Q4 2024 Norwegian Cruise Line Holdings Ltd Earnings Call
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Maria: Good morning and welcome to the Norwegian Cruise Line Holdings fourth quarter and full year 2024 earnings conference call. My name is Maria and I will be your operator.
At this time, all participants are in a listen-only mode.
Maria: Later, we will conduct a question and answer session and instructions for the session will follow at that time.
Maria: If anyone should require assistance during the conference, please press star then zero on your touchtone phone. As a reminder to all participants, this conference call is being recorded. I would now like to turn the conference over to your host, Sarah Inman. Ms. Inman, please proceed.
Sarah Inman: Thank you, Maria. And good morning, everyone. Thank you for joining us on our fourth quarter and full year 2024 earnings and business update call. I'm joined today by Harry Sommer, President and CEO of Norwegian Cruise Line Holdings, and Mark Kempa, Executive Vice President and Chief Financial Officer.
Sarah Inman: As a reminder, this conference call is being simultaneously webcasted on the company's Investor Relations website. We will also make reference to a slide presentation during this call, which can be found on our website. Both the conference call and presentation will be available for a replay for 30 days following today's call.
Sarah Inman: Before we begin, I would like to cover a few items.
Sarah Inman: Our press release with fourth quarter and full year 2024 results was issued this morning and is available on our website.
Sarah Inman: Our comments may also reference non-GAAP financial measures. A reconciliation to the Most Directly Comparable GAAP Financial Measure and other associated disclosures are contained in our earnings release and presentation. With that, I'd like to turn the call over to Harry Sommer. Harry?
Harry Sommer: Thank you, Sarah, and good morning, everyone. I'm pleased to be here today to share our exceptional fourth quarter and full year 2024 results.
Harry Sommer: I am thrilled with the enhancement to our product offering and guest experiences, and I'm particularly excited about the groundbreaking innovations to our ships debuting in 2025, Norwegian Aqua and Oceana's Allura.
Harry Sommer: Our strong execution throughout the year has led to outstanding financial performance with record results on the top line for revenue and net yield which, once again beating guidance, when combined with our disciplined cost control initiative,
Harry Sommer: drove our margins up almost 500 basis points and resulted in record adjusted EBITDA.
Harry Sommer: These results demonstrate that the initiatives supporting our Charting the Course strategy are paying off and position us firmly on track to achieve the 2026 financial and sustainability targets that we introduced this past May.
Harry Sommer: Our Charting the Course strategy, with its vision to have our guests' education better and experience more, guided our transformational achievements in 2024.
Harry Sommer: Under the strategic framework built on our four pillars of people, product, growth platform, and performance, we delivered on significant initiatives across our three brands, set ambitious long-term financial targets, and announced a historic fleet expansion program.
Harry Sommer: I'll begin my remarks today by walking through key highlights and progress across each of our four pillars and our sustainability strategy, which underpins charting the course.
Harry Sommer: Lastly, I will comment on the demand environment and how our offerings continue to drive record guest satisfaction scores.
Harry Sommer: All while maintaining disciplined cost management, the balancing of return of investment and return on experience, or ROI and ROX as we like to call it. I'll then turn the call over to Mark, who will provide more detailed commentary on our results and discuss our outlook for 2025.
Mark Kempa: Starting on slide four, I want to emphasize how our cultural transformation has been a driving force behind our success in 2024.
Mark Kempa: The introduction of our value anchors set the foundation for the behaviors we prioritize as an organization. This shift in mindset has enabled us to achieve remarkable results across all aspects of our business, both shoreside and shipboard.
Mark Kempa: Our team members have embraced these changes with enthusiasm, and the successful implementation of our charting the course strategy demonstrates that when we align our culture with our business objectives, we can create meaningful change.
Mark Kempa: As I look ahead to 2025, I am confident that the cultural foundation we have built will continue to accelerate our transformational journey.
Mark Kempa: Moving to slide five, I'm particularly proud of the significant brand enhancements we achieved in 2024.
Mark Kempa: For example, we successfully rolled out a repositioning campaign for our largest brand, Norwegian Cruise Lines Experience More at Sea.
Mark Kempa: This new brand position underscores NCL's commitment to providing guests with more. More variety. More elevated offering. More of what they love and more value while vacationing with Norwegian Cruise Line.
A prime example is the now-completed...
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Mark Kempa: We've also expanded our itineraries with additional ports of call across the fleet, as well as enhanced dining and entertainment options, as well as new and exciting onboard activities and shore excursion offerings.
Speaker Change: During the year, we form strategic partnerships that enhance our brands, including Norwegian's partnership with the National Hockey League and Region's partnership with Aston Martin Aramco Formula One team.
Speaker Change: These initiatives, among a myriad of other enhancements during 2024, underscore our commitment to aligning product offerings with what our guests value.
Speaker Change: Flipping to slide 7, I want to highlight our significant achievements in our long-term growth platform pillar during 2024.
Speaker Change: Historically, measured capacity growth has driven outsized revenue and earnings growth.
