also during the quarter, we successfully extended the maturity of our forward starting revolving credit facility by two years to August 2027, and Upsized, our borrowing capacity by $400 million, bringing the total commitments to $2 5 billion.
Speaker Change: We will continue to look for opportunity to upsize the facility to its accordion feature that allows us to add new banks and grow their commitment.
Speaker Change: Our efforts to proactively manage our debt profile continued throughout the quarter.
Speaker Change: Between open market repurchases early in the quarter and then I'll call. It the remaining nine 9% second priority secured notes, we redeemed over $600 million of debt.
Speaker Change: Removing the secured second lien lay up from our capital structure.
Speaker Change: In addition to our second lien notes, we were able to repurchase almost $400 million of debt at a discount at empower towards deleveraging efforts we expect.
Speaker Change: To continue our open market repurchase program on an opportunistic basis.
Speaker Change: We will continue to call some of our existing debt in.
Speaker Change: In fact yesterday, we prepaid our 837 million Euro term loan due in 2025, removing higher than average interest rate debt and then another secured instruments from our capital structure.
Speaker Change: This further demonstrates our commitment to an investment grade balance sheet.
Speaker Change: Our leverage metrics will continue to improve throughout 2024, as our EBITDA continues to grow and our debt levels improve.
Speaker Change: Using our March guidance EBITDA, a 5.63 billion, we expect it to turn improvement net debt to EBITDA leverage positioning us more than halfway down the path to investment grade metrics.
Speaker Change: In summary continued execution, coupled with strengthening demand for our brands is driving increased confidence in our ongoing performance. We are pleased this has been recognized by S&P and Moody's with their recent upgrades as well as by our banking partners with their recent upsizing in two year extension of our <unk>.
Speaker Change: Revolving credit facility.
Speaker Change: Looking forward over the next several years substantial free cash flow will significantly reduce our leverage moving us further down the road to rebuilding our financial fortress, while continuing the process of transferring value from debt holders back to shareholders.
Speaker Change: Now operator, let's open the call for questions.
Speaker Change: Thank you.
Speaker Change: If you would like to register a question. Please press the one four on your telephone.
Speaker Change: You will hear a three pronged to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three one moment. Please for the first question.
Speaker Change: Our first question comes from Robin Farley with UBS. Please proceed.
Robin Margaret Farley: Great. Thanks very much.
Robin Margaret Farley: Wanted to ask about your commentary about considerably higher for the remainder of the year.
Robin Margaret Farley: Just looking at.
Robin Margaret Farley: That the massive that is it fair to say that it looks like your premium growth in the rest of the year is accelerating to maybe 6% or higher compared to just.
Robin Margaret Farley: 5% in Q1 I just wanted.
Wanted to get it does that sounds right in terms of what your what you think considerably may mean, and then just if I could ask as a follow up.
Robin Margaret Farley: In terms of ship orders.
Robin Margaret Farley: Obviously as you know.
Robin Margaret Farley: Sorry, your second ship order yesterday.
Robin Margaret Farley: The pandemic and there was a line in it that said you know you continue to review fleet plans or there were some wording that I thought maybe you suggested you might have another ship order.
Robin Margaret Farley: Later this year for 2028, which would be completely in line with what you said long term, but is that is that kind of what the language.
Speaker Change: Suggesting thanks.
Speaker Change: Hi, Good morning, Robin This is Josh.
Josh Weinstein: So, yes, I mean the.
Josh Weinstein: The good news is you know, we just experienced a first quarter booking activity that really knocked the cover off the ball, which is which was really gratifying to see.
Josh Weinstein: The volumes are going to naturally taper down as we talked about but the good thing is people are paying for what we have left to offer.
Josh Weinstein: And so you know when we came up with our with our guidance for yields overall it was not just based on occupancy it was based on occupancy plus.
