Q1 2025 Royal Caribbean Group Earnings Call
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Regina: Good morning, My name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Royal Caribbean Group first quarter 'twenty 25 earnings call. All participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During this session you will need to.
Daniel: Star one on your telephone keypad I would now like to introduce <unk>, Vice President Investor Relations Mr. Daniel the floor is yours.
Speaker Change: Good morning, everyone and thank you for joining us today for our first quarter 2025 earnings call.
Speaker Change: Joining me here in Miami are Jason Liberty, Chief Executive Officer.
Speaker Change: Holly holds our chief financial Officer.
Speaker Change: Michael Bayley, President and CEO of the Royal Caribbean brand.
Speaker Change: Before we get started I'd like to note that we will be making forward looking statements. During this call. These statements are based on management's current expectations and are subject to risks and uncertainties.
Speaker Change: Number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning, as well as our filings with the SEC for a description of these factors we.
Speaker Change: We do not undertake to update any forward looking statements as circumstances change also we will be discussing certain non-GAAP financial measures, which are adjusted as defined and a reconciliation of all non-GAAP items can be found on our investor website and in our earnings release.
Speaker Change: As we state otherwise all metrics are on a constant currency adjusted basis Jason.
Jason Liberty: Jason will begin the call by providing a strategic overview and update on the business <unk> will follow with a recap of our first quarter. The current booking environment and our outlook for 2025. We will then open the call for your questions with that I am pleased to turn the call over to Jason.
Thank you Blake and good morning, everyone I am pleased to share our strong first quarter results and updated outlook for the year.
Jason Liberty: During the first quarter, we delivered over $2 million unforgettable vacations at exceptional guest satisfaction scores and achieved financial results that exceeded our expectations.
Jason Liberty: Likewise wave season was the best in our company's history, putting us in a strong book position for the remainder of the year for 2026.
Jason Liberty: Clearly consumers continue to choose Ara vacations.
Jason Liberty: Cause we consistently deliver the best experiences and provide value to our guests.
Jason Liberty: As we look across the current macro landscape, we recognize that there is heightened uncertainty.
Jason Liberty: However research, including the direct survey of our customers continue to show that the propensity to cruise remains encouraging.
Jason Liberty: The combination of the World class experiences, we deliver continued strong secular tailwind and the persistent value gap to land based vacation positions us well to navigate the current environment.
Jason Liberty: I'll touch more on this in a little bit.
Jason Liberty: We are certainly not immune to macro volatility, but what we're seeing on the ground and our bookings and the real time spending occurring on our ships.
Jason Liberty: Consumers are still prioritizing experiences planning to spend more on them. This year and are seeking value that we are well positioned to offer.
Jason Liberty: At this point, it's still too early to determine how exactly the current macro environment could impact the broader economy or consumer behavior.
Jason Liberty: I want to emphasize is that we are focused on what we can control.
Jason Liberty: Delivering the best vacation experiences for our guests.
Jason Liberty: Optimizing revenue managing cost and executing on our long term strategies.
Jason Liberty: Over the past several years, we have taken decisive steps to strengthen our balance sheet and we continue to do so.
Jason Liberty: We are in a very strong financial position investment grade balance sheet strong cash flow generation robust liquidity and minimal near term maturities and we remain focused on maintaining financial flexibility.
Jason Liberty: We are confident in our growth strategy and the incredible opportunity ahead of us continuing to win a greater share of the growing two trillion vacation market as we further progress from delivering the vacation of a lifetime into a lifetime of vacations.
Jason Liberty: We also continued to invest in the future of our fleet, our private destination portfolio and the guest experience we.
Jason Liberty: We do this all with the best talent and I want to thank the entire Royal Caribbean group team for their passion dedication and commitment to delivering the best vacation experiences responsibly and for driving strong financial results.
Jason Liberty: Now moving to our results and outlook.
Jason Liberty: We are very pleased with our first quarter results, which exceeded our expectations.
Jason Liberty: Yields grew five 6% and we saw better than expected close in bookings across all itineraries.
Jason Liberty: Adjusted earnings per share of $2 71 in the first quarter was <unk> 23 higher than our guidance.
Jason Liberty: Better revenue and favorable timing of expenses contributed to the better than expected earnings performance.
Jason Liberty: Natale will elaborate more in the first quarter results shortly.
Jason Liberty: Now I'll provide some insight into the demand environment and wave season.
Jason Liberty: During the first quarter bookings outpaced last year across all products, resulting in the best wave season in the company's history.
Jason Liberty: In the month of April bookings for 2025 are outpacing last year with close in bookings trending, particularly well.
Jason Liberty: Our book position is in line with prior years at higher Apd.
Jason Liberty: Onboard spending and pre cruise purchases continue to exceed prior years, driven by increased participation in onboard activities and experiences at higher prices.
Jason Liberty: All commercial channels are generating quality demand with particular strength in our direct to consumer channels.
As always we continue to possess a nimble and flexible sourcing model, both geographically and demographically.
Jason Liberty: Ability to source quality demand all over the globe.
Jason Liberty: We continue to be thrilled by the reception of our spectacular new ships. The enthusiasm for star of the Seas are second icon class ship and celebrity XL. The latest addition to the edge class lineup have exceeded expectations driving strong pricing and load factors.
Jason Liberty: As we look at our current and potential consumers, we remain encouraged while broader consumer spending moderated vacation spend continued to grow our consumer sentiment around leisure vacations remained positive.
Jason Liberty: Our customers continued to be engaged and excited about vacations.
Jason Liberty: And research fielded in April.
Jason Liberty: One out of 10 consumers told us that they intend to spend the same or more on leisure travel over the next 12 months with spend on travel continuing to outpace major material purchases.
Jason Liberty: And for nine out of 10 consumers surveyed value for money is crucial when making vacation plans.
Jason Liberty: And this is where we continue to excel.
Jason Liberty: Furthermore.
Jason Liberty: Financial concerns impact lifestyle or spending travel is not the first place consumers indicate they will pull back.
Jason Liberty: Cruisers are more financially secure and more likely to protect their travel budgets during times of uncertainty.