Speaker Change: And with our most comprehensive new-build order in our history announced last April, on top of the existing orders in place, we are set up to continue creating real long-term value for both our customers and our other stakeholders.
Speaker Change: With a total of 13 ships on order, we are set to significantly enhance our offerings and guest experiences further across all three brands, allowing us to significantly leverage our scale and strengthen our commitment to innovation and outstanding guest experiences while continuing to maintain measured and disciplined capacity growth.
Speaker Change: Allowing us to continue to drive outsized revenue and earnings growth.
Speaker Change: Looking to 2025, we are excited to introduce two state-of-the-art vessels to our world-class fleet. Norwegian Aqua, debuting in April 2025, represents an evolution as the inaugural vessel of our next-generation Prima-Plus class, and will be 10% larger than the first Prima-Class ship and have improved fuel efficiency.
Speaker Change: I can't wait to sail on Aqua in April and experience the groundbreaking attractions, especially the innovative Aqua Slide Coaster, the first-ever hybrid attraction that combines the thrills of a roller coaster with the rush of a water slide, along with other amenities such as a larger pool deck, reimagined dining experiences, and more.
Speaker Change: New entertainment including our immersive Prince tribute show, Revolution, a celebration of Prince
Speaker Change: Enhanced spa services, a three-bedroom duplex suite, and brand new activities in our innovative game zone and a glow board, which will set new standards for guest entertainment at sea. She's truly breathtaking.
Speaker Change: Additionally, we are eagerly anticipating the debut of Oceana Cruises Allura in July. This magnificent vessel exemplifies our commitment to upscale cruising, featuring meticulously crafted designer suites.
Speaker Change: Sophisticated lounges, and of course, world-class dining venues that Oceana is known for, including the introduction, the reintroduction of our signature French restaurant, Chops, which is a crowd favorite with our guests.
Speaker Change: Finally, let me highlight some significant investments in our private island strategy, particularly at Great Serb Cay. We are making a critical investment in a new two-ship pier scheduled to open in late 2025.
Speaker Change: This strategic enhancement at one of our highest rated ports will be a game changer for our guest experience.
Speaker Change: With the infrastructure upgrade, we anticipate welcoming over 1 million guests to the island in 2026, a significant increase from the approximately 400,000 guests that visited in 2024 and supported by a shift to a more gripping deployment beginning in late 2025.
Speaker Change: Looking ahead, this positions us well to make targeted investments to further enhance both the guest experience and financial returns from this premier destination. We are committed to establishing the island as a cornerstone of our Caribbean offering, ensuring an exceptional and unforgettable experience for our guests.
Let me now turn to our fourth pillar, exceptional performance.
Speaker Change: As shown on slide 7, our record-setting results in 2024 stem from four key factors.
Speaker Change: Delivering outstanding vacation experiences, execution from shoreside and shipboard teams, strategic initiative advancements, and discipline cost management.
Speaker Change: This execution, combined with strong market demand throughout the year, sets us up well to achieve our charting-to-force target.
Speaker Change: I am proud to report that we generated record revenue, record net yield growth, and record adjusted EBITDA in 2024, significantly surpassing even our own initial and repeatedly upwardly revised projections throughout the year.
Mark Kempa: While Mark will provide more detailed commentary shortly, I would like to highlight some of our financial achievements for the year. Net yield increased a record 10% in 2024, surpassing our initial February guidance by 450 basis points.
Mark Kempa: This outstanding overperformance reflects strength across all brands and itineraries complemented by strong on-board status.
Mark Kempa: These results not only validate our strong execution and positioning, but also underscore the strong consumer demand for Cruise.
Mark Kempa: While 2024's exceptional performance sets a historic benchmark, we accept further growth to align with our growth algorithm of low to mid-digit yield growth.
Mark Kempa: Our performance is particularly noteworthy as we achieved an approximately 900 basis points spread between our unit cost, including the Dry Dock Impact, and our net yield in 2024.
Mark Kempa: And these results are just the beginning. The momentum from our cost containment initiatives, from increased efficiencies, elimination of waste, and more strategic purchasing.
Mark Kempa: 2024's impressive results demonstrate that our strategic initiative and algorithm are delivering as planned. Our adjusted operational EBITDA margin, expanded by nearly 500 basis points,
to 35 and a half percent.
Mark Kempa: While our Adjusted RYC improved 320 basis points to just under 11%.
Mark Kempa: Notably, our net leverage ratio decreased two full times to 5.3 times, making significant progress on strengthening our balance sheet. These metrics clearly show that we are on track to achieve our 2026 charting the course target and validates both our strategic direction and execution capabilities.
Mark Kempa: Moving to slide 8, sustainability underpins our entire corporate strategy and our Sail and Sustain program continues to drive positive environmental and social impact through its five key pillars, reducing environmental impact, sailing safely, strengthening communities, empowering people, and operating with integrity.
Mark Kempa: In 2024, we received notable recognition for our efforts, including the ESG Leader Gold Award and an A rating from MSCI.
Mark Kempa: Operationally, we've made significant progress with nearly half of our fleet now tested with biodiesel blends, targeting 60% by the end of this year.