Josh Weinstein: Protium growth in pricing and that is playing out so I won't give you a specific number for rest of year or fourth quarter, but we know the comps get harder, but that's not an excuse for you just need to make sure. We're doing what we need to do on the demand and get the <unk> up year over year every quarter, which is what our expectation is so that trend has continued.
Josh Weinstein: Well and the great thing is that that Hasnt stopped if you look at the first months of of our next quarter of March.
Josh Weinstein: Trend has continued.
Josh Weinstein: So we're in good stead, there and Thats spilling into 2025 as well.
Josh Weinstein: You heard me, saying, David say, we're off to.
Josh Weinstein: Another unprecedented start which is which is great to see as far as the newbuild. Yeah. We're incredibly excited that we.
Josh Weinstein: We've restarted our newbuild ordering them, but but as you mentioned in line with what I've been saying for almost two years now which is when we restart which is what we've done we're talking about one to two ships a year starting in 2020 seven there won't be another one in 2027.
Josh Weinstein: That will be what we've got as far as 2028 goes could there be another one.
Josh Weinstein: It's not closed, but I wouldn't I wouldn't necessarily bank on it either we are working on more things that are going to be geared towards our highest returning brands as we've been talking about and when there's something to talk about we'll certainly share it.
Speaker Change: Okay, great. Thanks very much.
Speaker Change: Sure.
Speaker Change: Our next question comes from David Katz with Jefferies. Please proceed.
Speaker Change: Oh.
David Brian Katz: Good morning, David appreciate all the insights.
David Brian Katz: So far with respect to the guidance et cetera, but you know with the ship orders and just taking a much longer term view.
David Brian Katz: Presuming and are just looking for confirmation that.
David Brian Katz: That doesn't change or alter the path to investment grade by sort of adding some more capex to the system longer term.
Speaker Change: No not at all we are working down our road to investment grade you know we are prioritizing.
Speaker Change: The repayment of debt and the repurchase of debt and we will look as we did in the first quarter as Josh indicated and I gave the details we prepaid $1 $8 billion of debt. So far this year and with improved EBITDA.
Speaker Change: We expect to get to investment grade metrics in 2026, and remember Josh we are only talking one to two ships a year and with the cash generation. We expect to continue to see improved debt that debt to EBITDA in 2027, and 28 as well even with the new waters or not.
Speaker Change: Path to investment grade.
Speaker Change: Yes.
Speaker Change: And our roadmap service Josh we.
Speaker Change: We did we did factor in the assumption that there would be future new builds with stage payments in advance. So that was already factored into how we're thinking about the world and still being able to pay down the debt and get to those investment grade metrics.
Speaker Change: Understood Jonathan if I can just follow up quickly.
Speaker Change: And I know I ask this repeatedly I'd love to just get your sense for sort of what's at or near the top of the list in terms of just the business in general and you no other change in execution or how things are done or other improvements that you're working on thanks.
Speaker Change: Thanks.
Speaker Change: Sure.
Speaker Change: I'm going to sound like a broken record when it comes to the commercial side of the operations I think everybody has room to improve across all areas and that's never going to stop being a focus and we're seeing a good amount of progress and thats across the advertising across revenue management across onboard execution certainly.
Deployment planning I mean, you name. It we just expect to continually understand our business understand our guess brand by brand and have them execute at the highest level possible. So you know we've talked about some some game changers for us around the celebration T, which will be coming in 2025 with your peer and a half moon Cay, which will.
Speaker Change: Open up that destination, which is a true jewel two even more guests flow. So theres certainly some some very specific.
Speaker Change: Strategic assets that we've got moving in place, which are going to be a great tailwind for us, but I think the bigger tailwind.
Speaker Change: It was really having our brands perform across their core markets to their core guests to the to the best of their abilities.
Speaker Change: Thank you I appreciate it.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Brad Mas Tour with Barclays. Please proceed.
Speaker Change: Hey, everybody. Good morning, Thanks for taking my question.
Speaker Change: Joshua.