Jason Liberty: We are very well positioned to deliver great vacations from multiple locations close to home for millions of people in the U S.
Jason Liberty: Offering them extraordinary value range of itinerary options from three to 10 days from Florida, Texas, California, the northeast and the northwest.
Jason Liberty: Our vacation experiences remain an attractive value proposition and leading guest satisfaction compared to other vacation alternatives.
Jason Liberty: Consumers recognize that our brands offer superior value for money versus alternative options.
Jason Liberty: That value is made up of our unique ability to give guests the opportunity to visit a variety of destinations and one trip.
Jason Liberty: The convenience of having everything in one place plus our high quality onboard amenities and services and pricing that includes meals accommodations and entertainment.
Now, let me provide an update on our outlook for 2025.
Jason Liberty: Let me note that our guidance ranges are expanded compared to those we would typically provide and are based on current demand trends. While also considering the complexity of the macro environment based on what we know today.
Jason Liberty: Capacity is expected to grow five 5% in 2025, driven by the introduction of star of the seas, and celebrity XL as well as a full year benefit of icon Utopia and silver Ray.
Jason Liberty: Yield growth is expected to be in the range of two 6% to four 6% supported by the incredible appeal of our new ships the performance across our existing fleet and the continued success of our private destinations.
Jason Liberty: Full year adjusted earnings per share guidance is now expected to grow approximately 28% and be in the range of $14 55 to.
Jason Liberty: The $15 55.
Jason Liberty: We are benefiting from better than expected first quarter performance and favorable foreign exchange and fuel rates.
Jason Liberty: While we remain cognizant of macro economic uncertainties recent booking trends disciplined cost management, and a strong balance sheet positions us well to deliver another year of strong earnings growth and cash generation.
Jason Liberty: Our proven formula of moderate capacity growth moderate yield growth and strong cost control continues to drive superior financial performance and.
Jason Liberty: And we remain focus on executing our perfect performance program targeting a 20% compound annual growth rate and adjusted earnings per share through 2027 and.
Jason Liberty: In return of invested capital in the high teens.
We are relentlessly focused on delivering and innovating the best vacation.
Jason Liberty: Experiences on the planet.
And a key differentiator for us as our powerful commercial flywheel, where each guest experience fuels deeper loyalty and more engagement, which enables us to give guests for vacation experiences. They want so they keep coming back.
Jason Liberty: It starts with our exceptional portfolio brands each a category leader designed to cater to the diverse needs of our global guest base.
Jason Liberty: We amplify that strength with industry, leading ships exclusive private destinations and continuous innovation that elevates every aspect of the guest journey.
Jason Liberty: Over the next three years, we will introduce seven game changing new ships, including star overseas and celebrity XL in 2025.
We'll launch celebrity River in 2027, and expand from 2% to seven exclusive destinations.
Jason Liberty: We deepened customer relationships through data personalization in a frictionless experience that makes planning and enjoying a vacation seamless.
Jason Liberty: Our unified loyalty programs connect all our brands under one ecosystem encouraging repeat travel and unlocking more opportunities to engage across ocean and river cruising along with our exclusive destinations.
Jason Liberty: The ecosystem is working members of our loyalty programs accounted for nearly 40% of our bookings last year with cross brand bookings increasing.
Jason Liberty: Loyalty members are more likely to book direct and spend 25% more per trip than non members.
Jason Liberty: On the digital front bookings and our App have doubled so far this year and loyalty members are more likely to book in the app than non loyalty members.
Jason Liberty: Over the last 10 years, we've improved the rate at which guests to rebook within three months by one seven times.
Jason Liberty: And increased net promoter score by 15 points.
Jason Liberty: These results have translated into a 50 plus percent net yield growth over that time period, and we're just getting started.
Jason Liberty: Looking ahead, we are incredibly energized by the momentum we're building.
Jason Liberty: These ambitious initiatives reinforce our flywheel and strengthening our ecosystem as we turned the vacation of a lifetime to a lifetime of vacations.
Jason Liberty: I am incredibly proud of the teams at the Royal Caribbean group for their passion and relentless focus on delivering great vacation experiences for our guests.
Jason Liberty: We are executing from a position of strength and I remain optimistic about our ability to capitalize on the many opportunities that lie ahead.
Speaker Change: And with that I will turn the call over to Mark Tony.
Speaker Change: Thank you, Jason and good morning, everyone I will start by reviewing first quarter results, which were above our expectations adjusted.
Speaker Change: Adjusted earnings per share were $2 71.
Speaker Change: 9% higher than the midpoint of our guidance, we had a great first quarter that was driven by better than expected pricing on close in demand and <unk> <unk> per share of favorable timing of expenses.
Speaker Change: We finished the quarter with a net yield increase of five 6% in constant currency compared to the first quarter of 2024 60 basis points above the midpoint of our initial guidance in late January.
Speaker Change: Most of our yield growth was driven by strength in ticket pricing versus 24.
Speaker Change: Net cruise costs, excluding fuel increased 0.1% in constant currency of 175 basis points lower than our initial guidance driven entirely by timing of expenses that will roll into the second quarter and some of the rest of the year.
Speaker Change: Adjusted EBITDA margin was 35%.
Speaker Change: 360 basis points better than last year, and operating cash flow was $1 6 billion.
Speaker Change: As Jason mentioned, we had a record wave season, and our booked load factor is in line with prior years and at higher Apd.
Speaker Change: Bookings in the month of April continued at a higher pace than last year, including strength in close in demand and cancellation levels remain normal.
Speaker Change: The Caribbean represents 57% of our deployment this year and 49% of capacity in the second quarter.
Speaker Change: In 2025, we offer Caribbean sailings from nine U S home ports, Miami Fort Lauderdale, Tampa Port Canaveral, Galveston, Baltimore, Cape Liberty, San Juan and New Orleans.
Speaker Change: And a variety of sailing lengths.
Speaker Change: Our leading hardware and destinations strengthen our competitive position in this market.
Speaker Change: With the introduction of startup disease in late August celebrity Excel in November and the opening of Royal Beach Club Paradise Island by the end of this year.
Speaker Change: Europe will account for 15% of capacity for the year and 20% of capacity in the second quarter.