Mark Kempa: We're also continuing to invest in shore power capabilities, with almost 60% of our fleet equipped to connect when appropriate shore-side infrastructure is available.
Mark Kempa: We were the first to connect in the Port of Seattle at Pier 66 during the 2024 cruise season and partnered with Port Miami to launch the first major shore power installation on the U.S. East Coast.
Mark Kempa: Switching to slide 9, I'm pleased to report continued exceptional customer demand across our portfolio through the fourth quarter, which drove net yield up 9%. Throughout the year, our strategic execution in this robust demand environment delivered outstanding results.
Mark Kempa: Looking ahead, the momentum continues into 2025 as we remain at the optimal book position for the next 12 months with particularly impressive demand for summer sailings in Europe and Alaska.
Mark Kempa: Let me begin with our fourth quarter results on slide 10.
Mark Kempa: Once again, our fourth quarter results came in ahead of guidance, with net yield growing 9%.
Mark Kempa: The 210-basis point outperformance was driven by strength across brands and geographies as well as strong on-board spend.
Mark Kempa: Adjusted net cruise cost XFUEL was slightly above guidance, ending the quarter at $157, mainly driven by increased variable compensation due to our strong performance.
Mark Kempa: Excluding this and the $6 dry dock impact, adjusted net cruise cost X fuel would have decreased year-over-year, demonstrating the benefits of our transformation initiatives.
Mark Kempa: The combination of healthy top-line and strong cost control drove adjusted EBITDA of $468 million, exceeding our guidance.
Mark Kempa: Finally, adjusted net income for the quarter was $125 million or adjusted EPS of $0.26, which included an approximately $70 million or $0.15 benefit due to foreign exchange rates.
Mark Kempa: A reminder that as foreign exchange rates move, we revalue both our debt and advance ticket sales that are denominated in foreign currencies.
Mark Kempa: While this appears as a benefit in the fourth quarter net income, the impact is a headwind in future periods.
Mark Kempa: When these advanced ticket sales are realized, ultimately through the P&L. Now moving to our record full year 2024 results on slide 11. Let me start with our top line performance.
Mark Kempa: We delivered exceptional results this year, with net yield increasing 10% compared to prior year.
Mark Kempa: This represents the highest net yield growth in our company's history.
Mark Kempa: At the same time, our disciplined cost management delivered strong results, further solidifying the commitments that we made at the beginning of last year.
Mark Kempa: Our adjusted net cruise cost X fuel per capacity day only increased $1 to $160 in 2024, when excluding the dry dock impact during the year.
Mark Kempa: This result was achieved despite higher variable compensation due to our strong performance.
Mark Kempa: Excluding this, our adjusted net cruise cost X fuel would have decreased year-over-year.
Mark Kempa: I am extremely proud of the significant progress we have made to streamline our cost base during the year, demonstrating our focus and commitment to our margin enhancement initiatives.
Mark Kempa: while still delivering an exceptional guest experience and we expect this to continue in 2025 and beyond
Mark Kempa: As a result of the strong net yield growth and cost savings initiatives during the year, our adjusted EBITDA came in at just over $2.45 billion, while adjusted EPS came in at $1.82, which includes an approximate $0.10 benefit from FX.
Mark Kempa: And our operating cash flow came in at just over $2 billion, driving our leverage down two full turns to 5.3 times.
Mark Kempa: Our exceptional 2020 performance demonstrates our successful operational execution while capitalizing on strong demand in the market, which positions us well along our path to achieve our Charting the Course 2026 financial targets.
Mark Kempa: As we look ahead to 2025, we are committed to maintaining this momentum with continued focus and drive.
Mark Kempa: Moving to slide 12, let me walk you through our 2025 outlook, starting with the first quarter.
Mark Kempa: In the quarter, we are projecting pricing growth of 3.6% and net yield growth of 3.5%.
of 0.5%.
Mark Kempa: The underlying drivers of this growth rate are occupancy is expected to be down 3% year over year, coming in at just over 101%.
Mark Kempa: As we discussed in our prior earnings call, we have two large ships, Norwegian Breakaway and Norwegian Bliss, that are repositioning from the Caribbean to Europe for dry docks during the quarter.
Mark Kempa: As a result, we have a 71% increase in repositioning capacity days during the quarter.
Mark Kempa: These sailings naturally have a lower load factor than sailings in those vessels' typical deployment in the Caribbean.
Turning to pricing, we face a challenging year-over-year comparison.
Mark Kempa: In the first quarter of 2024, we delivered exceptional net per diem growth of 13%.
Mark Kempa: driving a 16% net yield growth. Despite this challenging comparison, we expect pricing to increase 3.6% in the first quarter of 2025.
Mark Kempa: This growth is particularly notable given that along with lower load factors, repositioning sailings typically generate lower prices as compared to typical itineraries.
Mark Kempa: And finally, looking to the last three quarters of 2025, where deployments are more normalized, we expect our net yield to grow at a healthy three and a half percent.
Mark Kempa: Driven by strong 4.6% pricing growth on the back of 7% capacity growth.