Speaker Change: When we look at your <unk> gross for 'twenty for guidance, and we think about what went into that and we rewind the clock.
Speaker Change: Six 912 months, we remember.
Speaker Change: You guys were what we call date, yet, but you called base building for 24 throughout last year.
Speaker Change: And it was a pricing environment.
Speaker Change: Arguably isn't as good as it is now and so I guess.
Speaker Change: I guess the question is you know when you when you think about where you were last year and where you wish you were where you are about where you are this year is the strategy you're going to do you feel better and as a strategy any different when you're thinking about base loading 25, and where we could be in 12 months from now thinking about pricing growth.
Speaker Change: Yeah.
Speaker Change: Yeah, I mean, I do feel better I feel better because we have another year under our belt of our brands really focused on optimizing their booking curves we're doing it in an environment, which we get the benefit of let's call. It a full year of of somewhat normal, whereas last year, depending on the brand. It was it was a.
Speaker Change: Struggle of trying to fill short term and think long term. This.
Speaker Change: This year, we because of what we've been able to build going into the year. We I mean, its historical we have the ability to really lean in even more into optimizing them from a strategic perspective as opposed to plugging holes along the way, which we were we weren't focused on as well last year. So I think the future's quite bright.
Speaker Change: Okay. That's helpful. And then you guys did touch on the.
Speaker Change: The the EAA brands in the European brands and how they are doing I was wondering if we could just sort of double click on that and talk about and maybe you could tell us.
Speaker Change: Yeah.
Speaker Change: Those brands recovery versus 19, and how they're tracking versus your north American brands, and just sort of split it out between occupancy ticket and onboard and sort of what inning do those brands are in across those two metrics that would be helpful.
So let me give you I'll give you overall, David if he wants to add some color and I certainly feel free I think the biggest difference between.
Speaker Change: The brand by segment when you think about this year is the huge occupancy jumped.
Speaker Change: That the European brands are making.
Speaker Change: Year over here and it's an occupancy jumped that was really focused primarily on the first half of the year and then it all started to normalize a good about more as we got through the second half of last year from a pricing perspective from an onboard spending perspective, and as we make our way through this year from an occupancy percentage perspective.
Speaker Change: Everybody is moving on both sides of the Atlantic in a positive way. So as expected we knew that the European brands would be an outsized driver of yield improvement for us simply because of the occupancy, but I can tell you. This they're not doing it at the expense of price or European brands are getting price and occupancy.
Speaker Change: Okay. David gave me a thumbs up so I hope that answers your question.
Speaker Change: Great. Thanks, guys.
Speaker Change: Our next question comes from James Hardiman with Citi. Please proceed.
James Lloyd Hardiman: Hi, good morning.
James Lloyd Hardiman: So maybe just to sort of the labor that last point about occupancy it seems like.
James Lloyd Hardiman: At least part of the first quarter success was occupancy was better than you thought I'm, assuming we're at a place now where it's not just about filling rooms, it's about filling rooms, but more people to get to higher occupancy. So what drove that outperformance and is there a way to think about.
James Lloyd Hardiman: The full year of <unk>, the second quarter.
James Lloyd Hardiman: Occupancy number obviously.
James Lloyd Hardiman: There's a wide range what could be considered historical but I don't know versus 2019, how should we think about occupancy.
James Lloyd Hardiman: Hey, James So as I think David talked about last quarter.
James Lloyd Hardiman: Historical range were talking 104 to 107 and 2019 was the peak of 107.
James Lloyd Hardiman: That may or may not be the right ending point for us and I'm not trying to be vague because we wanted to give our brands have the flexibility to not optimized for occupancy or price, but occupancy you know, it's about yield and it's about the combination of both so I feel quite good about where we are we did beat a little bit in occupancy and we also beat a little bit in price in the first quarter.
James Lloyd Hardiman: Which was good to see and you know from.
