Q1 2024 OneSpaWorld Holdings Ltd Earnings Call

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Operator: Good day, and welcome to the OneSpaWorld first quarter 2024 earnings conference call. All participants will be in listen-only mode.

Speaker Change: Good day and welcome to the one Spa World first quarter 'twenty 'twenty four earnings conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

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After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on I touched on fun too.

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Operator: Please note this event is being recorded. And now I would like to turn the conference over to Alison Malkin for some introductions. Please go ahead, Alison.

Please note this event is being recorded.

Speaker Change: And now I would like to turn the conference over to Allison Malkin for some introduction. Please go ahead Alison.

Allison C. Malkin: Thank you. Good morning, and welcome to OneSpaWorld's first quarter 2024 earnings column webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's column webcast may be deemed to constitute forward-looking statements. These forward-looking statements reflect our judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward-looking statements.

Allison C. Malkin: Thank you good morning, and welcome to one of the world's first quarter 2024 earnings call and webcast before we begin I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward looking statements. These forward looking statements reflect our judge.

Allison C. Malkin: For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter 2024 earnings release, which was furnished to the SEC today on Form 8K. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise.

Allison C. Malkin: Men and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting our business. Accordingly, you should not place undue reliance on these forward looking statements.

Allison C. Malkin: For a more thorough discussion of the risks and uncertainties associated with the forward looking statements to be made in this conference call and webcast. We refer you to the disclaimer regarding forward looking statements that is included in our first quarter 2024 earnings release, which was furnished to the SEC today on form 8-K.

We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call and explanation of these metrics.

Allison C. Malkin: In addition, the company may refer to certain adjusted non-GAAP metrics on this call. An explanation of these metrics can be found in our earnings release issued earlier this morning. Joining me today are Leonard Fluxman, Executive Chairman, Chief Executive Officer, and President, and Stephen Lazarus, Chief Financial Officer and Chief Operating Officer. Leonard will begin with a review of our first quarter 2024 performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and our guidance. I would now like to turn the call over to Leonard.

Allison C. Malkin: Can be found in our earnings release issued earlier this morning.

Allison C. Malkin: Joining me today are Leonard flux, then executive Chairman, Chief Executive Officer, and President and Stephen Lazarus, Chief Financial Officer, and Chief Operating Officer, Leonard will begin with review of our first quarter 2024 performance and provide an update on our key priorities then Steven.

Stephen B. Lazarus: We'll provide more detail on the financials and our guidance I would now like to turn the call over to Leonard.

Leonard I. Fluxman: Thank you, Alison. Good morning and welcome to OneSpaWorld first quarter 2024 results conference call. I'm very pleased to report another strong start to the year with our first quarter generating record results. We delivered robust double-digit growth in total revenue, income from operations, and adjusted EBITDA, all of which were at record setting levels. We also achieved significant accomplishments towards our strategic priorities, which provide for our ongoing growth in the current year and well into the future.

Leonard I. Fluxman: Thank you Alison good morning, and welcome to <unk> first quarter 2024 results conference call.

Leonard I. Fluxman: I'm very pleased to report another strong start to the year with our first quarter generating record results.

Leonard: We delivered robust double digit growth in total revenue income from operations and adjusted EBITDA.

Leonard: All of which were at record setting levels.

Leonard: We also achieved significant accomplishments towards our strategic priorities, which provide for ongoing growth in the current year and well into the future.

Leonard I. Fluxman: In fact, the ongoing strong momentum of our business from fiscal 2023 into early 2024 resulted in the best first quarter in history of our company. The resounding success across all fronts is a testament to the superior execution of our strategy by our exceptionally talented team.

Leonard: In fact, the ongoing strong momentum of our business from fiscal 2023 into early 'twenty 'twenty four.

Speaker Change: It isn't the best first quarter in the history of our company.

Speaker Change: The resounding success across all fronts is a testament to the superior execution of our strategy by our exceptionally talented team there.

Leonard I. Fluxman: Their relentless dedication to innovation, enhancement of partnership, leveraging of our category dominance, and adept navigation of our intricate business model have yielded extraordinary guest experiences and outstanding service to our esteemed cruise line and destination resort partners that is translating into increased value to our shareholders. As we look ahead, the second quarter is off to a positive start, and we expect a continued superior execution of our strategy combined with our ongoing ability to provide extraordinary service levels to our cruise and resort partners through a differentiated luxury experience for guests will position the company for continued success.

Speaker Change: And their relentless dedication to innovation and enhancement of partnerships leveraging about category dominance and a depth navigation of our intricate business model.

Leonard: The extraordinary guest experience and outstanding service to our esteemed cruise line and destination resort partners that is translating into increased value to our shareholders.

Leonard: As we look ahead, the second quarter is off to a positive start.

Leonard: We expect the continued superior execution of our strategy combined with our ongoing ability to provide extraordinary service levels to our crews and resort partners through a differentiated luxury experience for guests.

Leonard: And we will position the company for continued success.

Leonard I. Fluxman: Based on the continued strong execution by a talented team, new partnerships, and new initiatives, which continue to drive organic growth, we have raised our annual outlook beyond the outperformance achieved in the first quarter. We currently expect total revenues to increase by 10% and adjusted EBITDA to increase by 12% at the midpoint of our guidance ranges for fiscal 2023. Additionally, in further demonstration of the confidence in our strategy, our near and long-term business prospects, and our strong balance sheet, our Board of Directors approved a $50 million share repurchase authorization. Turning now to the highlights of the quarter.

Leonard: Based on the continued strong execution by our talented team new partnerships and new initiatives, which continue to drive organic growth. We have raised our annual outlook beyond the outperformance achieved in the first quarter we.

Leonard: We currently expect total revenues to increase by 10% and adjusted EBITDA to increase by 12% at the midpoint of our guidance ranges from fiscal 2023 <unk>.

Leonard: Additionally, in further demonstration of the confidence in our strategy.

Leonard: Near and long term business prospects and our strong balance sheet, our board of directors approved a $50 million share re purchase authorization.

Leonard I. Fluxman: Total revenue was $211.2 million, increasing 16% from $182.5 million in the first quarter of 2023. Income from operations increased 52% to $17 million from $11.2 million a year ago, and adjusted EBITDA rose 31% to $25.3 million from $19.3 million last year.

Leonard: Turning now to the highlights of the quarter total revenue was $211 $2 million, increasing 16% from $182 5 million in the first quarter of 2023.

Leonard: Income from operations increased 52% to 17 million from $11 $2 million, a year ago, and adjusted EBITDA rose, 31% to $25 $3 million from $19 3 million last year.

Leonard I. Fluxman: The expansion in our ship count continued during the period. At quarter end, we had health and wellness centers on 193 ships and an average ship count of 188 for the quarter compared with 179 ships and an average ship count of 173 ships in the first quarter of 2023. Also, at quarter end, we had 4,082 cruise ship personnel and vessels compared with 3,665 at the end of the first quarter of 2023. We also saw strength across key operating metrics, recording increases in average weekly revenue per ship and average weekly revenue per shipboard staff per day above the levels achieved in the first quarter of 2023. Keep in mind that the first quarter of fiscal 2023 cruise ship personnel was below full count levels as passenger load factors were still returning to normalization post COVID-19.

Leonard: The expansion that I ship count continued during the period at quarter end, we had health and wellness centers and 193 ships at an average ship count of 188 for the quarter compared with 179 ships and an average ship count of 173 ships at the first quarter of <unk>.

Leonard: <unk> 2023.

Leonard: Oh, sorry quarter end, we had 4082 cruise ship personnel on vessels compared with 3665 at the end of the first quarter of 2023.

Leonard: We also saw strength across key operating metrics recording increases in average weekly revenue per ship and average weekly revenue per shipboard staff per day above the levels achieved in the first quarter of 'twenty to 'twenty three.

Leonard: Keep in mind that the first quarter of fiscal 2023 cruise ship personnel was below full comp levels.

Leonard: As passenger load factors were still returning to normalization post COVID-19.