Mark Kempa: Excluding this, adjusted net cruise cost X fuel is expected to be up 2.1%, which is below inflation and higher than our cost growth for the remainder of the year due to costs associated with the delivery of Norwegian Aqua.
Mark Kempa: Our unit cost growth will normalize going forward as we anticipate no meaningful dry dock impacts on our full year adjusted net cruise cost comparisons.
Mark Kempa: We expect Adjusted EBITDA to come in at $435 million and Adjusted EPS at $0.08.
Mark Kempa: Looking now at the full year, net yield growth is expected to be approximately 3%.
Mark Kempa: This growth is mainly driven by strong performance from our largest brand with more modest growth rates at our other brands that are absorbing outsized capacity growth.
Mark Kempa: The recent appointment of our Chief Luxury Officer positions us well to enhance yields and margins across these brands going forward.
Mark Kempa: Driving more into the cadence of net yield throughout the year, we expect a temporary moderation in growth in the first quarter due to factors that I previously mentioned.
Mark Kempa: The subsequent three quarters, which better reflect our core business operations, are projected to grow at approximately 3.5 percent, primarily driven by strong net per diem growth of approximately 4.6 percent, which is in line with our long-term algorithm.
Mark Kempa: Turning to unit costs, building on our strong cost control performance in 2024, we intend to continue this momentum into 2025 and are targeting our adjusted net cruise cost X fuel to grow by one and a quarter percent.
well below anticipated inflation rates.
Mark Kempa: This low unit cost growth comes after a year of only 1% cost growth and is a testament to our culture change and disciplined execution.
Mark Kempa: This success is driven by the Transformation Office's ongoing strategic initiatives, which continue to identify and implement sustainable efficiencies across our organization, but that do not impact the guest experience.
These efforts are not just short-term fixes.
Mark Kempa: As I previously mentioned, the first quarter is the only period where we face year-over-year comparison impacts from dry docks and a related decline in capacity days, as well as the delivery of aqua.
Mark Kempa: For the remainder of 2025, we expect to have essentially flat unit costs, reflecting our continued focus on efficiency and strong cost discipline.
Mark Kempa: The spread between our net yield and unit costs for the last three quarters of the year will reach approximately 300 basis points.
Mark Kempa: These quarters better represent our core business, and this performance significantly exceeds our long-term algorithm while demonstrating our commitment to our Charting the Course targets.
Mark Kempa: As a result of the cost savings initiatives and strong net yield growth, we are expecting full-year adjusted EBITDA of $2.72 billion, which is net of an approximately $70 million headwind from both FX and fuel.
Adjusted EPS for the year is expected to be $2.05.
Mark Kempa: Setting us up well to achieve our 2026 Charting the Course Targets.
Mark Kempa: Similar to Adjusted EBITDA, Adjusted EPS also includes an approximately $70 million or $0.15 headwind from both FX and fuel.
Mark Kempa: The combination of a more efficient cost structure and strong top-line growth drove significant margin enhancements.
2024
Mark Kempa: with adjusted operational EBITDA margins, improving almost 500 basis points to 35.5%.
Mark Kempa: For 2025, we expect our margins will continue to strengthen, reaching approximately 37 percent.
Mark Kempa: These improvements position us well to achieve our 2026 Charting the Course Margin Target of approximately 39%.
Mark Kempa: On slide 14, I discuss our Balance Sheet and Debt Maturity Profile.
Mark Kempa: In 2024, we made important strides in liability management and strengthening the balance sheet.
Mark Kempa: We began in March, refinancing our backstop commitment from secured to unsecured and repaid $250 million of 9 ¾ senior secure notes due to 2028, our highest rate debt at the time.
Mark Kempa: We continued in September with the refinancing of 315 million of notes due December 2024 with six and a quarter unsecured notes due 2030.
Mark Kempa: with the remaining balance of the $250 million paid at maturity.
Mark Kempa: More recently, in January of this year, we successfully issued $1.8 billion of six-and-three-quarter unsecured notes through 2032, which were used to replace $600 million of secured debt with unsecured debt.
Mark Kempa: and $1.2 billion to refinance a portion of our 5-7-8 notes due 2026.
Mark Kempa: We also upsized our revolving credit facility to $1.7 billion and extended its tenor with improved terms.
Mark Kempa: Through these strategic transactions, we have optimized our collateral utilization, further strengthening our capital structure, while supporting our growth trajectory.
Mark Kempa: The rating agencies are also taking notice of our progress, with both S&Ps and Moody's recently upgrading our credit ratings with a positive outlook.
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Mark Kempa: Moving to leverage on slide 15, the company has been delivering on its track record of net leverage reduction.
Mark Kempa: During 2024, we reduced our net leverage two full turns, ending the year at 5.3 times.
Mark Kempa: We are confident we can continue making meaningful progress on this front going forward, driven by our organic cash generation and scheduled amortization payments.
Mark Kempa: Looking to 2025, we expect to bring down net leverage to approximately five times or better.
Mark Kempa: Ending the year at approximately five times, or better, demonstrates the company remains on track to achieve our 2026 target of the mid-fours.