James Lloyd Hardiman: From my perspective, I'd like us to outperform on both every single quarter. So.
Speaker Change: Yeah, there's no there's no games here I expect us to be well in the historical range and we will take our brands will take it as far as they think it should be in order to get the price combination along with the occupancy.
Speaker Change: Yeah.
Speaker Change: Got it and then.
Speaker Change: Yeah. The only thing I'll add is keep in mind is that we essentially got back to historical Hopkinton sea in the back half of 2023. So the occupancy opportunity in 2024 is much more heavily weighted to the first half, which I described in my prepared remarks.
Speaker Change: We were able to increase occupancy considerably by 11% in the first quarter.
Speaker Change: And we do expect occupancy to go up in the second quarter as well.
Speaker Change: And our brands I don't I don't want you to take this the wrong way our brands are being quite thoughtful about opportunities to introduce more families than they maybe had in the past I'm looking at their cabin configuration, So theres always opportunities and we encourage our brands to certainly lean into that.
Speaker Change: That's helpful. And then Josh you seem to make a point of noting that you don't think recurring.
Josh Weinstein: Demand strength is is really pent up demand at this point, which seems to suggest that maybe we'd graduated from.
Josh Weinstein: The post pandemic phase to the post post pandemic.
Josh Weinstein: Maybe speak to the <unk>.
Josh Weinstein: Secular story that seems to be building here, whether it be from an industry perspective, or a company specific perspective, I think a lot of people are just trying to figure out the.
Josh Weinstein: And the sustainability of the of the demand growth that we're seeing obviously.
Josh Weinstein: Per Dms are ahead of sort of that long term algo right, how long can that ultimately laughed and we're going to be the drivers there. Thanks.
Speaker Change: Sure. So I'll I'll I'll speak for the industry, Jason Harry I Hope you don't Hope you don't mind.
Speaker Change: But I would say that there is more and more of a realization.
Speaker Change: The value and experience got that cruising has two other alternatives.
Speaker Change: And since since the pandemic both of those things have effectively dropped out.
Speaker Change: Because it's a greater value because of the price dragging that the land based operations have been able to do and they've done it without providing comparable guest experience and when you compare that to us even with our outsized for Dms growth, it's still a value that people are not stupid consumers or not.
Speaker Change: Stupid, they're looking for value and they're looking for experiences that are worth paying for and when you mine that.
Speaker Change: It is boding very well for the cruise industry. We now speak on behalf of the Corporation. We are also leaning more into advertising getting our messaging out doing it more effectively which is additional tailwind. So we our new our new to cruise is up over 30%.
Speaker Change: Last year first quarter it's.
It's not pent up demand.
Speaker Change: Is truly.
Speaker Change: It is truly the casting a wide net having a great experience and delivering and so I do not see an ending point, we have room to close the gap to land when it comes to the value.
Speaker Change: And still be able to champion the value.
Speaker Change: What about leaning into the experience. So I think that that backdrop is incredibly encouraging for the industry.
Speaker Change: That's really good color thanks, Jeff.
Speaker Change: Got it thanks guys.
Speaker Change: Okay.
Our next question comes from Steve <unk> with Stifel. Please proceed.
Steve: Hey, guys good morning.
Steve: So Joshua day, but if we go back to the yields guidance for the year or the revised guidance I should say moving it up 100 basis points I mean, I you know I think that makes total sense given.
Steve: You know you have a lot more visibility into the way the year is going to look in your note you're probably in a extremely extremely well booked position.
Speaker Change: Yes. My question is going to be more on the onboard side as you kind of think about the rest of the year I would assume you guys are probably taking somewhat of a conservative view around the onboard metrics and I guess, saying that even differently as you onboard kind of stays where it is today.
Speaker Change: I would assume there's probably than upside to the to.
Speaker Change: So your guidance, but can I ask that that way hopefully.
Speaker Change: [laughter].
Speaker Change: Steve I think one of the things remember arm board.