Speaker Change: Alaska is expected to account for 6% of total capacity and 9% in the second quarter. We have also some of the best hardware in the region with celebrity edge to quantum class ships and silver Novo.
Speaker Change: Now, let me talk about our guidance for 2025.
Our proven formula for success modest capacity growth moderate yield growth and strong cost discipline is expected to drive significant earnings growth and higher cash flow generation. This year.
Speaker Change: Moving to revenue guidance, we are increasing our guidance for the year compared to our prior one in January.
Speaker Change: Did extend our typical guidance ranges to account for the broader external factors and the complexity of the current macroeconomic environment.
Speaker Change: For the full year, we expect yield growth of two 6% to four 6%.
Speaker Change: As a reminder, first quarter yield growth disproportionately benefited from both the timing of dry docks and new hardware a full quarter of icon. In addition to Utopia and silver rate.
Speaker Change: The cadence of yield growth throughout the year is expected is driven by the introduction of start of the seas and celebrity excel into third and fourth quarters, respectively. The.
Speaker Change: The impact of the timing of new ship deliveries on yield growth in the second half of this year is a headwind of approximately 140 basis points.
Speaker Change: Full year net cruise costs, excluding fuel are expected to be negative, 0.1% to up 0.9% 10 basis points lower than our prior guidance as we remain focused on efficiency enhancing margins and maximizing cash flow.
Speaker Change: While we manage our costs more on a yearly basis, the cadence of our cost growth varies throughout the year.
Speaker Change: This is driven by timing of dry docks ship deliveries and the ramp up of costs related to our acquisition of the <unk> port and other destinations.
Speaker Change: Second and third quarter cost growth is expected to be higher than the first and the fourth quarter.
Speaker Change: For the third quarter being most impacted by 280 basis points from these headwinds.
Speaker Change: We anticipate our fuel expense of $1 4 billion for the year and we are 59% hedged at below market rates.
Speaker Change: We are benefiting from the current low fuel rates and have capitalized on this opportunity by executing hedges for the upcoming years at very favorable rates.
Speaker Change: Based on current fuel prices currency exchange rates and interest expense.
Speaker Change: We expect adjusted earnings per share between $14 55, and $15 55.
Speaker Change: The 55% increase compared to our prior guidance is driven by a 37% benefit from FX and fuel rates for the remainder of the year.
Speaker Change: <unk> benefit from a lower share count due to share repurchases with the remainder attributed to the outperformance in the first quarter.
Speaker Change: We also expect 15% growth in adjusted EBITDA, and 210 basis point growth in gross EBITDA margin.
Speaker Change: This positions us to accelerate our cash flow generation, which allows us to continue investing in our strategic initiatives, maintaining investment grade balance sheet metrics and expanding capital return to shareholders.
Speaker Change: Now, let me comment on second quarter guidance.
Speaker Change: In the second quarter, we expect capacity will be up 6% year over year, and our net yield growth of four 3% to four 8%.
Speaker Change: Roughly half of the yield increase is driven by new hardware and the rest is driven by higher rates and load factors on like for like hardware.
Speaker Change: Net cruise costs, excluding fuel are expected to be up three 7% to four 2%. This.
Speaker Change: This includes higher dry dock days in the first half of the year compared to last year, and 140 basis points impact from first quarter cost timing shifts.
Speaker Change: Taking all this into account, we expect adjusted earnings per share for the quarter to be $4 to $4 10.
Speaker Change: Turning to our balance sheet.
Speaker Change: We ended the quarter with a strong four 5 billion in liquidity, we're in a very strong financial position and will continue to further strengthen the balance sheet.
Speaker Change: During the quarter S&P global ratings upgraded our credit rating to investment grade.
Speaker Change: Reflecting the strength of our financial position consistent performance and disciplined capital allocation strategy we.
Speaker Change: We are very pleased with this acknowledgment of the strong trajectory of the business and our commitment to strengthening the balance sheet.
Speaker Change: Also during the quarter, we exchanged $213 million of our outstanding convertible notes for cash and stock <unk>.
Speaker Change: This transaction reduced our fully diluted share count by 1 million shares.
Speaker Change: We have $110 million left outstanding that we plan to settle at maturity.
Speaker Change: During the quarter, we also repurchased 1 million shares under our $1 billion share repurchase program.
Speaker Change: As of March 31, we have $759 million available for repurchases under the current authorization.
Speaker Change: We will continue to opportunistically buy back shares while ensuring a strong balance sheet.
Speaker Change: We have very limited maturities left this year.
Speaker Change: All related to ship amortization payments that we plan to repay with cash flow.
Speaker Change: We also expect to further reduce leverage to below three times by the end of 2025.
Speaker Change: In closing, we remain committed and focused on our mission to deliver the best vacation experience as responsibly as we work to deliver another year of solid returns.
Speaker Change: With that I will ask our operator to open the call for a question and answer session.
Speaker Change: At this time, if you would like to ask a question press star followed by the number one on your telephone keypad, we ask that you limit yourself to one question and one follow up then reenter the queue for any additional questions. You may have our first question comes from the line of Matthew Boss with J P. Morgan. Please go ahead.
Matthew Boss: Thanks, and congrats on a nice quarter.
Speaker Change: Thank you.
Matthew Boss: So Jason could you speak to drivers of the better than planned performance in the first quarter, maybe elaborate on business in April and just walk through the company specific initiatives and continued investments that you have that you think could insulate results in win multiyear market share.
Speaker Change: Sure Matt.
Matthew Boss: Coke Coke are doing well.
Speaker Change: Just starting off in the first quarter.
Speaker Change: We have seen this kind of continuous trend.
Speaker Change: That.
Speaker Change: Inside of a quarter.
Speaker Change: Sure.
Speaker Change: We see kind of an uplift in demand.
Speaker Change: As we get very close in.
Speaker Change: Not only do we see an uplift in demand. We're also able to raise our pricing during that period of time.
Speaker Change: They are also high quality customers that are also spending well in the ship.
Speaker Change: So the driver of the Q1 is really just really strong close in demand that we've seen and you heard us talk about.
Speaker Change: In April and in the second quarter, we're seeing that continuous trend the interesting thing about the trend is yes.