Leonard I. Fluxman: Notably, in the first quarter, we continued to surpass the level of experienced staff members in 2019, reflecting the success of our ongoing initiative to retain on-board staff members. These experienced staff members contributed to the delivery of double-digit growth across certain key operating metrics as compared to fiscal 2023 and 2019. The quarter also marked a key milestone for our company as we reached the fifth year anniversary of our DSPAC public listing. Now, Stephen will comment momentarily. In addition to our robust revenue and profit growth, notably, OneSpaWorld warrant holders expressed their support for the company with 98% of all outstanding warrants converted. The remaining warrants were canceled.

Leonard: Notably in the first quarter, we continue to support the level of experienced staff members in 2019, reflecting.

Leonard: Reflecting the success of our ongoing initiative to retain onboard staff members.

Leonard: These experienced staff members contribute to the delivery of double digit growth across certain key operating metrics as compared to fiscal 2023 and 2019.

Leonard: Yeah.

Leonard: The quarter also marked a key milestone for our company as we reached the fifth year anniversary of Ids back public listing.

Leonard: And as Stephen will come into my materially in addition to our robust revenue and profit growth, notably ones fall would warrant holders expressed their support for the company with 98% of all outstanding warrants converted.

Leonard: The remaining warrants were canceled.

Leonard I. Fluxman: Importantly, we also eliminated the hedging of our private equity investor, which sold its final tranche of shares, simplifying our capital structure while increasing trading liquidity in our public float. The quarter included progress towards our four strategic priorities. Let me share some highlights.

Leonard: Importantly, we also eliminated the whole bang, although a private equity investor, which sold its final tranche of shares.

Leonard: Simplifying our capital structure, while increasing trading liquidity and our public float.

Leonard: The quarter included progress towards a focused strategic priorities, let me share some highlights.

Leonard I. Fluxman: First, we captured highly visible new ship growth with current cruise line partners and added new cruise line partnerships to our fold. To this end, in the first quarter, we entered into a new exclusive agreement with Royal Caribbean and Celebrity Cruises for their 40 ships currently in service and future ships entering service during the agreement term. In addition, at quarter end, we added Arroya Cruises to our list of partners where we will operate all health and wellness facilities beginning late 2024, thereby strengthening our market-leading competitive position and providing further evidence of our best-in-class operating capabilities. We expect to end fiscal 2024 operating on about 198 visits.

Leonard: First we captured some highly visible new ship growth with current cruise line partners and added new cruise line partnerships too I felt to this end in the first quarter, we entered into a new exclusive agreement with Royal Caribbean.

Leonard: Celebrity cruises for their 40 ships currently in service and pewter future ships entering service during the agreement too.

Leonard: In addition at quarter end, we added a ROI of cruisers to our list of partners, where we operate all health and wellness facilities, beginning late 'twenty 'twenty four.

Leonard: Thereby strengthening our market, leading competitive position and providing further evidence of a best in class operating capabilities.

Leonard: We expect to end fiscal 'twenty 'twenty four operating.

Leonard: On about 198 vessels.

Leonard I. Fluxman: Second, we continue to launch high-value services and products. Our innovation pipeline is robust this year with introductions of cryotherapy body services and new cryotherapy and LED facial services to complement the new technology driven by Elemis Biotech 2.0 facial. Additionally, we continue to introduce light stem therapy, augmenting other acupuncture services, which has dramatically improved acupuncture revenue on the vessels where we have introduced this protocol.

Leonard: Second we continue to launch high value services and products.

Leonard: Our innovation pipeline is robust this year with introductions of prior therapy body surfaces, and new cryotherapy and Leds facial services to complement the new technology, driven by Elemis biotech to pointed out official.

Leonard: Additionally, we continue to introduce light stem therapy, augmenting other acupuncture services, which has dramatically improved acupuncture.

Leonard: Acupuncture revenue on the vessels, where we have introduced this protocol.

Leonard I. Fluxman: Third, we focused on enhancing health and wellness center productivity. We grew key maritime operating metrics at double-digit rates, supported by a sustained pipeline of strategic initiatives to increase pre-booking. However, the number of treatments declined, and the number of passengers utilizing the spa.

Leonard: Third we focused on enhancing health and wellness center productivity.

Leonard: We grew key maritime operating metrics at double digit rates supported by a sustained pipeline of strategic initiatives to increase pre booking.

Leonard: The number of treatments declined and the number of passengers utilizing the spa.

Leonard I. Fluxman: As we previously discussed, pre-booking guests spend on average 30% more than those who book on board while allowing us to better optimize staffing, facilities, and service capacities to drive higher health and wellness center economics. We also continue to drive higher revenue services through simplified service menus and modified treatment lengths, which contribute to growth in average spend per guest. Average guest spend also benefits from refinement in the length of service and pricing architecture of certain services, which resulted in increases in service frequency and a mix towards higher-priced services and products.

Leonard: As we previously discussed pre booking guests spend on average 30% more than those who book on board well.

Leonard: Allowing us to better optimize stuffing facilities and service capacities to drive higher health and Wellness Center economics.

Leonard: We also continued to drive higher revenue services by simplified service menus and modified treatment lengths, which contribute to growth in average spend per guest.

Leonard: Average guest spend also benefits from refinements and length of service and pricing architecture of certain services, which resulted in increases in service frequency and a mix towards higher priced services and products.

Leonard I. Fluxman: We also increased our MediSpa offering with services on 142 ships at the end of the first quarter of 2024, up from 122 ships in 2023. We continue to expand our ManySpa offering to 148 ships this year. We further enhanced our financial position and flexibility. In addition to the simplification of our capital structure, we utilized our strong cash flow to repurchase our common shares and repaid $20 million of our first lean term loan during the quarter. This brought total debt reduction to $94.1 million since the second quarter of 2022, which has substantially lowered ongoing interest expense.

Leonard: We also increased our very spa offering with services on 142 ships at the end of the first quarter of 2024 up from 122 ships in 2023.

Leonard: We continue to expand on many spa offering to 148 ships this year.

Leonard: Fourth.

Leonard: We further enhanced our financial position and flexibility.

Leonard: In addition to the simplification of our capital structure, we utilized our strong cash flow to repurchase our common shares and repaid $20 million about first lien.

Leonard: Loans during the quarter. This brought total debt reduction to $94 $1 billion since the second quarter of 2022 which has substantially lowered ongoing interest expense.

Leonard I. Fluxman: And first, our Board of Directors approved a $50 million share repurchase program, further demonstrating the confidence in our strategy and long-term growth opportunities. Overall, we remain excited about our business outlook. We expect a strong start to the year, coupled with visible growth opportunities made possible by the advantages we possess in the operation of health and wellness centers at sea and a destination for sports on land, further buoyed by highly favorable market dynamics, across the cruise line industry to position us for another record-setting year in 2024. With that, I will turn you over to Stephen who will comment on our first quarter financial results.

Leonard: And fifth our board of directors approved a $50 million share repurchase program.

Leonard: Further demonstrating the confidence in our strategy and long term growth opportunities.

Leonard: Overall, we remain excited about our business outlook, we expect a strong start to the year, coupled with visible growth opportunities made possible by the advantages we possess in the operation of health and wellness centers at sea and at.

Leonard: Destination of a sports on land.

Leonard: Further buoyed by highly favorable market dynamics.

Leonard: Ross the cruise line industry to position us for another record setting year in 'twenty 'twenty four.

Leonard: With that I'll turn you over to Stephen who will comment on our first quarter financial results.

Leonard: Steven.

Stephen B. Lazarus: Thank you, Leonard. Good morning, everybody.

Stephen B. Lazarus: Thank you Linda good morning, everybody.

Stephen B. Lazarus: We are pleased to report a strong start to the year with better than expected top and bottom line results, along with further improvements to our balance sheet. I will share some more details on our first quarter results that we reported this morning. Total revenue was $211.2 million, up 16% as compared to $182.5 million in the first quarter of 2023. The increase principally was attributable to our average ship count increasing 9% to 188 health and wellness centers onboard ships operating during the quarter compared with our average ship count of 173 health and wellness centers onboard ships operating during the first quarter of 2023.

Stephen B. Lazarus: We are pleased to report a strong start to the year ago with better than expected top and bottom line results.

Stephen B. Lazarus: With some of the improvements to our balance sheet.

Stephen B. Lazarus: I will share some more details on our first quarter that we reported this morning.

Stephen B. Lazarus: Total revenue was $211 $2 million up 16% as compared to $182 $5 million in the first quarter of 'twenty to 'twenty three.