Speaker Change: As I mentioned in my prepared remarks, we are seeing increases on both sides of the Atlantic. It's just that there's a mix impact.
Speaker Change: And you're going to see somewhat of a mix impact in the second quarter as well, although not nearly as big.
Speaker Change: For the first hits, the first quarter because of the occupancy growth will not be as great or I should say the outcome opportunity will not be as great in the European brands in the second quarter.
Speaker Change: But on both sides of the Atlantic, it's coming up and we feel very good with as I said, we are seeing continued strength in onboard on the gas we are accelerating the pre cruise sales we saw a double digit increase in terms of the percent of <unk>.
Pre cruise sales of onboard revenue in the first quarter.
Speaker Change: So a lot of positive things are happening and all of that was built into our guidance.
Speaker Change: Yeah, I'd say I'd say, Steve you know as always we try to give our best understanding of how the world looks today, while continuing to push impressed internally with our brands to optimize or maximize both I'm a ticket and on the onboard spending which is more important.
Speaker Change: As we move forward to look at on a combined basis, given bundling and how we package things for our for our guests and and it just hasn't slowed down which is which is really the message that people should take and I know there was some commentary that came out with the cost of a noise about you know are there is there anything that we need to be worried about.
Speaker Change: For Q4 are slowing down and for us at least it's the opposite.
Speaker Change: The acceleration has included Q4, both on the volume and the price.
Speaker Change: So you know long may it last.
Speaker Change: Okay. Thanks for that guys and then second question.
Speaker Change: Ask about 2025 and look I'm sure you're obviously very limited in what you can say around bookings given its you know its still so far out.
Speaker Change: But if you look at bookings for next year, I guess, what I'm trying to get a sense of are you seeing a change in who is booking.
Speaker Change: Today, what I mean by that is normally you know you'd be booking your longer more exotic itineraries right now but are you starting to see a more what we would call the normal itineraries being booked this far out and are you continuing to see that that new to cruise category for next year still be pretty strong or is it just still too early.
Speaker Change: So the answer the first part the good news is it really is across the board. It's not just you know more people around the world cruises, which we are seeing so not to discount that but what we are seeing is an improvement in the revenue management and booking curve across the board.
Speaker Change: So I think that bodes well for 2025, I think it's probably too early to talk about composition of gas other than to say you know our profile as we have been growing quarter by quarter has been.
Speaker Change: Improving that casting of the net to go beyond you know brand repeaters and going into going into new to cruise, which I think is probably the greatest litmus tests that things are working but the message is getting through now we also have.
Speaker Change: We also do have celebration key which as we get closer and closer to the 2025 and closer and closer to its opening which isn't due until the second half of 'twenty five I think well be able to see more more and more about the halo impact of that in our in our Arsenal.
Speaker Change: Okay, great. Thanks, guys.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Jamie Katz with Morningstar. Please proceed.
Jaime M. Katz: Hi, Good morning, I wanted to piggyback on to that value proposition question, we havent really hear from James and I guess.
Jaime M. Katz: Can you talk a little bit about what.
Jaime M. Katz: Motivating consumers to actually convert the booking is it bundling is it traditional marketing like advertising is there something else there or has there been sort of any change.
The pattern to what is motivating people to make that decision. Thanks.
Jaime M. Katz: Sure.
Speaker Change: I don't think there's necessarily a change other than we are doing things better than we used to we are we are doing it.
Speaker Change: We are doing a better job I believe of investing more in advertising and doing a better job of getting the word out.
Speaker Change: Like I said, the revenue management right pricing it right at the right point in the curve to get people to commit as quite important but the.
Speaker Change: Other.
Speaker Change: Sorry, I just lost my train of thought.
Speaker Change: So I'll just leave it at that I don't see anything that's that's inherently different.