Mark Kempa: And I am confident that our continued focus on deleveraging will further strengthen our balance sheet and create value for our shareholders in the many years to come.
Harry Sommer: With that, I'll turn it back to Harry for closing remarks. Thank you, Mark. Looking at slide 16, I want to take a moment to once again recognize the significant progress that we made during 2024 on our key charting the course financial targets.
Adjusted Operational Limit of Margin Improved Approximately 500 Basis Points
Speaker Change: Adjusted EPS grew by 161% to $1.82. Net leverage declined two full terms and our adjusted RYC ended up 320 basis points at just about 11%.
Speaker Change: These exceptional results were made possible through the dedication of over 40,000 employees who worked tirelessly to provide our guests with memorable vacations at great value. It is truly an honor to work side-by-side with this outstanding team and witness what we can accomplish together.
Speaker Change: At our Investor Day back in May, we set our 2026 targets based on a straightforward, executable plan backed by an experienced management team, outstanding staff, a clear strategy, and a
Speaker Change: and a performance-driven culture designed to drive meaningful results in shareholder value and an extraordinary guest experience.
Speaker Change: Given our strong progress towards these targets in 2024 and our expected continued momentum in 2025, I am more confident than ever that our strategy is working and our execution is delivering results.
Speaker Change: I look forward to what 2025 will bring as we continue charting our course towards our bright future. With that, we will now move on to the question and answer portion of the call, and I will hand the line back to our operator.
Speaker Change: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.
Speaker Change: We ask that analysts limit themselves to one question and a follow-up so that others may have an opportunity to ask questions.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please, while we poll for questions.
Speaker Change: Our first question comes from Lizzy Dove with Goldman Sachs. Please proceed with your question.
Lizzy Dove: Hi there, thanks for taking the question. My first question is on Bucking's color. You did give some color, which I appreciated, but wondering if we could go a bit deeper and just talk about, you know, the different brands. You made a comment about, you know, maybe the biggest brand performing the best and some of the luxury brands may be lagging a little bit with the capacity growth. Curious of just if you can expand on that and then anything about the different geographies and, you know, cadence of 2Q through 4Q.
Lizzy Dove: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Good morning, Lizzie, and thank you for the question. Listen, I think we're reasonably happy with our booking pace that we've been seeing both in Q4 and for the first two months of the year. I think we referenced in our prepared remarks that we're particularly happy with Europe and Alaska, which really have
Speaker Change: Outperformed for us for the summer period for this year. I think by brand again in our prepared remarks We reference the fact that that that our luxury brands are just a little slower than we would have liked and in Exchange the NCL brand has been performing a little bit better, but but nothing major It's not a a huge shift from one to another I think bookings are where we need them to be and I'll stay steady as she goes
Speaker Change: Perfect, that's helpful. And then obviously the 2024 results ended up being
Speaker Change: overachievement of those cost savings or putting it a different way, you know, you've talked about the 300 million in the past, between, you know, back then and 2026, like, is there kind of more upside to that? Or how should we kind of be thinking about that?
Speaker Change: Well, yes to many questions, so I guess yes isn't a good answer. Let me be a little bit more specific. The cost savings have come in a little bit quicker than we initially expected, which is obviously a good thing. You know, we want to start out with a reasonable and measured plan, and as the year progressed, I give kudos to the entire management and staff for taking this cultural change seriously, as I knew they would, and overachieving our initial expectations.
Speaker Change: We did accelerate or overachieve on some of that in year one.
Speaker Change: That said, we continue to harvest and we continue to see opportunities.
in both 25 and 26.
Speaker Change: And I think that's really demonstrated in the fact that when you look at our net cruise cost guidance, XFUEL.
Speaker Change: We're guiding one and a quarter points, so to put that in context.
If you think about where inflation is...
generally around three to four percent.
Speaker Change: We are actually guiding a couple points below that. So we feel good about where we are. As I say, every quarter we gain more and more confidence around that. And everything we're doing is really streamlining and gaining more efficiencies, all on the premise without impacting the guest experience.
You know, I can't emphasize that point enough.
Mark made about guest experiences of extraordinary importance.
Speaker Change: I reference in my prepared remarks that we have record guest satisfaction scores at each of our three brands, and that's something that we diligently follow on a weekly voyage by voyage basis to make sure we stay on top of this. This starts with guests, it doesn't start with financials.
Speaker Change: This starts with guests, and if we can get the product right and happy guests, the financials follow, which is our 2024 results are testament to.
Awesome. Thank you.
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Our next question comes from Brent Montour with Barclays. Please proceed with your question.
Speaker Change: 3.6 and 4.6 respectively, which is which are healthy rates. But I'm but I'm curious why why you guys are penciling in an occupancy loss X the first quarter looks like one point.
Speaker Change: in your guide, 105 verse 104 for 2Q through 4Q for 25. Just curious if there's a mixed issue or if that's an opportunity for you guys.
Speaker Change: I would say in Q1, you know, we spoke to the issues with dry dock and repositioning cruises. So I hope that's self-explanatory, what happened with the occupancy rates in that. Obviously, on the repositioning cruises to and from the dry dock, transatlantic cruises in January and February tend not to...