Stephen B. Lazarus: The increase principally was attributable to every ship count increasing 9% to 188 health and wellness centers onboard ships operating during the quarter.

Stephen B. Lazarus: On page with that every ship count of 173 health and wellness centers onboard ships operating during the first quarter of 2023.

Stephen B. Lazarus: In addition, we benefited from our initiatives to drive revenue growth and profitability in each of our on-board health and wellness centers through enhanced pre-booking of guest services, on-board guest engagement and experiences, our guest service and product offering innovations, and the disciplined execution of our complex operating protocols by our on-board and corporate teams.

Stephen B. Lazarus: In addition, we benefited from our initiatives to drive revenue growth and profitability in each of our onboard health and wellness centers.

Stephen B. Lazarus: Enhance pre booking of guests services onboard guest engagement and experiences our guest service and product offering innovations and the disciplined execution of a complex operating protocols that are onboard and corporate teams.

Stephen B. Lazarus: The cost of service was $144 million, compared to $126.3 million in the first quarter of 2023. The increase was primarily attributable to costs associated with increased service revenues of $172.2 million in the quarter from our operating health and wellness centers at sea and on land, compared with service revenues of $150.1 million in the first quarter of 2023. The cost of products was $33.5 million compared to $28.3 million in the first quarter of the previous year.

Stephen B. Lazarus: Cost of service was $144 million compared to $126 $3 million in the first quarter of 2023. The increase was primarily attributable to costs associated with the increased service revenues of $172 $2 million you'd look water from our operating health and wellness centers.

Stephen B. Lazarus: Oh names compared with revenues of $151 million in the first quarter of 2023.

Stephen B. Lazarus: Cost of products was $33 5 million compared to $28 3 million in the first quarter of prior year, the increase being primarily attributable to classes, Saudi associated with increased product revenue of $39 million.

Stephen B. Lazarus: The increase being primarily attributable to costs associated with increased product revenue of $39 million, in the quarter from our operating health and wellness centers at sea and on land compared to product revenues of $32.3 million in the first quarter of 2023. Net income was $21.2 million or net income per diluted share of 21 pennies as compared to a net loss of $15.9 million or net loss per diluted share of 17 pennies in the first, The $37.1 million increase in net income was attributable to a $29.6 million positive change in the fair value of our warrant liabilities, a $1.7 million decrease in interest expense, and a $5.8 million positive change in income from operations.

Stephen B. Lazarus: In the quarter from the operating health and wellness centers, it's not.

Stephen B. Lazarus: Lane compared to product revenues of $32 $2 million in the first quarter of 2023.

Stephen B. Lazarus: Net income was $21 $2 million or net income per diluted share of 21 pennies as compared to a net loss of $15 $9 million or net loss per diluted share of 17 pennies in the first quarter Australia.

Stephen B. Lazarus: The $37 1 million increase in net income was it due to those two.

Stephen B. Lazarus: $6 million positive change in the fair value of our warrant liabilities, a one 7 million.

Stephen B. Lazarus: The decrease in interest expense.

Stephen B. Lazarus: And a $5.8 million positive change in income from operations.

Stephen B. Lazarus: The change in the fair value of our warrant liabilities, as you know, during the quarter ended March 31st, 2024 was a gain of $7.7 million compared to a loss of $21.9 million during the quarter ended March 31st, 2023. The net gain in the change in fair value of warrant liabilities was a result of the re-measurement to fair value of the warrants exercised during the first quarter of 2024 and changes in market prices of our common stock and other observable inputs deriving the value of these financial instruments.

Stephen B. Lazarus: Change in the scalability of our warrant liabilities as you know during the quarter ended March 31, 'twenty 'twenty four was a gain of $7.7 million compared to a loss of $21 $9 million during the quarter ended March.

Stephen B. Lazarus: 2023.

Stephen B. Lazarus: The net gain in the change in fair value of warrant liabilities was was a result of the re measurement to fair value of the warrants exercised during the first quarter of 2024 and changes in market prices of our common stock and other observable inputs deriving the value of these financial instruments.

Stephen B. Lazarus: Adjusted net income was $19.3 million, or adjusted net income per diluted share of 19 pennies, as compared to adjusted net income of $12.3 million, or adjusted net income per diluted share of 13 pennies, in the first quarter of last year. Adjusted EBITDA was $25.3 million compared to adjusted EBITDA of $19.3 million in the prior year, an increase of 31%.

Stephen B. Lazarus: Adjusted net income was $19 $3 million or adjusted net income per diluted share of <unk> 19, pennies as compared to adjusted net income of $12 3 million or adjusted net income per diluted share of 13 pennies in the first quarter of last year.

Stephen B. Lazarus: Adjusted EBITA was $25 million compared to adjusted EBITDA was $19 3 million in the prior year, an increase of 31%.

Stephen B. Lazarus: Turning to the balance sheet, cash as of March 31, 2014 totaled $66.6 million. In the first quarter, we repaid $20 million on our first lean term loan.

Stephen B. Lazarus: Turning to the balance sheet.

Stephen B. Lazarus: Cash at March 31, 24 totaled $66 $6 million in the first quarter, we repaid $20 million on a first lien term loan.

Stephen B. Lazarus: Since the second quarter of 2022, we have repaid a total of $94.1 million in debt instruments, reducing our ongoing interest expense. At quarter end, total debt net of deferred financing costs was $138.6 million compared to $202.6 million at the end of the first quarter last year. As previously announced, our $20 million credit facility reached its expiration on March 19, 2024. Given our strong liquidity profile, we do not currently plan to renew this facility and will continue to evaluate entering into a new line of credit in the future.

Stephen B. Lazarus: Since the second quarter of 2022 we have repaid a total of $94 $1 billion in debt instruments, reducing our ongoing interest expense at quarter end total debt net of deferred financing costs was $138.6 million compared to $202 6 million.

Stephen B. Lazarus: At the end of the first quarter last year.

Stephen B. Lazarus: As previously announced our $20 billion credit facility reached its expiration on March nine T. H 'twenty 'twenty four.

Stephen B. Lazarus: Given our strong liquidity profile, we do not currently plan to renew this facility and will continue to evaluate entering into a new line of credit in the future. Additionally.

Stephen B. Lazarus: Additionally, we utilized $7.7 million in cash to repurchase 606,000 shares of our common stock during the first quarter. In the first quarter, unlevered after-tax free cash flow was $24.1 million compared to $17.9 million in the first quarter of 2023. That translates to a 95% conversion rate for unlevered after-tax free cash flow to EBITDA.

Stephen B. Lazarus: Additionally, we utilized $7 $7 million in cash to repurchase 606000 shares of our common stock during the first quarter.

Stephen B. Lazarus: In the first quarter Unlevered after tax free cash flow was $24 1 million compared to 17 point odd billion dollars in the first quarter. It was 2023.

Stephen B. Lazarus: That translates to a 95% conversion rate for Unlevered after tax free cash flow to EBITDA in the quarter.

Stephen B. Lazarus: As it relates to the Warrant Exchange, on March 26th, 24, we announced that all remaining public warrants had been converted into common shares and exercised or cancelled. This generated $51.7 million in net cash proceeds in the quarter. Over the five-year exercise period, a total of 24 million warrants were exercised, generating net proceeds to the company after deducting applicable fees of approximately $54 million. Additionally, as previously announced, 19.3 million warrants were exchanged for the company's common shares pursuant to a privately negotiated warrant agreement, called Sheraton Holders of the War. I'm delighted to say that there are now only 21,600 pipe warrants remaining, the only warrants remaining for the company.

Stephen B. Lazarus: As it relates to the warranty exchange on March 26 of 24, we announced that all remaining public warrants had been converted into common shares and exercised or cancelled this generated $51 $7 million in net cash proceeds in the quarter.

Stephen B. Lazarus: Over the five year exercise period, a total of 24 million warrants were exercised generating net proceeds to the company after deducting applicable fees of approximately $54 million.

Stephen B. Lazarus: And as previously announced $19 3 million warrants were exchanged for the company's common shares pursuant to a private negotiated warranty agreement with certain holders of the warrants.

Stephen B. Lazarus: I'm delighted to say that there are now only 21600 pipe warrants remaining and those the only warrants remaining for the company.