Speaker Change: Other than being able to go deeper into what we are doing and doing it well and the results that we see not only from the bookings, but from the search activity from the website visits from the conversion. It's all moving in the right direction as is all of those commercial activities are supporting our ability to get that to get that message out and the other thing I do.
Speaker Change: I know it was going to say the other thing I would say this is not this is not a thing about pre pause versus post pause. This is you also got to remember that.
Speaker Change: If you think about the four year period that we've just gone through where we had no sailings and then slowly ramping up. This is the first year that we've really got full capacity all gas onboard our ships then get off of our ships and when they get off of our shifts to go tell their friends and their.
Speaker Change: Ali how amazing it is and help us convinced newcomers to come aboard.
Speaker Change: And so we really are finally back at this point, where we have all of those channels and all of those avenues at our back to support the future.
Speaker Change: Okay. That's helpful. And then I think there was a comment that there was some benefit to the timing of expenses in the first quarter is there any shift in the timing of expenses over the back three quarters that would be helpful to be aware about.
Speaker Change: Oh, we we gave guidance for the second quarter.
Speaker Change: The third and fourth quarter.
Speaker Change: Probably the third quarter might be a little bit lower than the fourth overall.
Speaker Change: But nothing that we're seeing you know shifts that we're seeing at the moment.
Speaker Change: Excellent. Thank you.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Matthew Boss with Jpmorgan. Please proceed.
Matthew Robert Boss: Great Thanks, and congrats on another nice quarter.
Matthew Robert Boss: Yeah.
Matthew Robert Boss: So Josh.
Matthew Robert Boss: Oh, yeah yeah.
Matthew Robert Boss: So near near term and maybe relative to the phenomenal wave season, and the strength that you cited across brands.
Josh Weinstein: Was hoping maybe could you elaborate on trends that you're seeing today at the call.
Josh Weinstein: Carnival and Aida brand, maybe relative to the direction of improvement that you're seeing across your other seven brands as we think about maybe just the remaining opportunity across the portfolio in 2025 and beyond.
Speaker Change: You know I think.
Speaker Change: That's a good question, let me think about how to answer that I would say that both of those brands are actually fully recovered.
Speaker Change: At this point to pre pause.
Speaker Change: The ROIC is already back to where it was an impact exceeding.
Speaker Change: When we talk about the spectrum, where all of our brands have been and where they currently are on the commercial space right. When it comes to revenue management when it comes to the deployment planning when it comes to the performance marketing.
Speaker Change: <unk> marketing I would say you know those two brands not surprisingly our leaders in those categories and so it does give us the road map for the other brands to follow suit right and that is what we're doing I mean, I don't want I don't want I don't want I don't want to call it to misunderstand, what I'm, saying all of our brands are improving.
Speaker Change: Not surprisingly the ones that performed at the top before are back at the top again, and we are making sure that the learnings and the practices are being shared and disseminated and utilized across the board, which is why we are getting back our ROIC piece by piece.
Speaker Change: This guidance will be back to above 9% at the end of this year, we've got three more points after that to meet our targets for 2026, or so I'm confident in and then to go further and we're going to do that by continuing that progress on the commercial space.
Speaker Change: And then maybe just a follow up so if we think about the booking curve at record levels and obviously, providing some increased forward visibility when we think about pricing power in 'twenty, five or or or multi year and I'm just thinking back to the baseline of low to mid single digits historically.
Speaker Change: Incrementals seems like the experiences and the investments that you've made as we think about opening celebration key in the second half of <unk> of 25, So just thinking about pricing.
Speaker Change: Pricing power moving forward relative to the historical baseline what the opportunities may be.
Speaker Change: Yeah.
Speaker Change: Although I'd love to say, that's what we're banking on.
Speaker Change: Is that easy it's not I mean, it is celebration Keith is going to be fantastic and we're already seeing the start of that impact, but I cannot I can't emphasize enough. When we are doing a good job on revenue management and pulling that booking curve for it and managing the pricing through the curve as opposed to tanking pricing at the end you don't.