Speaker Change: Of course, our revenue management tools take those things into account.
Speaker Change: Try to predict in the next quarter that it's going to be at a certain level.
Speaker Change: And it keeps elevating which I know was probably counterintuitive to some of the reporting around consumer confidence and so forth that's out there I.
Speaker Change: I think the reason for that is several factors one of which is obviously incredibly focused.
Speaker Change: On our flywheel.
Speaker Change: No.
Speaker Change: How do we get our guests to be more to come with us more frequently so the investments we've made in loyalty.
Speaker Change: Vessels, we've made even in our App and online.
Speaker Change: So that it makes it easier and easier whether it's through us or through our travel partners to do business with us gets easier and easier.
Speaker Change: And then we're getting more and more reps out of those investments that we're making I think behind that is also we have seen this for a while it was just a flight to quality when you're delivering an exceptional vacation experience with net promoter scores that are above 70.
Speaker Change: You get very strong advocacy and you get customers that.
Speaker Change: We want to continue to.
Speaker Change: The sale with you.
Speaker Change: And I think Thats why were seeing again, another we saw an outperformance quarter in Q1 and why I also think we're bucking some of the trends that are very intuitive when you look at consumer confidence and so forth the.
Speaker Change: The combination I think of what we're delivering combined with the value gap to land based vacation, which as you know.
Speaker Change: Everyone. On this call has heard me overtime is frustrating to have that gap, but in times like this and we've seen this in other markets when when there's economic concerns that value gap is actually a pretty good buffer.
Speaker Change: Four.
Speaker Change: First delivering our vacation experiences and our guests willing to pay for those experiences and for us to meet needs.
Speaker Change: Our our financial expectations.
Speaker Change: I also think when we think about the longer term opportunity and the investments we're making.
Speaker Change: Obviously, our destination portfolio has been exceptionally successful.
Speaker Change: We're going to basically be adding in destination or two over the next several years, that's going to drive tremendous value.
Speaker Change: And for our shareholders.
Speaker Change: It's a great margin business for us and it also enhances the guest experience we have a lot of great ships coming online that are.
Speaker Change: Our very very well received as a very focused and designed to who the customer I would say on the customer of tomorrow is.
Speaker Change: Got a lot of investments on the technology side. So obviously our yield management program is has a tremendous amount of items inside of it and that gets smarter and smarter.
Speaker Change: Installing a new travel platform that will be centered around the customer instead of being centered around our cabin.
Speaker Change: And then we have a lot of other I would say modernization activities and so forth that are taking some of the great learnings from our newer ships are bolting them back on to some of our legacy fleet. So we're really excited.
Speaker Change: I think we all appreciate that there is some noise in the environment, but we are seeing.
Speaker Change: Yes.
Speaker Change: All things considered very strong consumer trends for our business.
Speaker Change: That's really great color and then maybe <unk> if you could just walk through the areas of this year's guidance, where you wanted added expanded assumption at the range is tied to the current macro backdrop and just multiyear any change in thinking to your outlined 20% earnings growth CAGR based on anything that you've seen.
Speaker Change: To date.
Speaker Change: Yes, hi, Matt So really if you look historically.
Speaker Change: At this time of the year.
Really narrowed the range. So we start sort of roughly around 50.
Speaker Change: I'm, sorry, 100 basis points on yield and the beginning of the year and at this point.
Speaker Change: We are around 50, so we kept it at 100, so thats really where the difference is obviously cost is something that we feel we can control very well so that hasnt changed and obviously the earnings we've.
Speaker Change: We've expanded that range.
Speaker Change: No obviously, we just announced.
Speaker Change: Just a couple of weeks ago, and so we feel very good about as Jason said about the long term opportunity to continue to win share for a very very large and exciting two trillion dollar vacation market. We continue to invest on our strategy as we believe our strategies work and so we feel that we are also in a great financial position to continue to capitalize on that opportunity.
Speaker Change: <unk>.
Speaker Change: Best of luck.
Speaker Change: Our next question comes from the line of been shaken with Mizuho. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Hey, good morning, Thanks for taking my questions.
Speaker Change:
Speaker Change: NASA opening in December Naftali I think on the last call. You said this is the.
Speaker Change: Greatest weekend in the history of crews any updated.
Speaker Change: Follow up on the pricing of that day pass.
Speaker Change: Thanks.
Michael Bayley: Hey, Ben its Michael.
Speaker Change: This weekend in the world.
Speaker Change: Utopia of disease.
Speaker Change: I think out of Port Canaveral to perfect day, and the soon to be the Royal Beach club, So and we're absolutely.
Speaker Change: Delighted with the performance of that product. It has been outstanding so very pleased with that and it truly is the greatest weekend in the world.
Speaker Change: On the Beach club pricing strategy, we have a big event that we are hosting in New York City and a couple of weeks and we'll be talking about the destination portfolio.
Speaker Change: <unk> some of the images and concepts that will be coming alive in the coming years, and particularly we'll be talking about the Royal Beach club in Nassau and we'll be talking during that presentation about how we're thinking about pricing, we're very as Jason mentioned and we're super excited about this portfolio that we've got coming online over the next few years.
Speaker Change: And.
Speaker Change: The first one out of the gates at closest the Royal Beach Club Nashville.
Speaker Change: Understood I appreciate that and then and then.
Speaker Change: Maybe clarification.
Speaker Change: Why are the why the new ships are headwind in <unk> I think you mentioned 140 basis points in two weeks to yield I guess simplistically I would've thought.
Speaker Change: The ships are a positive and it's just basically like Ted Cruz's ramping up <unk> without the associated full revenue ramp.
Speaker Change: Yes, let me just clarify so it's really about timing of when these shifts center into service.
Speaker Change: We broadly say second sorry, third quarter, but really that theres timing into it. So if you think about Utopia and entered pretty early in July start is actually entering towards very late in August and so you have those lower <unk> as well as.
Speaker Change: Less of.
Speaker Change: That form from the load factors ramping up so thats really the headwind.
Speaker Change: That is mostly on Q3 Q3 also on an absolute dollar is the highest in the second half so it weighs a little bit more on the second half of the year.