Stephen B. Lazarus: As announced, our Board of Directors approved a $50 million Shari Purchase Program, which will be executed opportunistically using available cash. The company's fully diluted share count is expected to approximate $105 million as of June 30, 2024, as most of the warrants aforementioned were converted for cash. This expectation does not consider any future share purchase activity.

Stephen B. Lazarus: As announced our board of directors approved a $50 million share repurchase program, which will be executed opportunistically using available cash.

Stephen B. Lazarus: The company's fully diluted share count is expected to approximate $105 million as of June 30 years 'twenty 'twenty four is most of the warrants aforementioned will convert to cash.

Stephen B. Lazarus: This expectation does not consider any future share repurchase activity.

Stephen B. Lazarus: Going forward, we will continue to evaluate all opportunities to utilize our strong cash flow generation for the benefits of our shareholders. Moving on to our guardians. As mentioned, we are increasing our fiscal year guidance based upon our better than expected first quarter performance and favorable outlook while introducing expectations for the second quarter. For the full fiscal year 2024, we now expect total revenue in the range of $860 to $880 million versus our previous guidance of $850 to $870 million.

Stephen B. Lazarus: Going forward, we will continue to evaluate all opportunities to utilize our strong cash flow generation for the benefit of our shareholders.

Stephen B. Lazarus: Moving on chalk audience.

Stephen B. Lazarus: And just the EBITDA is now expected in the range of $95 to $105 million versus our previous guidance of $90 to $100 million. We expect to end fiscal 2024 operating on 198 cruise ships and at 51 resorts. For the second quarter, we have introduced guidance expecting total revenue in the range of $216 to $221 million and adjusted EBITDA in the range of $24.4 to $26 million. Additionally, our second quarter guidance assumes an ending ship count of 195 and a resort count of 51.

Stephen B. Lazarus: As mentioned, we are increasing our fiscal year guidance based upon out better than expected first quarter performance and favorable outlook, while introducing expectations for the second quarter.

Stephen B. Lazarus: For the full fiscal year 'twenty 'twenty four we now expect total revenue in the range of $860 million to $880 million versus our previous guidance of $850 million to $870 million. Adjusted EBITDA is now expected in the range of $95 million to $105 million versus our previous guidance.

Stephen B. Lazarus: $90 million to $100 million.

Stephen B. Lazarus: We expect to in fiscal 'twenty 'twenty four operating on 198 cruise ships and at 51 resource for.

Stephen B. Lazarus: For the second quarter, we have introduced guidance expecting total revenue in the range of $216 million to $221 million and adjusted EBITDA in the range of 24, 4% to $26 million in our second quarter guidance assumes an ending ship count of 195, Kinder resort count to 51.

Stephen B. Lazarus: Importantly, we feel very confident about our positioning and growth outlook as we look ahead for the balance of 2024. We are pleased with the continued momentum we are experiencing in the second quarter and expect to continue our track record of strong operational results throughout the year. Molis, could you please go ahead and open the call?

Stephen B. Lazarus: Importantly, we feel very confident about our positioning and growth outlook. As we look ahead for the balance of 'twenty 'twenty. Four we are pleased with the continued momentum we are experiencing in the second quarter and expect to continue our track record of strong.

Stephen B. Lazarus: Operational results throughout the year.

Speaker Change: With that we will open up the call for questions more niche. If you could please go ahead and open the call.

Operator: Thank you very much. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. Again, star, 1. If you are using a speakerphone, please pick up the handset before pressing the key.

Speaker Change: Thank you very much we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone again star one.

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Operator: We ask that you limit yourself to one question and one follow-up. You can re-enter the queue if you have additional questions. And if at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. We'll start with a question from Steve Wieczynski from Stifel. Steve, please go ahead. Hey guys, good morning.

Speaker Change: And if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time.

Speaker Change: Pause momentarily to assemble our roster.

Speaker Change: Let's start with a question from Steve was unscathed from Stifel Steve.

Steve: Steve. Please go ahead.

Steve: Hey, guys good morning.

Leonard I. Fluxman: So I wanna start with the revised guidance for the last three quarters of the year. And I think this is now your, I don't even know, third or fourth straight quarter in which you've materially beat the midpoint of your guidance range. So I guess as we think about the last three quarters of 2024, I'm just wondering how you're thinking about or what you're embedding in terms of the way you're thinking about your customer base.

Steve: So when I start with the revised guidance for the last three quarters of the year and I think this is now your I don't even know third fourth straight quarter in which you have.

Steve: Materially beat kind of the midpoint of your of your guidance range. So I.

Speaker Change: I guess as we think about in the last three quarters of 2024, just just wondering how you're thinking about or what you're embedding in terms of the way you're thinking about your customer base.

Leonard I. Fluxman: And if you're assuming that spend levels stay status quo, or you're embedding some conservatism in there just because you really just don't know where the consumer's gonna go. You're just trying to understand how you're thinking about spend levels for the last three quarters of the year. Thanks.

Speaker Change: And if you're assuming that you know spend level stay status quo or you're embedding some conservatism in there just you know just because you really just don't know where the consumer is going to go up just you're just trying to understand how you're thinking about spend levels for the last three quarters of the year. Thanks.

Speaker Change: Okay.

Leonard I. Fluxman: Steve, good morning. I'll start off and then you can add more if you want to, obviously. As mentioned, the first quarter saw very strong spend levels which continued from the prior year, and we have continued to see that here as we started into the second quarter. Obviously, nobody has a crystal ball with certainty around what's going to happen over the remainder of the year. We do think spend on board should remain strong, bookings are very favorable, and the booking trends that all the cruise lines have talked about and you're keenly aware of.

Speaker Change: Steve Good morning, I'll start off and then Internet if he.

Steve: Once to obviously so.

Leonard I. Fluxman: Okay, gotcha. Thanks for that.

Steve: As I mentioned, the first quarter, so very strong spend levels, which continued from prior year and we have continued to see you back here as we've started into the second quarter.

Speaker Change: Obviously, nobody has a crystal ball with certainty around what's going to happen over the remainder of the year, we reducing spend on board should remain strong bookings are very favorable the booking things that all the cruise lots of talks about them. We are keenly aware of.

Speaker Change: Pointing in the right direction.

Speaker Change: However, having said that you know in.

Speaker Change: In the latter part of the year I think it's not unlikely keep speak maybe a slight softening in some of the spend.

Speaker Change: <unk> accounted for but we expect generally that are onboard performance will remain strong.

Stephen B. Lazarus: And then maybe a bigger picture question, but, based on your free cash flow generation, which, you know, remains obviously very strong, it's pretty clear that your balance sheet could, you know, could essentially be debt free in the next year or so. So, you know, I guess the question is, how are you guys balancing, you know, obviously, you just announced the share repurchase program, but how are you balancing a share repurchase versus a potential, you know, initiating a dividend again versus, you know, some kind of acquisition?

Speaker Change: Okay got you thanks for that and then maybe a bigger picture question, but.

Speaker Change: Based on your free cash flow generation, which you know rate remains obviously very strong I mean, it's pretty clear that your balance sheet could you know could essentially be debt free and.

Speaker Change: Next year or so so you know I guess the question is how are you guys. Balancing you know obviously, you just announced the share repurchase program, but how are you balancing of share repurchase versus a potential you know initiating a dividend again versus you know some kind of acquisition in it and if you thought about some acquisition or potential acquisition.

Stephen B. Lazarus: And if you thought about some acquisition or potential acquisitions down the road, what type of acquisitions would you know, would you guys be looking at, or what you know, what is out there that would make sense for you guys?

Speaker Change: Down the road, what you know what type of acquisitions would you know what would you guys be looking at or what you know what is out there that would make sense for you guys.

Speaker Change: Yeah.

Leonard I. Fluxman: Let me touch quickly on the cash use and then I'll let Leonard talk about the acquisition side of things. So as it relates to the buyback, the feeling was that was the most appropriate near-term action to take and it aligns specifically with the $15 million of cash that came in from the warrants, which as you know, historically you account for those on a treasury basis, but because they were all converted, almost all of them are converted on a cash basis, We felt it would be most appropriate to take that $50 million and reduce the share count back to where it would have been as if those shares were converted cashless, hence the $50 million buyback.