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Unknown Executive,
Speaker Change: I think it was 400,000 guests to a million guests from prior year to 26.
Speaker Change: In 25, there's actually a slight shift the other way where our Asia, Africa, and Pacific itineraries, and I think we include this as one of the slides in our presentation, is actually up 20% from 9% to 11% of our total deployment.
Speaker Change: And we've also employed a larger ship on our longer Alaska run. The Norwegian Joy is now doing our nine, ten-night Alaska runs, which also has a bit less of a family mix because they're longer in length. So I think those two changes in mix account for
Speaker Change: The entirety of the small change in occupancy that you see.
Speaker Change: That's super helpful. Thank you for that. And then just to follow up, you know, Harry, it was good to hear that you guys are seeing strong demand, particularly from US into Europe. Maybe you could just double click on that. I mean, obviously, you know, you some of that easier comps, obviously, last year, you had, there was some geopolitical events in late 23, that affected 24. But also just, you know, pre post election, if you're seeing, you know, if you saw any sort of change in booking
Speaker Change: Unknown Executive, Mark Kempa, Unknown Executive, Mark Kempa, Unknown Executive, Mark Kempa,
Speaker Change: So, yeah, three-part follow-up question there. Let me see if I can cover them all. Yeah, I wouldn't say that we had particularly soft coms for last year. I think last year, you know, where we ended up with a 10% yield growth reflected good performance across all geographies. I don't think you can get to a 10% yield growth if there's really softness in any itinerary. So the fact that Europe is doing well for this year, I think, is...
Speaker Change: Just a reflection of, you know, a great customer product, you know, good marketing.
Speaker Change: Good acceptance for the experiences that we offer, which we're absolutely happy to see in terms of, you know, behavior pre and post election, you know, the week of election was a challenging week as, as it is every four years, but that's, you know,
Speaker Change: One out of 200 weeks, so we don't necessarily worry about that, but I think since then we've seen normal patterns. Nothing really extraordinary, positive or negative since the election has occurred.
Perfect. Thanks, everyone.
Yes, I've answered the question. Sorry, move on.
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Our next question comes from Steve Wyszynski with Steeple. Please proceed with your question.
Hey guys, good morning. Congratulations on a strong fourth quarter.
Speaker Change: Harry or Mark, if we think about the guidance for the year, if we think about the 3.5% yield growth that you're...
Speaker Change: kind of expecting there in the second quarter through the fourth quarter. That's probably actually a little stronger than we were kind of looking for. And look, you gave a lot of commentary around demand for Alaska, Europe. So that's probably
Part of that
Speaker Change: But just maybe help us understand, you know, maybe how you're thinking about the on board side of things as we think about, you know, kind of the middle to the latter part of the year just seems like I guess what I'm trying to figure out here is, you know, is there a potential upside to that three and a half percent number based on maybe a little bit higher load factors plus on board?
So, um...
Speaker Change: The guidance we provided are numbers that we feel confident with that we can deliver. So I wouldn't necessarily imply that there's upsides that we haven't yet factored in. It's a number that we believe in. We think a 3.5% yield growth on a 0.5% cost growth in the back three quarters of the year represents a very strong performance, especially coming off of the extraordinary performance last year. So I'm not here to give new guidance 10 minutes after we just gave original guidance.
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which takes a look at what guests.
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Unknown Executive,
Speaker Change: You know, we have an entire team that all they do day in and day out is take a look at the 13 different verticals we have of onboard revenue and make sure that we're delivering them to our guests in an exceptional way and then obviously pricing it in a way that reflects the value.
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Okay, thanks for that, Harry. And then second question, maybe a bigger picture question around
Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa,
Speaker Change: If I kind of look at your fleet, you've got a handful of ships that are now in, let's call it that 25 to 30 years age range. So is that something you guys are starting to contemplate?
You know.
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: You know, obviously we always look at what the market is out there, but I'll just point out that our oldest ships in our fleet are from 98 and 99, so none of them have reached yet 30 years.
Speaker Change: and we believe our ships can even perhaps get to 35 years or beyond so there still is a little bit of room there if you will before we have to be more aggressively considering ship retirements.
Speaker Change: We have also been very aggressive. One of the blessings of coming on after the previous CEO, which was a huge believer in investing in our product, is our ships are extraordinarily well-maintained. I, too, visit them on a regular basis, and I'm very pleased with even the older ships in our fleet, how well they have stood up.
Speaker Change: So I don't think that there's anything imminent coming, but of course, we always keep our eye open. I think Mark wants to add to my comments. Yeah, and I think, Steve, around that question is, I think, you know, when you look at our prepared remarks and some of the activities that just occurred in January,
Mark Kempa: Again, not indicating we're on that path, but it allows us to explore that and set some of our strategy around that. So I think we have much more flexibility now than we had before, but it sets us well up into the future for the best outcome.
Mark Kempa: Okay, yeah, Mark, that's what I was trying to figure out. Thanks for the color guys. Appreciate it.
Of course. Thank you.