Speaker Change: Understood. Thank you very much.
Speaker Change: Sure.
Speaker Change: Our next question comes from the line of David <unk> with Stifel. Please go ahead.
David: Hey, guys good morning.
Speaker Change: So Jason if we go back to revised guidance for the rest of the year.
Speaker Change: I guess I would say I'm, probably a little surprised you guys didn't tick up.
Speaker Change: More conservative view around.
Speaker Change: Onboard spending <unk> close in pricing and I know you mentioned in the feedback that <unk> gotten from and your data from your customer base does remain positive, but clearly onboarding close and Ken can change very quickly. So I guess my question is if there was going to be some pressure from your customer base do you think the.
Speaker Change: The low end of your guidance is now set low enough that even if there was going to be some pressure. It would capture that and look I know thats kind of a tough question because we have no clue, how that spending levels would have to be before it goes outside that range, but I wanted to get your kind of feedback there or take on that.
Speaker Change: Yes look I think there's obviously, there's a lot of companies that are doing different things.
Speaker Change: There is a heightened level of uncertainty that's out there.
Speaker Change: We are guiding Steve the best that we can do is look at how we're trading each and every day.
Speaker Change: And also how our customers are spending and where we see resistance and where we don't see resistance.
Speaker Change: In.
Speaker Change: And what we're doing.
Speaker Change: I think that when we look at.
Speaker Change: And how we've guided for the balance of the year, obviously, we needed to update for Q1, we needed to update.
Speaker Change: For FX and fuel.
Speaker Change: Although we did not update.
Speaker Change: For the back half and so typically what you would see is when we see trends that we saw in the first quarter.
Speaker Change: You would start to think about how that's going to impact the balance of the year. So I think we've tried to take a little bit more of a conservative position that's informed by how we see our guests trading with us.
Speaker Change: Each and every day and then we've tried to extend that range to think about how we look at a maybe a softer side and maybe a more optimistic side.
Speaker Change: No.
Speaker Change: Kind of investors understand how we see the range of it as you mentioned.
Speaker Change: There is uncertainty and so things could change obviously, but.
Speaker Change: But I think we feel I mean.
Speaker Change: Over 86% booked for the year. So so I think we have pretty good visibility and we see really no no change in cancellation rates.
Speaker Change: No real change in how our consumers are acting outside of that they are a little bit more short term focused and we see that in the elevation on bookings for the second quarter.
Speaker Change: Okay got you that's good color, Jason and then yeah.
Speaker Change: Second question one of the questions, we get a lot from investors is around discounting.
Speaker Change: And what we would call kind of promotional work in order to drive drive demand. So as we think about bookings and maybe not so much for this year, but as we think about into 2026 and beyond can you can you maybe help us think about.
Speaker Change: How you would attack.
Speaker Change: Using lowering pricing versus other tools in order to stimulate demand if there was going to be a slowdown in bookings and then.
Matthew Boss: Jason I'm not sure you mentioned this in your prepared remarks, but can you give us some color around what youre seeing so far for 'twenty six and maybe how you are booked for next year versus what you would call your optimal.
Speaker Change: Booked position.
Speaker Change: Sure So first and foremost.
Speaker Change: We are very religious about price integrity.
Speaker Change: We've been through different cycles, before and ensuring that we have a high level of price integrity. We think is very important.
Speaker Change: And I think the combination of all the tools that we have in place having that kind of global yield management platform and being able to source from different.
Speaker Change: Parts of the world in different parts of the U S.
Speaker Change: <unk>.
Speaker Change: On a dime I think positions.
Speaker Change: US really really well, but I would say Steve that what we generally view is that we have a pretty good.
Speaker Change: Holster of.
Speaker Change: Different.
Speaker Change: Promotional tools and so forth that we use and we engage all the time.
Speaker Change: In the marketplace.
Speaker Change: But I think we would lead with price integrity.
Speaker Change: And we would we would obviously want to focus on making sure that whatever we're putting into the marketplace.
Speaker Change: Does not have something that we believe will impact <unk>.
Speaker Change: The integrity of our brands.
Speaker Change: Or.
Speaker Change:
Speaker Change: How we're managing revenue into the future I did comment on 2026 that one.
Speaker Change: The booking window is about a week shorter.
Speaker Change: But that's really being driven by close in demand and.
Speaker Change: Our book position.
Speaker Change: For 2026 I set at this point is.
Speaker Change: In line with same time last year on a volume standpoint.
Speaker Change: And of course, obviously, we have.
Speaker Change: And thats on a percent or so obviously you have more capacity next year and at higher prices.
Speaker Change: Okay got you thanks, guys appreciate it.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Lisa <unk> with Goldman Sachs. Please go ahead.
Lisa: Hi, guys. Thanks for taking the question congrats on a good set of adding.
Lisa: Just curious in terms of the inventory you still have to fill for <unk>. The 2026 has there been any difference in terms of like the type of bookings without that.
Lisa: Europe versus U S. Itineraries are different brands strengthen contemporary vs premium short duration drive to anything like that that you would call out that's kind of different unusual trends.
Lisa: Theres really nothing specific with you that I would call out what we're seeing by market. Obviously some of the things that you that you read out there about things a little bit softer for markets like Canada.
Lisa: Yeah. That's that's that's fair, but it's very rare for us its very material to our business.
Lisa: But when we look at whether it's sourcing from whether it's North America, Europe or Asia for the products that they source too and we feel very good in terms of their of their booking activity.
Lisa: And I think we've also been studying obviously, we have brands that are in different segments and so we're looking at is there any behavioral change in the family market is there any behavioral change in the luxury market.
Lisa: So there are different consumers they have different balance sheets.
Lisa: You tend to act and behave differently, but from what we can see so far.
Lisa: So far meeting.
Lisa: As of an hour ago.
Lisa: They continue to.
Lisa: It will be focused on their vacation experiences, making sure that they have planned and theyre getting their vacation experience.
Lisa: What they want and I think there's just a general recognition that there is there is there is this value gap and potentially their trading more for a more known all inclusive experience, which is why I think we're we're seeing trends that are more favorable than what we might see with other travel peers.