Speaker Change: Let me touch quickly on the cash used and then I'll, let Nick talk about the acquisition side of things. So as it relates to the buyback. The feeling was that was the most appropriate near term action to take and it aligns specifically with a $15 billion of cash that came in from the warrants.

Nick: Which as you know historically you account for those on a treasury basis, but because they were all converted almost all of them are converted on a cash basis. It does increase the share count and so.

Nick: We felt it would be most appropriate to take that $50 million and reduce the share count back to where it would it be and see if those shares were converted cashless, hence the $50 million buyback and it doesn't really change any of our thinking overall around continuing to pay off debt at these interest rates and potentially a subsequent.

Leonard I. Fluxman: And it doesn't really change any of our thinking overall around continuing to pay off debt at these interest rates and potentially a subsequent introduction of a dividend. So all of those things remain on the table. We have exhibited now for the past two quarters not being only able to do one thing where we have in the last two quarters paid off debt and bought back shares. So as we move forward, we will continue to evaluate what we feel are the most appropriate ways of returning cash to shareholders, and I will let Leonard answer the part on the acquisition.

Speaker Change: Introduction of a dividend so all of those things remain on the table, we have exhibited for the past two quarters.

Speaker Change: Only able to do one thing where we have in the last two quarters paid Allstate and bought back shares. So as we move forward. We will continue to evaluate what we feel are the most appropriate ways of returning cash to shareholders.

Speaker Change: And I will listen into the answer the part on the acquisitions.

Speaker Change: [laughter].

Stephen B. Lazarus: So, Steve, I mean, it's interesting times. I mean, we haven't found the right solution yet, although we've been presented a lot of ideas by bankers, inbounds. And we're always getting them.

Speaker Change: So Steve I mean, it's it's it's interesting times I mean.

Speaker Change: We haven't found although we've been presented.

Speaker Change: A lot of ideas by bankers in bounds.

Leonard I. Fluxman: It's not like there's just a pickup in it, but certainly, people are always giving us ideas. Some of these ideas, but there's nothing really compelling on the table right now, but if you look at what would make sense for us and the vision around what we would target to do, we would want to do something that not only augments what we're doing on board but adds incremental value to our offering on board and any of the protocols that we can do, most likely.

Speaker Change: And we always getting them, it's not that's not like this just to pick up in that but suddenly.

Speaker Change: People always showing us ideas leap you discussed some of these ideas, but there's nothing really compelling on the table right now, but if you look at.

Speaker Change: What would make sense for us and the vision around what we would target to do as we.

Speaker Change: We would want to do something that not only augments what we're doing on board, but adds incremental value to our offering on board at any of the protocols that we can do more.

Speaker Change: Most likely.

Leonard I. Fluxman: The best target for that is going to be in, what I would call, the wellness, or mindful space, where there's a lot of new technologies, a lot of ways in which we can learn more about our bodies, etc. And to the extent that there are diagnostic tools within the capabilities of that target that can enhance what we can do on board in our MedSpar and then transfer that to some kind of land-based or e-commerce type experience where they can continue to help and service the guest that we've started the initial consultation with.

Speaker Change: The best targets for that is going to be in I would call the wellness.

Speaker Change: Mindful space, where there's a lot of.

Speaker Change: There's a lot of new techs.

Speaker Change: <unk> technologies a lot of ways.

Speaker Change: Ways in which we can learn more about our bodies et cetera and to the extent that.

Speaker Change: There are diagnostic tools within the capabilities of that target that can enhance what we can do on board in our med spa.

Speaker Change: And then transfer that to some kind of land based or E. Commerce type experience, where they can continue to help and service. The guests that we have started the initial consultation with I think that would make a lot of sense, because we could certainly increase.

Leonard I. Fluxman: I think that would make a lot of sense because we could certainly increase the offering of supplementation on board, continue with supplementation for guests who sign up with us and take some of the seminars and educational seminars that we do on board. So, it's not easy to find, but I'm sure we'll find something like that. But I think that fits into the vision very, very well. So, A, helping us improve the offering on board, and capture more guests because of interest in immunity, wellness, mindfulness, things that we can continue to do to serve our guests between cruises, or even if they don't come back, they'll be able to participate in some form of nutrition counseling, supplementation, et cetera.

Speaker Change: The offering of supplementation on board continue with supplementation for guests to sign up with us and take some of the seminars and educate educational seminars that we do on board so not easy to find but I'm sure. We will find something like that but I think that fits into.

Speaker Change: Into the vision very very well, so a helping us improve the offering on board capture more guests because of interest in the immunity wellness mindfulness things that we can continue to do to serve our guests between cruises or even if they don't come back they will be able to participate.

Speaker Change: In some form of nutrition counseling supplementation et cetera.

Leonard I. Fluxman: Okay, great. Thanks, guys. That's a really good color. I appreciate it.

Speaker Change: Okay, great. Thanks, guys, that's really good color I appreciate it.

Speaker Change: Yeah sure.

Operator: And now we have a question from Sharon Zackfia from William Blair. Sharon, please go ahead. Hi, good morning.

Speaker Change: And now we have a question from Sharon.

Sharon: The ixia from William Blair Sharon. Please go ahead.

Sharon: Good morning.

Sharon Zackfia: You know, it's really a nice surprise to continue to hear about the resiliency in your business. We're not hearing that throughout the broader experience of space, you know, outside of cruise. I guess when we think about a consumer that maybe is looking for more value more broadly, I mean, how do you think you're communicating that? Because you're obviously doing that very well.

Speaker Change: Yeah.

Sharon: And a nice.

Sharon: Surprised to hear about the resiliency in our business, we're not doing that throughout the broader experiences.

Sharon: Outside of crews.

Sharon: When do we think about a consumer that navy is looking for more value and more broadly and how do you think you're communicating because you're obviously doing that very well or do you think that consumers just in a different mindset they get on that shelf.

Leonard I. Fluxman: Or do you think the consumer is just in a different mindset once they get on that ship and the wallets open up? I'm also curious about pre-booking, which is obviously a big positive for you. Does the pre-booking cadence for future cruises look as good as it has been? I'm just wondering if we're seeing any reticence on that end that might come to play kind of further down the pipe. Thanks

Sharon: And the wallets open up I'm also curious on pre bucket, which is obviously a big positive for you.

Sharon: Pre booking cadence for future Christos.

Sharon: Look as good as it has that I'm just wondering if we're seeing any radisson.

Sharon: And that might come to play kind of further down the pike.

Leonard I. Fluxman: Thanks, Sharon. Yeah, look, I mean, we're, you know, we're extremely pleased with the resilience of the onboard spend. As I did mention on the call, you know, we've made some simplifications to the menu services. The menu is much easier to navigate for our guests.

Speaker Change: Yeah. Thanks, Sharon Yeah look I mean, we're you know we're in.

Speaker Change: Extremely pleased with the resilience of the onboard spend as I did mentioned on the call you know we've we've made some simplifications.

Speaker Change: Of the offering menu services, the offering is much easier to navigate for our guests and obviously, we're trying to focus on how to get them to spend at the highest level of that service offering which would then accompany that offering with the potential to do more retail, which is where we're focused on right now.

Leonard I. Fluxman: And obviously we're trying to focus on how to get them to spend at the highest level of that service offering, which would then accompany that offering with the potential to do more retail, which is where we're focused on right now. And as you saw, retail, you know, during the quarter was quite strong. So we're not seeing pushback on price on service or on retail.

Speaker Change: And as you saw at retail during the quarter was quite strong. So we are not seeing pushback on price on service or on retail.

Leonard I. Fluxman: You know, we're moving into. You know, the second quarter where ships seasonally move to other geographies, but. So far, so good, and we expect the second quarter to continue just as well. I think the pre-book, you know, we still are new in terms of the pre-book rollout on NCL, which is an incredibly great opportunity for us, where it wasn't there in the first quarter of 2023. So, we introduced that late 23, and so the cadence of that is still starting to bleed through the numbers, and will positively impact it probably by the third quarter whilst we take on all the ships.

Sharon: You know we're moving into.

Sharon: The second quarter with ships seasonally moved to other geographies, but.

Sharon: So far so good and we expect the second quarter to continue just as well I think the pre book, we still are new in terms of the pre book rollout on N C. L, which is an incredibly great opportunity for us where it wasn't there in the first quarter of 2023.