Speaker Change: Our next question comes from Ben Pulitzer with Wells Fargo. Please proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions
Speaker Change: I mean, can you maybe talk about the impact of a strong FX and strong dollar and if that's also providing some ongoing tailwind as it relates to demand?
Speaker Change: You know, we've been seeing the strong demand in Europe for the entire booking season, you know, even going back to, you know, last summer when when summer 25 would have started booking. So I don't think it's particularly related to the strong US dollar. I think we it just is reflective of
as I mentioned in one of the previous questions.
Speaker Change: So, I haven't really seen that much change as the U.S. dollar has strengthened since the election.
Speaker Change: You know, versus Caribbean, listen, obviously we've pulled out Europe and Alaska, so we're really, really happy, but I'll just point out that, at least during the summer, Caribbean is a very small part of our deployment. You know, it gets down to about 9% in Q3, so the fact that we didn't necessarily point out Caribbean doesn't necessarily reflect a weakness, it just, I point to Alaska and Europe because on a combined basis, they're well over half of our deployment in the summer, and that's what we're focused on and particularly happy with.
Speaker Change: And Dan, as I think as you think about that with the with the with the comments around the dollar.
Speaker Change: So, yes, while there could be some minor benefit around a stronger dollar, I don't think it's a huge driver one way or the other, other than the fact that I would be remiss if I didn't remind the group today that we do see an impact from that in our overall earnings per share as a result of the stronger dollar. But that said, I think we're feeling good with those markets.
Speaker Change: Got it, that makes sense. And then look, there's obviously been some headlines lately from the current administration on taxation of the cruise industry. I don't know to what extent you could comment, but if there's anything you could kind of opine on whether it relates to your exposure, level of operating income that, you know, could be risked, and maybe talk us through some of the puts and takes or even a history lesson on this area of the tax code.
Speaker Change: I'll spare you the history lesson, but I'm happy to talk about the current environment. You know, it's funny, we had an over-under how many questions into the earnings call with this tax thing come up.
Cruise Line that has reported since the Commerce Secretary
Speaker Change: Over time, there'll be more clarity on what's going on, and we'll see then, but but I will say that that, you know, I'd be remiss if I didn't point out to some of the positive things that are coming out of the administration. I think this this push for
Sustained Peace.
Speaker Change: In the Middle East, and potentially between the Ukraine and Russia can be a significant tailwind for us in 2026. And I'll take Russia as an example. You know, in our summer 26 deployment...
Speaker Change: We have one-third of our fleet, 11 ships, that are going to be based in Northern Europe, and that's all without St. Petersburg being available. If St. Petersburg was to become available for the summer 2016 season, I think as a company with one-third of our fleet based in that region of the world, we could disproportionately benefit.
Speaker Change: from positive things in that region. So of course, as a human being, I hope for peace for purely humanitarian reasons, but as a cruise operator, we think this can provide us a unique opportunity for the summer of 26, or if not for the summer of 26, for the summer of 27. You know, we're here for the long-term and we are very pro-humanity.
Speaker Change: The work that the administration is doing in trying to bring priests to those two regions.
Speaker Change: Our next question comes from James Hardiman with Citi. Please proceed with your question.
James Hardiman: Hey good morning, quick follow-up on I think it was Brent's question earlier on occupancy.
James Hardiman: A lot of the color that you've given us would seem to suggest that the...
James Hardiman: yield headwind from occupancy this year, it sort of feels more one time ish.
So maybe...
James Hardiman: You know, it's a little early for us to give guidance for 2026, but I think the general comment that we may have a mild tailwind on occupancy in 2026, I think is a correct way to look at things. You know, we'll have a little less Asia-Africa-Pacific deployment, we'll have a little more Caribbean deployment, a little more shorter Caribbean deployment, as we talked about our ramp-up, for example, of visitors to GFC, so I think it is fair to expect a mild tailwind coming
James Hardiman: It would be premature for me to comment by exactly how much that would be.
James Hardiman: Got it, totally fair. And then, you know, along the same lines, you know, obviously, it's pretty early for 2026. But you guys do have these, you know, charting the core course targets that are out there. And so if I just look at, you know, 2025, the guide is for about 13% earnings growth.
James Hardiman: That reaccelerates in 2026 to get to that 245. That's about 20% earnings growth
Obviously, you know, capacity is accelerating.
Speaker Change: a bit. Is there anything else worth calling out? Or what else would you call out? Let me ask the question.
Speaker Change: that way. Obviously, you've got great stir tea coming online, which should be a benefit. I didn't know if there's any sort of below the line opportunities. Occupancy sounds like it's going to be a little bit better. So just just sort of bridge the gap between
where you're guiding 25 and where you've targeted 26.
Speaker Change: You know, I'll make a specific comment and then a general comment, you know, I know you referenced the 13% improvement in EPS from 24 to 25, but I'll point out that if you adjust
Speaker Change: For the FX change that Mark talked about in his commentary. It's actually represented 29%
and Unknown Executive, Mark Kempa.
Got it. That's a good color. Thank you.
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Our next question comes from Vince Seeple with Cleveland Research. Please proceed with your question.