Speaker Change: That makes sense and then I guess just thinking about the makeup of the yield outlook for this year, obviously, you've been getting such great premiums on the new ships has been a big driver I'm curious any color you can share with like.
Speaker Change: The contribution of new ship premiums versus like for like pricing, whether you're still a bit of private island, maybe lesser this year, but and that but just as.
Speaker Change: Like for like pricing still up year on year, I mean, just any way to kind of think about the relative contribution of each of those kind of blocks of space.
Speaker Change: Yes, So hey, Lindsay so I said that.
Speaker Change: First quarter it was roughly.
Speaker Change: Half and half between like for like a new hardware, it's pretty consistent throughout the year, except for the third quarter as I mentioned because of the timing of the new ship started the seas that obviously is a little bit less so in.
Speaker Change: And most mostly.
Speaker Change: Like for like so, it's pretty consistent and excluding that.
Speaker Change: In the third quarter.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Brian <unk> with Barclays. Please go ahead.
Speaker Change: Good morning, everybody. Thanks for taking my question just a follow up on the.
Speaker Change: Near term.
Speaker Change: Dan.
Speaker Change: Commentary.
Speaker Change: You guys see a lot of data from your loyalty program now that you are a loyalty program is it 40% of your business.
Speaker Change: You see you can attract customers and where they're going in the system are you seeing any one.
Speaker Change: Trade down between shifts between brands, just looking for more value within the system.
Speaker Change: Okay.
Brent: I will just be crystal about it know Brent.
Brent: They are there they are continuing to behave how they normally behave.
Brent: We've even been watching.
Brent: Even as they are.
Brent: It's not just about the booking itself. It's also the journey. They go through and they are researching and so forth or are they looking for alternative is done or that or less and we're not seeing that either occurring at this point.
Speaker Change: Okay. Thanks for that Jason and then another question sort of recession scenario.
Speaker Change: Type of question, but your load factors are in line with prior years for for this year for next year. One of your larger peers is running they are booked position ahead of prior years and so the question is if you go into.
Slower bookings environment.
Speaker Change: Would you be willing to how much would you be willing to flex your load factors in order to protect price and if that's something that you that you would even need to do or if there's other levers you could pull out.
Speaker Change: Well I don't think I mean.
Speaker Change: It's tough to deal in hypotheticals.
Speaker Change: I think that we're obviously focused on optimizing.
Speaker Change: Our revenue.
Speaker Change: And.
Speaker Change: But at the same time, maintaining price integrity. So I don't have any answer on how much load factor, we would give up I think what we're what we've been trying to do is actually increase.
Speaker Change: Our load factor, we've announced fitting our legacy ships.
Speaker Change: With.
Speaker Change: More capabilities to take on more load factor, our new ships are able to take on more load factor.
Speaker Change: And so we're trying to maximize that and thought about load factor to get more people in it's actually to bring more value to the vacation experience.
Speaker Change: For our guests, especially our families and multi generational and instead of having to buy two cabins are able to maybe get their family members into one cabinet because we've been able to increase the load factor inside the cabin.
Speaker Change: And of course because of the demand that we have in the flywheel that we have the loyalty system, we have we're able to kind of.
Speaker Change: Maintain that momentum and get more and more reps out of our loyalty guests.
Speaker Change: And so that's I don't really know what the hypothetical answer intuitive, but I would lean into that we do look to obviously maximize our load factor, but also not not at the sacrifice of price integrity.
Speaker Change: Got it makes sense, thanks very much.
Speaker Change: Our next question comes from the line of CPO with Cleveland Research. Please go ahead.
Speaker Change: Thanks.
Speaker Change: As a follow up the brands.
Speaker Change: It sounds like Youre April bookings were quite strong there have been some.
Speaker Change: The core of our growth a little choppy or April so just curious what you see out in the marketplace.
Speaker Change: New leadership across all three major cruise lines are going through what potentially might be some choppy waters jury's still out but up to this point in time, how do you think the industry has been navigating through the last 30 60 days from a pricing perspective.
Speaker Change: Yeah well.
Speaker Change: I'm about three five years into this this I don't know how how new eyes.
Speaker Change: If you can call me young that would be great as well.
Speaker Change: I mean first of all you're also dealing I think with.
Speaker Change: Net of.
Speaker Change: Of industry leaders that well.
Speaker Change: While there might be relative three and a half years as new then I guess, the other ones might be a little bit newer but we've been in this industry for a long time in my.
Speaker Change: I continue to see but I mean pretty rational behavior.
Speaker Change: Generally leading with price integrity, and I think thats.
Speaker Change: It's tough to get a read on it because I think theres been a lot of high quality demand that the industry is continuing.
Speaker Change: To see and I think it goes back to what we keep pressing on this is that this isn't about share.
Speaker Change: Well I think volume in the cruise industry. This is about.
Speaker Change: How small cruisers to the broader travel and leisure industry and the focus and I think we're all collectively focused but I can't speak for the others is how do we close that gap to land based vacation and and how do we get that extra rep from land.
Speaker Change: Onto our ships and I think that's that's that's kind of what the vision and the focus is almost about stealing share from from each other on the cruise industry side and I think that's that combined with the value gap I think is.
Is why youre seeing a difference in behavior.
Speaker Change: I just wanted to comment on the on what you referred to on the Choppiness I mean.
Speaker Change: Everybody gets their sources from from from different places, but I think you should take our commentary around April to describe what we're seeing.
Speaker Change: And then may be seen differently by different channels as well, but.
Speaker Change: Just wanted to make that point.
Yes, that's really helpful clarification, and then maybe for not just.
Speaker Change: Around capital allocation and recently announced the share repurchase plan just thoughts with you.
Speaker Change: Balance what you are seeing on the macro front with <unk>.
Speaker Change: Turning capital versus shoring up the balance sheet, how are you thinking about that and any change to the capex plans in light of what you are seeing out there.
Speaker Change: Yeah. So first I'll start by saying that we feel very good about financially in this balance sheet and where we are we have made as you know.
Speaker Change: A lot of FERC over the last couple of years to make sure that we get to the place where the balance sheet.
Speaker Change: This is a strong investment grade.
Speaker Change: Now rated.