<unk> me, if its math right and it works and it means that we can maintain that price consistency and and pricing is going to go up as we go year over year and to the point you were you're asking about our other brands. Some of our brands have been doing that well four years some of them have not.
Speaker Change: The ones that have not are leaning into it now and we're starting to see starting to see that improvement and the great thing is there was a long runway for that to continue.
Speaker Change: Great Best of luck.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Patrick Scholes with Truth Securities. Please proceed.
Patrick Scholes: Great. Good morning, Thank you.
Patrick Scholes: Josh we've talked to a high level.
Patrick Scholes: On positives around celebration T. I'm wondering what you know what sort of.
Patrick Scholes: Daily cruise pricing premium, you're seeing or may be expecting.
Patrick Scholes: For itineraries that do stop it celebrating key thank you.
Josh Weinstein: Hey, Patrick.
Patrick Scholes: So we're not giving guidance for 'twenty five yet and since we're not selling them until 'twenty five I'm gonna be careful about how I answer this I would say.
Speaker Change: First of all we're expecting we are as I said in my notes, we're expecting an uplift both on the ticket side and the import spending which effectively will come across as onboard revenue.
Speaker Change: It's too early to give you specifics when we did our investment for.
Speaker Change: <unk> key and then we effectively just double down to get a pure for for two more.
Speaker Change: First we did that with a very healthy ROI I see.
And then Roy she is coming from three main components. One is the incremental ticket too is incremental import spending and three is the benefit we get from creating something so close to so many home ports in the United States and it cuts our fuel consumption considerably so those three <unk>.
Speaker Change: Ponant or what's driving that decision, making and it's going to be a great guest experience and.
Speaker Change: Be an incredible asset for us.
Speaker Change: Okay. Okay, and then just a follow up on that.
Speaker Change: From a high level.
Speaker Change: What are some of those opportunities for.
Speaker Change: Upsell once you are on the island.
Speaker Change: Celebration key.
Speaker Change: Familiar with.
Speaker Change: Yeah competitors.
Speaker Change: What they what items they charge what they don't.
Speaker Change: Maybe a bit of a softball question, but one.
Speaker Change: Yeah.
Speaker Change: They will be.
Speaker Change: We'll be really are willing to pay a pay up for it to have an extra extra special time on.
Speaker Change: Your island. Thank you.
Speaker Change: Sure. So it'll be a combination of things we have a private beach club as part of the bigger development of celebration, which isn't an island. It is part of.
Speaker Change: Grand Bahama, which is a phenomenal home for us.
Speaker Change: We're going to also have a huge capacity for love cabanas over water cabanas different size cabanas that people would be able to rent for the day, which you'd be surprised at how much people are willing to pay the rent cabanas for the day theres going to be F&B opportunities there are retail opportunities.
Speaker Change: That's just the start of phase one a bit.
Speaker Change: Because we have only built on or we will have built out about a quarter of the property debt.
Speaker Change: That we've got our R. R.
Speaker Change: No we own.
Speaker Change: So phase one is that in phase two will be incremental guest experiences and spaces and revenue opportunities.
Speaker Change: Okay I'm all set thank you. Thanks.
Speaker Change: Thanks, Patrick.
Speaker Change: Our next question comes from Ben Chaiken with Mizuho. Please proceed.
Ben Chaiken: Hey, good morning, Thanks for taking my question just to just to dig in on the cost cadence on a bit more <unk> better than guide it sounds like some timing I guess to clarify does that mean it slipped into <unk> a little bit and then <unk> also includes one three points from Red Sea I guess with this.
Ben Chaiken: Now with that in mind, the full year cost guidance, 5% constant currency, which I think suggests something around mid single digit in the back half in the context of a year over year, it's getting easier relative to the one offs I guess, one do I have those moving parts correct and then two could you help us better understand the variables you're considering in the second half. Thanks.