Sharon: So we introduced that late 'twenty, three and so the cadence of that is still starting to bleed through the numbers and will positively impacted probably by the third quarter, whilst we take on all the ships. So.

Leonard I. Fluxman: We continue to do as much as we can in terms of optimizing what people are choosing on the pre-book front, which is yield management, and we'll continue to invest in that as we move forward, not only in our own IT capabilities but together with the cruise lines and helping them focus on it, because a big focus for them as well is how to get people into all of their pre-booking amenities that they offer. And certainly, as we've demonstrated to them what certain banners are doing versus others, we're able to get their attention on how to grab more of that pre-book. So, I think we're optimistic that that number will continue to grow, and clearly, it is positively impacting the top line for us. Can you say it?

Sharon: We continue to do as much.

Sharon: As we can in terms of optimizing what people are choosing on the pre book front, which is yield management and will continue to invest in that as we move forward not only in our own capabilities, but together with the cruise lines and helping them focus on it because a big focus for them as well as how to get people into all of their pretty.

Sharon: Booking.

Sharon: Amenities that they offer and certainly as we've demonstrated to them what certain banners are doing versus others were able to get their attention on how to grab more of that pre book. So I think we're optimistic that that number will continue to grow and clearly.

Sharon: It is you know positively impacting top line for us.

Speaker Change: Can you still hear me.

Leonard I. Fluxman: I wanted to follow up on that because I think you're making some incremental investments in tech and AI this year, and what you're doing there, and you know, 25 and beyond.

Speaker Change: Yes, yes.

Speaker Change: Sorry, my phone cut out for a second.

Speaker Change: I wanted to follow up on that because I think you were making some incremental investments untack NII this year.

Speaker Change: And what you're doing there.

Speaker Change: Let me hit on 25 and beyond.

Speaker Change: Yeah.

Leonard I. Fluxman: So across the company, Sharon, we're investing in back office automation with AI capabilities. We're in the early stages of deciding where we're going to go first, what's the lowest hanging fruit that we can tackle and improve in terms of efficiencies.

Speaker Change: So across the company, Sharon, we're investing and back office automation.

Speaker Change: Automation with AI capabilities.

Speaker Change: In the early stages of.

Speaker Change: Navigating where are we gonna go first what's the lowest hanging fruit that we can tackle and improve in terms of efficiencies and then on the other side on the flip side on board, we're going to look as we mentioned before on other calls.

Leonard I. Fluxman: And then on the flip side, on board, we're going to look, as we mentioned before on other calls, how we can use AI to improve our marketing offerings, replicating best in class across all of the ships, or at least all of the ships in that geography with that demographic. So I think all of those capabilities are being, the architecture is in play right now. We're planning for it.

Speaker Change: We can use AI to improve our marketing offerings replicating best in class across you know all of the ships or at least all of the ships in that geography with that demographic. So I think all of those capabilities are being the architecture is in play right now we're planning.

Leonard I. Fluxman: We have a kickoff meeting very soon on where we're at and next steps to follow. So together with the enhancement that we've made in data collection and data capabilities, which is helping us improve performance on a weekly basis, we're able to triage it much quicker than before, as we've mentioned on prior calls, and we'll continue to invest in that platform as we move forward. And it's becoming more and more of an everyday tool versus just being able to flash our revenue on a Monday, figuring out where the weak points are, where the weak managers, if there are some, need help, how we get more training to them quicker, and how we focus on improving sell-through and attachment.

Speaker Change: On it we have a kickoff meeting very soon on where we're at and next steps to potash. So together with the enhancements that we've made in data collection and data capabilities, which is helping us improve performance on a weekly basis, we were able to triage it much quicker than before as we've mentioned on <unk>.

Speaker Change: Calls and we'll continue to invest in that platform as we do.

Speaker Change: Move forward, and it's becoming more and more of an everyday tool. This is just being able to flash our revenue on a Monday. So you know the team is immersed in data.

Speaker Change: Figuring out where the weak points are where the weak manages if there are some need help how do we get more training to them quicker and how we focus on improving sell through an attachment.

Speaker Change: Thank you so much.

Speaker Change: Of course.

Operator: And our next question comes from Maks Rakhlenko from J.D. Cowan. Maks, please go ahead.

Speaker Change: And our next question comes from Max Guang call from TD Collyn Max. Please go ahead.

Maksim Rakhlenko: Great, thanks a lot. So first, what's your latest thinking around the number of ships that we should be modeling for you guys, over the next few years, given your own wins, including one that you discussed this morning with us, as well as some more data points coming across at an industry level. And then when you combine the new ships with your own initiatives that you're discussing, what's the latest thinking around the medium term revenue growth profile for the company over the next few

Maksim Rakhlenko: Great. Thanks, a lot so first what's your latest thinking around.

Maksim Rakhlenko: Number of ships that we should.

Maksim Rakhlenko: Should be modeling for you guys.

Maksim Rakhlenko: Over the next few years, given your own wins, including one that you are discussing this morning with us as well some more data points coming across.

Maksim Rakhlenko: At an industry level and then when you combine the new ships with your own initiatives that you're discussing what's the latest thinking around the medium term revenue growth.

Maksim Rakhlenko: Profile for the company over the next few years.

Stephen B. Lazarus: Maks, we continue to have five vessels in total coming into service, new builds that is, in 2024, and then in 2025, there are eight of those. One of those numbers likely goes up, likely depending on when Virgin announces the brilliant Lady coming into service. In terms of the new ship introduction numbers, those continue to look good; they continue to support our thesis that we believe we can grow revenues at a high single-digit rate, and we remain committed and have reiterated that that is a medium-term growth rate on the top end.

Maksim Rakhlenko: Next we continue to have.

Maksim Rakhlenko: Vessels in total coming into service new builds that is in.

Maksim Rakhlenko: In 2024, and then in 2025, there are eight of those one of the numbers goes up like he depending on when Virgin announces the brilliant Lady.

Maksim Rakhlenko: You have to service so.

Maksim Rakhlenko: In terms of the ship new ship introduction numbers those continue to look good they continued to support our thesis that we believe we can grow revenues in the high single digit rate and we remained.

Maksim Rakhlenko: Come back to them and have reiterated that that is the medium term growth rates on the top end.

Maksim Rakhlenko: Yeah.

Maksim Rakhlenko: Got it. Okay.

Speaker Change: Got it Okay, and then a nice job on raising the full year guidance.

Speaker Change: Curious how does the team now view the EBITDA margin power of the business and then the opportunities to expand past the high end, which is now at 11, 9% for the year. So curious if you could just rank order.

Stephen B. Lazarus: And then, nice job on raising the full-year guidance. Curious, how does the team now view the EBITDA margin power of the business and then opportunities to expand past the high end, which is now at 11.9% for the year? So, curious if you could just rank order the line items, which have the greatest opportunity for further margin expansion from the current level.

Maksim Rakhlenko: The line items, which have the greatest opportunity for further margin expansion from current levels.

Stephen B. Lazarus: So as it relates to margin expansion, I think it always comes back to what we talk about, which is where our focus lies. And again, I don't want to sort of.

Maksim Rakhlenko: So as it relates to margin expansion I think it's it's always comes back to what we talk about which is where our focus lies and and again I don't want to sort of imply anything that that is misinterpreted.

Stephen B. Lazarus: Imply anything that is misinterpreted, right? But for us, the focus certainly remains on absolute dollar generation. We've talked at length about how generating revenue on board with a highly variable cost model, provided that there is marginal contribution, always makes sense, even to the extent that you need to do promotional or discounting activity, which, in fairness, to date, has not been required a lot. But as we move forward, perhaps if consumer spending weakens slightly, we would certainly entertain that.

Maksim Rakhlenko: For us the focus certainly remains on absolute dollar generation, we've talked at length about how generating revenue on board with a highly variable cost model.

Maksim Rakhlenko: Provided that it's marginally that theres marginal contribution always makes sense, even to the extent that you need to do promotional or just activity, which in finished two data has not been required a lot, but as we move forward pets as consumer spending weakened slightly we would certainly entertainment so.

Stephen B. Lazarus: Just as an overarching theme, the focus for us is not necessarily EBITDA margin in and of itself, because if it was, then we could simply drive that at the expense of absolute dollars, but we want to bring absolute cash into the business, and so we will always do that as long as it's on a marginal contribution basis. The biggest way that happens on board is through the demand and through the improvement in the marketing programs, but again, it's difficult, right?