Vince Seeple: Great, thanks. I want to come back to great stirrup. I don't know if I catch the number right that maybe it'd be a million
Vince Seeple: passengers in 26. It sounds a little bit higher maybe than previous targets and what percentage of capacity do you envision stopping there in 26 and any any way to frame up the potential yield benefit you might see from from Great Syrup?
Vince Seeple: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Vince Seeple: So, a million passengers at 26. Yes, you did hear that correctly. Yes, that is slightly higher than what we had previously talked about as we've now completely finalized our 26th deployment. So we're giving you the latest and most accurate numbers. I believe we're scheduled to have just over 3 million guests next year. Mark, can you help me with that one? Yeah, we have over 3 million guests. So this would represent, say, 30% of all our guests would include a visit at Great Serb Cay.
Vince Seeple: Again, on 26 guidance, so I won't comment on any yield benefit, but obviously if we didn't think it was worth going there, we wouldn't.
Speaker Change: And Vince, keep in mind, you know, what we've announced so far is that we are completing the pier in the fourth quarter of this year.
Speaker Change: And most importantly, what that's going to allow us to do is that is deliver the product that we've actually sold to the customer. So I think that that number one will be an overall just brand tailwind.
Harry Sommer: But, again, we will have more throughput in there in FY26, but I agree with Harry, it's a bit too premature to talk about what the yield benefit could be simply from adding up here.
Speaker Change: Thanks, that's, that's helpful. And then, you know, to the earlier comments on, you know, hoping for peace and what that could mean.
Harry Sommer: For numbers, I thought that was a helpful way to quantify St. Petersburg.
Harry Sommer: Any thoughts on what Middle East or Red Sea kind of opening up could mean? How quickly things could adjust? Is that more of a 27 opportunity at this point? Or could there be any lift to 26 if things got a lot better faster there?
Harry Sommer: Yeah, so I think you have it exactly right. I mean, unlike
Harry Sommer: Northern Europe, where we have 11 ships positioned there already, so I'm not saying it would be easy, but it would be reasonable for us to adjust itineraries to take advantage of an opening in St. Petersburg, if and when it was to happen.
Harry Sommer: Clearly, in 27, we will also have something like 11 ships or a third of our fleet there. So even if we missed the opportunity in 26, there's a longer term tailwind in 27. Middle East is a little bit more complicated, because that's part of a deployment program where we position ships between the summer and winter. So we would not...
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Thank you.
Harry Sommer: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Harry Sommer: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Connor Cunningham with Melius Research. Please proceed with your question.
Speaker Change: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Yeah, good morning, Connor. Look, I think, you know, what we've said and what we've we've continued to say is every year, every quarter, we we get better and better at improving our revenue management systems.
Technology Improvements
Speaker Change: That's part of our normal day-to-day business. So that's something we focus on week in, week out, quarter after quarter. It's a never-ending process. As you well know, revenue management is an art as much as it is a science.
Speaker Change: But I don't think we've indicated that we're doing some sort of sweeping change. It's more of continuous refinement and improvement of our existing processes and technology.
Speaker Change: Okay, that's helpful. And then was hoping you could just touch on the demographic changes. And, you know, you've highlighted a lot of marketing efforts with partnerships, you know, in the deck and whatnot. So are you seeing an influx of new to cruise and new to brand just trying to understand how like the our eyes are on the marketing campaigns as you as you change some stuff? Thank you. Unknown Speaker
Speaker Change: It's a continuous thing that we work on day in and day out. Maria, I believe we have time for one last question.
Mark Kempa: Unknown Executive, Mark Kempa, Sarah Inman, Unknown Executive, Mark Kempa, Sarah Inman,
Speaker Change: Okay, our last question is from Robin Farley with UBS. Please proceed with your question.
Robin Farley: Great, thank you. I think on last quarter's call you had given a little bit of color on your forward bookings. I think you, a little more detail, I think you had said that price
Robin Farley: and Load Factor in each quarter in 2025 was at the same or higher than last year. Could you kind of give us a sense of that or is there a difference in any of those quarters, you know, kind of how that is compared to last quarter? Thanks.
Robin Farley: Hi, good morning, Robin. Thanks for the question. Look, I think, you know, rather than focusing on is every quarter at higher load or higher pricing, I think the better question for us is, are we at our best optimal book position, whether it's on a 12 or 15 or 24 month basis?
Robin Farley: We are focused on delivering the best economics out of the customer.
Robin Farley: We are not necessarily focused on the minutiae between each quarter. Yes, obviously, we monitor that, but you want us to be in our best optimal position versus...
Robin Farley: Thinking about any sort of records or anything like that. So no change in in thinking or no change in our forward outlook Simply really focusing on what we believe important. Is that optimal range?
Speaker Change: Okay, great. Thank you. And then just a quick follow up on a totally different topic. And I think I probably know what your answer will be, but just to get your official sort of thoughts about the river cruise business. I, you know, some others have been looking at that for the first time. And I, I assume your focus and your balance sheet is mostly going to be, you know, really just focused on your core business and a lot of things you want to do in your existing business, but thought I'd get your official thoughts on that. Thanks.
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