Speaker Change: We have a very strong liquidity, we're generating very healthy cash flows and so we feel pretty good about where we are and so as we look at the opportunity. We feel that there is so much opportunity to kind of win the share of that two trillion dollar market and we do want to.
Speaker Change: To invest we are very confident with our strategies and we have a very well articulated and defined capital investment over the next couple of years and obviously it has articulated and perfect.
Speaker Change: So that that we will continue to do.
Speaker Change: And I.
Speaker Change: I think the balance sheet is.
Speaker Change: It's very good to support that.
Speaker Change: But we do acknowledge that also there is supplemental to the investment because we are focused on growth and we are a growth company, but we do appreciate that there is excess cash flows. So we've restarted the dividend we've.
Speaker Change: Increased it three times since the summer of 2024, we feel we're in a in a very good spot right now offering competitive dividend and we will continue to evaluate those things come by and then.
Speaker Change: Share repurchases are opportunistic and so we did.
Speaker Change: Feel that this.
Speaker Change: This quarter, we had an opportunity to recapture some shares.
Speaker Change: And we've done that and and we will continue to evaluate that opportunistically and of course, it's important to note that we are very focused on the balance sheet. So.
Speaker Change: <unk>.
Speaker Change: We will not compromise the balance sheet for for that but we feel in a very good position and we will continue to evaluate those share repurchases.
Speaker Change: Helpful. Thanks.
Speaker Change: Okay.
Our next question comes from the line of Robin Farley with UBS. Please go ahead.
Speaker Change: Great. Thank you just circling back to your comment that the month of April.
Speaker Change: You said bookings for 2025 are outpacing year over year, and just thinking about what that might imply about 2026 bookings.
Speaker Change: I know you said the load factor for 2006 are in line with the same time last year, but is it fair to say, it's still above sort of historic ranges right. So even if maybe the focus of bookings from the consumer today is on the close in.
Speaker Change: More than than 2026 is it fair to say, there's still room for that.
Speaker Change: Jack or Tim could come down in other words, if you can sort of weighed out a little bit of uncertainty here.
Speaker Change: Tim risk weighting, a little bit to be more aggressive in 2026.
Speaker Change: Yeah sure so our commentary around April represents.
Speaker Change: Our future bookings, so I'll leave it there as it relates to.
Speaker Change: Whether it's 26 or 'twenty seven.
Speaker Change: We are booking some fixed for 27 at this point in time.
Speaker Change: And and I think on the load factor or the booked position for 2026, Rob.
Robin: Robin the way that I would look at this is.
Robin: You heard me say this at the beginning of this year I said that.
Robin: Towards the end of last year and also towards the end of <unk>.
Robin: 2023.
Robin: I think we always have some level of regret that were booked.
Robin: Going into into the calendar year.
Robin: We leave revenue on the table. So I think we feel very good being booked in line with same time last year.
Robin: Our revenue management.
Robin: Models.
Robin: Say, that's where we shouldnt be booked and of course, we are booked at at higher rates. So I think I think.
Robin: The load factors are a little bit lower that's okay, because it is substantially higher.
Robin: Book position than if you were to look back in the.
Robin: The 2015.
Robin: 10 years ago.
Robin: Yes.
Robin: It is much higher but.
Robin: We typically do have a level of regret that we would have had an opportunity to grab more.
Robin: Revenue optimize more revenue.
If we if we want to wait a little bit longer.
Speaker Change: Oh, great now it totally makes sense. Thank you and then maybe just one quick follow up just noticed a capacity growth rate. In 2026 is just like slightly lower growth rate than it was previously is that just sort of dry dock scheduling or like a ship delivery changing by few weeks something like that.
Speaker Change: Yes, Robin its really a rounding.
Speaker Change: So it's and this is exactly what you said some of the refinement of Drydocks some of the specific entry points of the new hardware and.
Speaker Change: It's not a 100 basis points, it's much it's much smaller it's close to 30 basis points.
Speaker Change: Okay, great, yes, so that.
Speaker Change: The second point and really start yeah, that's right exactly.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Conor Cunningham with Melius Research. Please go ahead.
Conor Cunningham: Hi, everyone. Thank you.
Speaker Change: <unk> had some great survey stats I thought at the beginning of the call and I think you mentioned that nine in 10 people.
Speaker Change: Your survey or a site the relative value of cruising in general. So I was curious you know.
Speaker Change: We're early days and the potential downturn here from a from an economic standpoint like how has that moved up your consumers' priority list for us like other secular opportunities that you see within this space I'm just trying to understand how much more insulated here outcomes could be relative to other forms of travel that are out there setting up more difficult.
Speaker Change: Backdrop in general Thank you.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: You value is always an important consideration. It is it is at a higher level than what we have historically seen but it's only moved up.
Speaker Change: Our position or two.
Speaker Change: On that list.
Speaker Change: I think that one of the things.
Speaker Change: We've been trying to close that value gap to land based vacation and depreciation of so much more you get out of out of a cruise experience than you do by.
Speaker Change: By land base and I think it's but it does serve in times like like like this where there's maybe a greater level of uncertainty it does help us navigate.
Speaker Change: Some of maybe some of those concerns that might be out there from the consumer because they know how much value they get out of it.
Speaker Change: They have a sense on the bookends on what it will cost them and their family or friends to be able to do it.
Speaker Change: They know theyre going to get a great experience out of it and I think those are the combination of.
Speaker Change: <unk> been able to build memories and experiences with their friends and family, which are very high on that list.
Speaker Change: Visiting locations that they haven't been before is very high on that list.
Speaker Change: And value for money.
Speaker Change: High on that list and it's a little bit elevated versus what we've seen in the past.
Speaker Change: And then maybe just going back to the capital allocation commentary I'm just trying to I know, it's early days on the buyback and.
Speaker Change: You guys conviction level continues to improve basically every quarter and you have a.
Speaker Change: Pretty robust outlook for the next couple of years. So why why wouldn't we be leaning in really hard on the buyback in general It just seems like there is a mismatch and what you are communicating a time as to what the market is doing so just any thoughts there on why not why we wouldn't lean in or maybe it. Thank you.