Speaker Change: Sure Yeah, the main thing.
Speaker Change: Roofing parts are correct here the average for.
Speaker Change: For the first half of the year.
Speaker Change: 7.7% in the first quarter and 3% in the second is about high and the back half is also about five.
Some of the differences driven by dry dock days as well because we added different timing between the quarters I think in December I had indicated the amount to dry got God that increased in the first quarter and there's also differences in advertising and a number of other things between the quarters.
Speaker Change: I always talk to people about measuring us on a full year cost guidance because the timing of expenses between the quarters, sometimes has a choice of things that we want to spend either on repair and maintenance or other things. So look at it from a full year perspective, and that's the best way to judge it.
Speaker Change: Yeah that makes sense, just maybe a little bit more detail on the dry dock could you maybe clarify the quarters I believe originally it was <unk> and <unk>, where the heavy drydock orders is that still the right way to think about it or how would you think it is in the <unk> was considerably higher than the.
Speaker Change: The second or the fourth quarter.
Speaker Change: Yeah.
Speaker Change: Thank you I appreciate it.
Speaker Change: So operator, I think we got time for one more question.
Speaker Change: We have a question from Lizzie Dove with Goldman Sachs. Please proceed.
Lizzie Dove: Hi morning, Thanks for taking.
Lizzie Dove: And I think at ticket price that passenger is very strong as commentary it sounds like a pretty decent outlook for this year and 25 I'm curious how much of that is kind of benefit from some of the new hardware you know, it's a frenzy joining the fleet as the some of the other fine Carnival do you believe some princess how much do these new ships impact pricing.
Lizzie Dove: Premium are you getting and how does it change how you manage the pricing for the rest of the fleet.
Speaker Change: Yeah, So <unk>.
Speaker Change: Good morning, welcome to the first I think your first call and my first call since you've been covering us.
Speaker Change: So.
Speaker Change: The new ships get a premium there is no doubt that the new ships get a premium the way we manage brand by brand how much of that premium to get it also depends on where we're putting that ship.
Speaker Change: Because we're not going to necessarily want to put the best ship on the best itinerary, because that's not a good thing for the overall brand. So there is obviously a bunch of different components to get into what I will tell you, though I mean, just to take a step back because remember we've got nine brands most of which have not had a newbuild and we will not have a newbuild for some time and the pricing improvements that we're getting are.
Speaker Change: Not focus solely on the brands that get the new ships.
Speaker Change: Ends that have not gotten new ships are seeing nice improvements as well in pricing.
So while I do love them.
Speaker Change: It's three this year out of 95 shares and so the 92 ships, having them deliver outsized demand in pricing is going to move us more so than a premium on one or two of the shift so I'm not I'm I'm not disagreeing with with with the question, but I think to put it into perspective, it's much more important for us.
Speaker Change: To get the per Dms up on the rest of the fleet, which is what we've been very very focused on.
Speaker Change: Got it that's helpful. And then just one follow up I thought Jamie's question about the secular.
Speaker Change: Right. Its outlook was interesting I know you guys tend to index higher on new to cruise than some of your parents. I think you said you captured three and a half million if need to cruise gas last year. How many of those do you see then convert into second time third time cruises and say how can we you know what's the outlook like real category expansion here.
Speaker Change: Yeah, well you know our brand repeated were up 9%.
Speaker Change: Year over year. So it is it does translate into.
Speaker Change: Incremental overall demand for the long term no cruisers don't generally.
So every year you know we're looking for every three to four years would be ideal for those of them that they don't.
Speaker Change: Decided they like what we do and want to come back.
Speaker Change: So that that is that's that's part of the growth plan, it's casting our net wide and getting a good portion of them to sell with US again in the next three to four years.
Got it thank you.
Speaker Change: Okay.
Speaker Change: Well. Thank you everybody I appreciate the questions and look forward to seeing you all soon.
Yeah.
Speaker Change: That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.
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