Maksim Rakhlenko: Just as an overarching theme the focus for us is not necessarily EBITDA margin in and of itself because if it was then we could simply drop dead at the expense of absolute dollars, but we wouldn't bring absolute cash into the business and so we will always do that as long as it's on a marginal contribution basis.

Maksim Rakhlenko: The biggest way that happens on board is through the demand and through the improvements in the marketing programs, but again, it's difficult dropped we know that 85% of the of the more of the model onboard is variable in nature and so.

Stephen B. Lazarus: We know that 85% of the model on board is variable in nature, and so driving that percentage up is more challenging. There is some benefit that you get as revenue grows and the company continues to scale that we get the benefit of leveraging some of the fixed costs that we have at a corporate level, which obviously don't go up in lockstep versus what revenue goes up, but it does go up more on a step basis. For us, the focus is going to be on driving total revenue, and while we hope that the margin will continue to improve, absolute dollars are where our focus will remain.

Maksim Rakhlenko: Driving that percentage up is more challenging there is some benefit that you get extra revenue grows in the company continues to scale that we get the benefit of leveraging some of the fixed costs that we have at a corporate level, which obviously doesn't go up in lockstep versus what revenue goes up it does go up more on a step basis. So.

Maksim Rakhlenko: For us the focus is going to be on driving the total revenue and while we hope that the margin will continue to improve the absolute dollars as we all focus will remain.

Maksim Rakhlenko: Great, thanks a lot. That's super helpful. Best regards and good luck.

Speaker Change: Great. Thanks, a lot that's super helpful. Best regards and good luck in the second quarter.

Speaker Change: Thanks Nathan.

Operator: And our next question comes from Laura Champine from Loop Capital. Laura, please go ahead. Thanks for taking my question.

Speaker Change: And our next question comes from Laura Champine from Loop capital Laura. Please go ahead.

Laura Champine: Thanks for taking my question. I hear that the share repurchases are not incorporated in the outlook for 105 million diluted shares in Q2, but any color you can give, because you do have that cash on your balance sheet already, on the timing of potential share repurchases?

Laura Champine: Thanks for taking my question.

Laura Champine: I hear that the share repurchases are not incorporated in the outlook for 105 million diluted shares in Q2, but any color you can give because you do have that cash on your balance sheet already on the timing of potential share repurchases.

Stephen B. Lazarus: We want to be opportunistic, Laura, when there's weakness in the stock is when we will be most aggressive in terms of the buyback. And no, unfortunately, I don't think we would signal specific timing on when that would occur as the focus will be to utilize it on an opportunistic basis. If you're not understood, that's helpful.

Speaker Change: We wanted to be opportunistic Laura when it's a weakness in the stock is when we will be most aggressive in terms of the buybacks so and.

Laura Champine: No. Unfortunately, I don't think we would signal specific timing on when that would occur as the focus will be to utilize on an opportunistic basis.

Laura Champine: Understood. That's helpful. I don't want to read too much into a small thing, but your products segment did grow a little bit faster than services. Is there anything going on from a product innovation or a promotion perspective that's helping drive that line? So, Laura, as I mentioned...

Speaker Change: That's helpful.

Laura Champine: Don't want to read too much into a small thing, but your products segment did grow little bit faster than services is there anything going on from a product innovation or promotion perspective, that's helping drive that line.

Laura Champine: Okay.

Leonard I. Fluxman: So, Laura, as I mentioned before, I mean the simplification of our menu skews towards services, and the choice of those services tend to result in a higher sell-through of product, generally across face and body. I think with some of the new cryotherapy body services, facials, LED, etc., we're starting to see those results come through. And there is a very heightened focus on getting retail attachment improved over 2023. Even with the increased pricing for services, we saw some catch-up there, and so we continued to have and prioritize sell-through as a big focus of what we're doing at the same time as ensuring that we are providing the guests with a very luxurious and good service overall.

Laura Champine: So Laura as I mentioned before I mean, the simplification of our menu skews towards services and the choice of those services tend to result in a higher sell through of product generally across based on body I think with some of the new cryotherapy bodies.

Laura Champine: Services facial L E D et cetera, we're starting to see those results come through and there is a very heightened focus on getting retail attachment improved over 2023.

Laura Champine: Even with the increased pricing and services, we saw some catch up there and so we continue to have.

Laura Champine: And prioritize sell through is a big focus of what we're doing at the same time is ensuring that we are providing the guests with a very luxurious and good service overall.

Speaker Change: Understood. Thank you.

Speaker Change: Yep. Thank you.

Operator: Another question comes from Gregory Miller from Truist Security. Gregory, please proceed. Thank you. Good morning.

Laura Champine: Another question comes from Gregory Myler from Truest Securities Gregory. Please proceed.

Gregory Jay Miller: Thank you good morning.

Gregory Jay Miller: I thought to ask about the new banner announcement and your expectations with Arroyo in terms of the wellness spend from the guests, who I presume are largely from the Gulf region of the world. Any behavior of the kind of wellness spend habits that they may have on that ship. Thanks.

Gregory Jay Miller: I thought to ask about the new banner, our announcements and your expectations with the ROI in terms of the while the spend from the guests that I presume are largely from the Gulf region of the world.

Gregory Jay Miller: The behavior of the kind of wellness spend habits that they may have on that ship.

Leonard I. Fluxman: Mr. Gregory, I think it's a little early to tell how this plays out. I mean, it's a new cruise line. It's a new part of the world for us to operate in. Lillie has operational and its own logistical challenges because of culture, etc.

Speaker Change: Yeah, So Greg I think it's still early to tell how this plays out I mean, it's a new cruise line, it's a new part of the the world for us to operate in clearly.

Speaker Change: Lilly has operational.

Speaker Change: And its own logistical challenge, just because of culture et cetera.

Leonard I. Fluxman: But, you know, we are... We are positioned to do everything that we have discussed with the operators and, you know, we'll see. I mean, this is new territory. It's a new geography, new demographic that's focusing extensively, you know, in the Gulf, as you say. But I think we'll start to see how to adapt to that model. I mean, it's not like we haven't done work in the region before on land. So I think we're going to be fine and I think the cruise line hopefully will be successful.

Speaker Change: But you know we are.

Speaker Change: We are positioned to do everything that we have discussed with the operators and you know we'll see I mean this is this is new territory, it's a new geography, new demographic. That's focusing extensively you know in in in the Gulf as you say, but I think we all will start to.

Speaker Change: She had to adapt to that model I mean, it's not like we haven't done work in the region before on land. So I think we're gonna be fine and I think the cruise line hopefully we'll be successful.

Gregory Jay Miller: Thanks. And then as a follow-up, Norwegian, as you know, put out some new ship orders, and over time, some of these ships will be larger in terms of passenger capacity. I'm curious, in an early stage, do you have any sense of the implications for you all in terms of potentially the size of your wellness facility on the new vessels, increase in staff, potential changes to the thermal suite? If there's anything that you could share at this time, that would be interesting.

Speaker Change: Thanks, and then as a follow up.

Speaker Change: Norwegian as you know I'll put out some new ship orders and over time. Some of these ships will be larger in terms of passenger capacity.

Speaker Change: I'm curious at an early stage do you have any sense of the implications for you all in terms of potentially the size of your wellness facility on the new vessels increase in staff.

Speaker Change: Potential changes to the thermal sweet if theres anything that you could share at this time that'd be interesting to hear.

Leonard I. Fluxman: Whenever there are large vessels announced like the ones they have, we're first in line to ask for more space, particularly in the MedSpa area, more staff. Obviously, those are always at a premium because everybody else wants to do the same thing, which is offering some amenity or service on board. So, yeah, we talk to them as early as we can and try and switch it up where needed. And to the extent that we can increase the offering and footprint in MedSpa and wellness, we'll continue to push very hard on those new ships with bigger passenger counts.

Speaker Change: Whenever there are large vessels announced like the ones. They have crushed in line to us for more space, particularly in the med Spa area more staff. Obviously those are always at a premium because everybody else wants to do the same thing that's that's offering some amenity of service on board. So yes.