Speaker Change: Yes so.
Speaker Change: So I think I think the main driver of it I think just to.
Speaker Change: I mean to be clear about it is that we're still settled a little bit with some of the covenants from during COVID-19, because we lost a lot of equity.
Speaker Change: And the and the balance sheet and the P&L, that's still being built up and so there is still some net worth.
Speaker Change: Covenants that we have to manage around and so it's.
Speaker Change: That 1 billion dollar announcement for the year as base meant to be kind of smoothed out not because of the opportunity that might weigh in front of us.
Speaker Change: On the stock side some of it has to do with just the timing of that net worth calculation and the cushion that's on top of that.
Speaker Change: You have to make sure that we don't take them on some type of an issue that's really the driver on why we would not have bought more as an example, and then we take advantage of opportunities like we did with the converts.
Speaker Change: <unk> and his team did that allowed us to.
Speaker Change: Congrats on more.
Speaker Change: Those of those shares what I will tell you is.
Speaker Change: Yes.
Speaker Change: All of the all of the dilution that we had to incur which again is a fraction of others.
Speaker Change: Very very personal to us.
Speaker Change: We're focused on how do we recaptured as soon as we can.
Speaker Change: Okay I appreciate the detail. Thank you John.
Speaker Change: Yeah.
Speaker Change: Our next question comes from the line of James Hardiman with Citi. Please go ahead.
Speaker Change: Hi, This is Sean Wagner on for James.
Speaker Change: The growth in Occupancies and increasingly noteworthy how should we be thinking about occupancy in the context of the 2025 guide.
Speaker Change: That opportunity going forward as you add the icon class ship every year with what we know about the load factors on those shifts.
Speaker Change: Yes, so I think we've articulated in the past that.
Speaker Change: We we feel that there is a great opportunity for both for existing ships right. So retrofitting some of the the rooms with some higher ability to take up.
Speaker Change: Bigger bigger occupancy and capacity and then also with the newer ships there are accretive accretive to our overall average load factor.
Speaker Change: And so we have icons, we have utopia deeds are much higher.
Speaker Change: And then the operator, so as we continue to add those ships.
Speaker Change: That will inch up the load factor and at the end of the day, we're trying to maximize yield and thats. It.
Speaker Change: Both load factor and in price.
Speaker Change: Okay.
Speaker Change: For the 2025 guidance what is your assumed occupancy for the year.
Speaker Change: Yes, we don't really.
Speaker Change: Kind of guide on occupancy just on yield, but it's consistent with.
Speaker Change: Kind of how we're trending here.
Speaker Change: Okay fair enough.
Speaker Change: I guess what are you assuming for your equity income line in the context of the full year Guide do you expect that growth to keep up with the EBIT growth or.
Speaker Change: As far as variability.
Speaker Change: I am here for where do you expect that to flex up and down commensurate with your full year guidance.
Speaker Change: Yeah.
Speaker Change: Yes, I think it's really consistent.
Speaker Change: Throughout the year, so there's nothing specific to call out.
Speaker Change: Okay. Thank you very much.
Speaker Change: Yeah.
Speaker Change: Our final question from the line.
Speaker Change: Our final question comes from the line of Xi'an show with BNP Paribas. Please go ahead.
Speaker Change: Hi, guys. Thanks for the question on <unk>, you kind of beat the net yield guidance and then <unk> it looks like a nice guy.
Speaker Change: Guidance as well on on net yield, but the full year net yield guidance on constant currency maybe up.
Speaker Change: A little bit.
Speaker Change: I'm just curious how youre thinking about two H and if that changed at all versus 90 days ago.
Speaker Change: Yes no.
Speaker Change: As you can see we haven't really changed our yield guidance for the year. It was up slightly basically you're taking into account the outperformance into fourth quarter and so we made the comments around the first quarter, where we disproportionately benefited from timing of new hardware. If you remember last year icon came in during.
Speaker Change: The first quarter and was.
Speaker Change: Is ramping.
Speaker Change: Load factors, we do not have utopia, so theres a lot of contribution from that timing in the first quarter.
Speaker Change: And then on the third quarter I made these comments earlier that there is also a headwind this year from the timing of star entering into service and just the year over year comp both for may be Cds as well as just a load factor ramp up and so.
Speaker Change: There is kind of the cadence throughout the year.
Speaker Change: And there are the things that we're trying to point out.
Speaker Change: How they are trying to impact, but if you kind of.
Speaker Change: Normalized for that it's pretty consistent throughout the year.
Speaker Change: Our formula is very clear right moderate capacity growth moderate yield growth strong cost control. That's our formula for success. That's how we are managing the business.
Speaker Change: And so that's pretty consistent this year.
Speaker Change: Great. Thanks, and then maybe just another follow up on the booking trend any kind of change.
Speaker Change: France is between returning customers versus new customers or are you seeing any differences. There you mentioned kind of strong loyalty, but yeah I'm curious any other thoughts.
Speaker Change: I mean, the only thing that we would we would.
Speaker Change: The reason why we pointed out the point on the loyalty side is where we're getting more reps.
Speaker Change: Out of our loyalty customers.
Speaker Change: Some of that is also just cross branding opportunities that are that are being enabled by our loyalty program.
Speaker Change: But demand from.
Speaker Change: New to cruise and first the brand is exceptionally high.
Speaker Change: We're just there's just accretion of greater competition.
Speaker Change: For our inventory because of all the successful activities that are coming from our loyalty program.
Speaker Change: Great. Thanks, guys. Good luck.
Speaker Change: And I'll now turn the conference back over to <unk> CFO for closing remarks.
Speaker Change: Thank you we thank everyone for your participation and interest in the company placed will be available for any follow ups. We wish you all a great day.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you all for joining you may now disconnect.
Speaker Change: The best family vacation in the World icon.
It's the first kind of a whole new class of ships, where everyone. In your crew will have.
Speaker Change: Multiple times a day.
Speaker Change: Never forget the clearing of plunging down.
Speaker Change: Record breaking slides.
Speaker Change: We're finding the courage to conquer the crowns.
Speaker Change: Bravery like nothing we've ever dared dangling high above the ocean.
Speaker Change: Yes.