Speaker Change: Where we talk to them as early as we can and try and switch it up where needed and to the extent that we can increase the offering and footprint in med Spa and wellness will continue to push very hard on those new ships, you know with bigger passenger counts, but having said that I mean NCL spas.

Leonard I. Fluxman: But having said that, I mean, NCL's spas are beautiful. You know, they're cutting edge, and I would imagine... Part of our discussions and negotiations with them on layout should be positive towards getting us, what we need with the MedSpa, for instance. I agree having seen

Speaker Change: Beautiful.

Speaker Change: You know they are cutting edge and I would imagine.

Speaker Change: Part of our discussions and negotiations with them on layouts.

Speaker Change: Should be positive towards getting us.

Speaker Change: What we need with the med spa offering.

Leonard I. Fluxman: I agree, having seen some of these ships in person. Thanks very much.

Speaker Change: I agree having seen some of these ships in person thanks very much.

Speaker Change: Youre welcome.

Speaker Change: Okay.

Operator: And our next question comes from Assia Georgieva from Infinity Research. Assia, please go ahead.

Speaker Change: And our next question comes from Jeff <unk> from Infiniti Research. Please go ahead.

Assia Plamenova Georgieva: Leonard and Stephen, congratulations on a great quarter and a great outlook for the rest of the year. Again, March 19th is thankfully over.

Jeff: And then I can Stephen congratulations on a great quarter and a great outlook for the rest of the year again March 19th Thankfully is over.

Jeff: So I'm just looking at both from an operational point of view, obviously things are going very well and we are going to be well. We are seeing growing occupancies were not still quite at 2019 levels across all banners.

Leonard I. Fluxman: So just looking at both from an operational point of view, obviously things are going very well, and we're going to be, well we are seeing growing occupancy rates, but we're not still quite at 2019 levels across all banners. So that, to me, seems an opportunity. Pre-bookings are growing, and especially, as you mentioned on Norwegian, you're not quite yet on all ships. So Q3 would provide another opportunity. With a great wave season, so a third point I guess I'm trying to make, we have higher quality passengers.

Jeff: So that to me seems an opportunity.

Jeff: Pre bookings growing and especially as you mentioned on Norwegian.

Jeff: Not quite yet on all ships, so Q3 would provide the other opportunity.

Jeff: We did great wave season, so the third point I guess I'm trying to make we have higher quality passengers yet one flight offset might be the fact that for one of the banners Q late Q3 and into Q4 ticket pricing is coming down therefore quality.

Leonard I. Fluxman: Yet one slight offset might be the fact that for one of the banners, late Q3 and into Q4, ticket pricing is coming down, and therefore the quality of passengers may be coming down. How would you balance this on the operational part?

Jeff: Passenger may be coming down how would you balance this the operational part and secondly in terms of equity structure balance sheet buybacks and a potential dividend.

Leonard I. Fluxman: And secondly, in terms of equity structure, balance sheet, buybacks and the potential dividend, you're in better shape seems to me than you have been in the last five years. So really glad that the board authorized the 50 million opportunistic buyback and today might not be the date for an opportunistic buyback given how well the stock has reacted. Is the 50 million kind of time limited or is this again up to your discretion in terms of what the markets are doing? Thank you.

Jeff: You are in better shape seems to me than you have been in the last five years, so really glad that the board authorized a 50 million opportunistic buyback and today might not be the date for an opportunistic buyback given how well the smell kids reacted.

Jeff: Is the 15 million a kind of time limited or is this again up to you had this question in terms of what the markets are doing thank you.

Jeff: Okay.

Stephen B. Lazarus: We're going to answer the first part. Stephen can answer the second part for you, Assia, but certainly, load factors continue to improve across all the banners. Some may not be quite stable in 2019, but overall, load factors are much improved versus the first quarter of 2023. And obviously, we starve according to that improvement.

Speaker Change: I'm going to answer the first part Steven can answer the second part for us here, but certainly.

Speaker Change: Load factors.

Speaker Change: Continue to improve across all the banners.

Speaker Change: Some may not be quite to fill the 2019, but overall load factors are much improved versus the first quarter of 2023, and obviously, we stopped according to that that that improvement.

Leonard I. Fluxman: So I'm not too worried about that, and to the extent that some ticket pricing looks a little weaker in the third quarter. You know, the quality of passengers who buy that cheaper ticket is not necessarily the same as the quality of passengers coming into the spa. So I'm not really concerned, and to the extent that we do need to modify anything, which I'm not sure we need to, as long as we continue to penetrate around that 11, 11, and a half percent of the best passengers which we target, it should not materially impact us, if anything at all. I'll turn the next question over to Stephen.

Steven: I'm not too worried about that and to the extent that.

Jeff: Some ticket pricing looks a little.

Jeff: In the third quarter.

Jeff: You know the quality of passenger.

Jeff: Who is buying the cheapest ticket is not necessarily the St passenger coming into the spa.

Jeff: I'm, not really concerned and to the extent that we do need to modify anything which.

Jeff: Not sure we need to as long as we continue to penetrate roundabout that 11 11, 5% of the best passengers, which we target it should not materially impact us if anything at all.

Jeff: So I'll turn the next question over to Steven.

Stephen B. Lazarus: Yeah, thanks Leonard. The short answer to your question is no, there is no time limit in terms of when we can utilize that authorization, so again it will be opportunistic, and we will buy on weakness.

Steven: Yes excellent at the.

Steven: The I'd say the short answer to your question is no. There is no time limit in terms of when we can utilize that authorization. So again, it will be opportunistic and we will buy on weakness.

Stephen B. Lazarus: Again, today doesn't seem to be the day. Probably not today, exactly.

Steven: Again today it doesn't seem to be the date to do so probably not today [laughter] I'm very glad to see the lack of opportunity today.

Assia Plamenova Georgieva: Probably not today, exactly. But I'm very glad to see the lack of a...

Stephen B. Lazarus: Great job. One last question, and I'm not sure that you can answer this in such a public forum. The RCL renewal, would that generally be within a standard term, meaning five years or so? Yeah, it was a multi-year agreement.

Speaker Change: Great job one left.

Speaker Change: Question and I'm not sure that you can answer this.

Speaker Change: In such a public forum.

Speaker Change: D C a renewal with them.

Speaker Change: I think people didn't standard time, meaning five years or so.

Speaker Change: Yeah.

Speaker Change: It's a multiyear agreement.

Leonard I. Fluxman: It continues beyond five years, Assia, so we're in really good shape with that. So long runway on both Celebrity and Royal, which we're extremely pleased and honored to have been awarded that contract.

Speaker Change: Yeah go ahead.

Speaker Change: Yeah. It continues to be one five years or so.

Speaker Change: We're in really good shape with that's a long runway on but celebrity and Royal which we're extremely pleased and honored to have been awarded that contract.

Assia Plamenova Georgieva: Perfect. Great. Thank you so much. And again, great job and looking forward to the next call. All right.

Speaker Change: Perfect great. Thank you so much and again, great job and are looking forward to the next call.

Leonard I. Fluxman: All right, thanks, Assia.

Speaker Change: Alright, Thanks Assia.

Operator: And this concludes our question and answer session. I would like to turn the conference back over to Leonard.

Speaker Change: And this concludes our question and answer session I would like to turn the conference back over to Leonard flux.

Leonard I. Fluxman: Thank you, Leonard Fluxman, for any closing remarks. All right, thank you and thank everybody for joining us today. I want to again congratulate my entire leadership team and the entire team across.

Speaker Change: Flex Smith for any closing remarks.

Leonard I. Fluxman: All right. Thank you. And thanks, everybody, for joining us today. I want to again congratulate my entire leadership team and the team across all of our ships on land, in training, all of our academies. An incredible quarter. Continue to execute fantastically. Thank you so much. And we look forward to speaking with all of you when we report second quarter earning results.

Leonard I. Fluxman: Alright, Thank you and thanks, everybody for joining us today I want to again congratulate my entire leadership team and the team across all of our ships on land and training all of our academies and incredible quota continue to execute fantastically. Thank you. So much and we look forward to speaking with all of you in.

Leonard I. Fluxman: We report second quarter, earning results.

Leonard I. Fluxman: Okay.

Leonard I. Fluxman: Okay.

Operator: You may now disconnect. Thank you.

Speaker Change: You may now disconnect. Thank you.