挪威郵輪 (NCLH) 2024 Q3 法說會逐字稿

Greetings, and welcome to the Norwegian Cruise Line Third Quarter 2024 Earnings Conference Call and Webcast.

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It's now my pleasure to turn the call over to Sarah Immon, Head of Investor Relations.

Please go ahead, sir.

Thank you, and good morning, everyone.

Thanks for joining us for our third quarter 2020 for earnings and business update call.

I'm joined today by Harry Kraemer, President and CEO of Norwegian Cruise Line Holdings, and Mark Pompa, Executive Vice President and CFO.

As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at w. w. w. dot and still HICD. dot com slash investors.

Throughout the call, we refer to a slide presentation that can be found on our website.

The conference call and presentation will be available for replay for 30 days following today's call.

Before we begin, I would like to cover a few items.

Our press release with Third Quarter 2024 results was issued this morning and is available on our website.

This call include forward looking statements that involve risks and uncertainties that could cause our actual results to differ materially from such statements.

These statements should be considered in conjunction with the cautionary statement contained in our earnings release.

Our comments may also reference non-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.

Harry.

Well, thank you, Sarah, and good morning, everyone.

Thank you for joining us today for our third quarter 2024 earnings call and happy Halloween.

I'm extremely pleased with our results as Norwegian Cruise Line Holdings continues to make steady and meaningful progress driving and leveraging the strong demand environment while delivering exceptional location experiences all while effectively controlling our costs.

Thanks to the dedicated efforts of our shipboard and shoreside fees.

I am delighted to say for the third straight quarter, we have achieved results that surpassed our guidance across all key metrics, which has led to an increase in our full year guidance for fourth time this year.

These results demonstrate how our strategic direction is yielding positive results now and positioning us well for the future, progressing steadily towards our 2026 financial and sustainability targets.

As you recall from our Investor Day earlier this year, we unveiled our charting the course strategy with additions.

We have our guests vacation better and experienced more and which focused on what I refer to as before, Pete's people, product growth platform and performance.

I would like to take the opportunity today to share our progress on several fronts of the strategy.

I'll begin my remarks by highlighting our performance filler through both our strong third quarter results and providing an update of our full year outlook.

Next, I'll discuss recent developments in our exciting new build program, part of our growth platform as well as new initiatives on all three of our award winning brands.

Part of our product pillars are also key comment on the strong demand we are seeing and how our onboard offerings and service quality continue to drive improved guest satisfaction while maintaining disciplined cost management, the balancing of return of investment and return on experience that is one of the core tenants of our strategy.

And last but not least, I'll cover some of the key advancements in our sustainability efforts, which underpins each pillar of our strategy.

I'll then turn the call over to Mark, who will provide more detailed commentary on our results and updated guidance.

First, I'm pleased to report that our strong momentum for the first half of the year.

A combination of the continued focus and execution by our teams on our strategic initiatives and successful cost efforts, coupled with sustained robust demand, has continued into the third quarter, resulting in exceptional performance.

As illustrated on slide 4, we not only met but exceeded our guidance across all key metrics.

For our third straight quarter, we achieved the highest quarterly gross revenue and adjusted EBITDA in our companies history and the highest trailing 12 month adjusted operational EBIT margin since returning to regular operations, improving almost 10 full percentage points from the third quarter of last year.

Our adjusted EPS increased 31% to $0.99, well ahead of our guidance of $0.92 despite a $0.06 negative impact from foreign exchange rates.

And our higher adjusted EBITDA drove net leverage to end the quarter at 5.58 times an approximate one and three quarter churn improvement over just the last nine months.

It's from year end 2023.

Slide 5 lays out the effect of our strong third quarter guidance third quarter results.

On our full year guidance.

Mark will provide more detailed commentary shortly.

I would like to highlight a few key points on our full year numbers.

We are projecting net yields increased 9.4% this year, marketing 120 basis point improvement from our previous guidance as we carry forward strength from the third quarter and raised our fourth quarter guidance.

This impressive growth is expected to be a record for the Company since going public in 2013 and is truly exceptional.

No.

Our adjusted operational EBITDA margin is expected to improve to 35.3%, 4.6 percentage points over 2023 and a significant step towards our goal of approximately 39% in 2026, driven by strong top-line growth and our flat adjusted net cruise cost, excluding fuel in drydock during the year, we expect our adjusted ROIC to close the year in the double digits in improvement from 8% in 2023, demonstrating we are well on our path to 12% by 2026.

And lastly, we expect our net leverage to further decrease to approximately 5.4 times by 20 target of mid four times.

Each of these year-end metrics demonstrates that we are on track to achieve our 2026 charting the course targets and reinforces our confidence in our strategic direction and ability to execute.

Turning to Slide 6, which I know you are familiar with, I want to once again highlight how our long-term growth platform pillar is set to deliver measured capacity growth and optimize our fleet to drive strong financial returns.

Historically measured capacity growth has driven outside revenue, outsized revenue and adjusted EBITDA growth, both and we expect this trend to continue with the additions of new vessels to our fleet.

I'll provide more details on these exciting developments.

As we turn to Slide 7.

At Norwegian, we recently unveiled would in 2026 will be the 21st shipments in our fleet Norwegian Luna.

This exciting addition will launch a variety of funding fund voyages ceiling rounds just from Miami, starting in April 2026 as assisted ship to Norwegian Aqua Luna.

Both exciting enhancements over previous premium class ships, including a 10% increase in capacity, luxurious new three-bedroom duplex Haven suites of ground breaking hybrid roller coaster water slides that we'll review next year on Norwegian Aqua new activities and gains for our guests and a new revitalized service at the Mondoro sponsor.

Ron and post fitness centers.

Speaking of Norwegian Aqua, we're making excellent progress towards your launch in early 2025.

Earlier this month, I visited the Fincantieri shipyard in Italy.

At witness first hand, the impressive final touches being applied to the vessels.

I'm incredibly excited for our guests to experience this next generation premium class ship at Oceania Cruises.

We remain committed to delivering the finest cuisine Etsy with new experiences on every newbuild.

In this case, I'm sorry, in the case of the brands upcoming, Laura, we are introducing the creativity for which Oceane is newly appointed Executive culinary directors and resident Master Chef Safran's, Alice Corindi and Eric Burrell have crafted over 20 exquisite recipes.

I'm eagerly anticipating our food 11 guest reaction to this new exciting culinary experience when a lower debuts next year.

And of course, I'll be first in line.

Finally, Regent seven Seas Cruises recently celebrated the steel cutting for its latest ultra-luxury ship seven Seas prestige, a 77,000 tons and accommodating only 850 gas.

This vessel will offer our guests unrivaled space and see with one of the highest guest to sales ratios in the industry.

The ship will introduce exciting innovations, including a reimagined Palacio region suite, a new set of duplex suites and other accommodation categories, fresh dining experiences and numerous other incredible offerings that will allow our guests to experience luxury transcended.

Moving to slide 8, we have enhanced our offering and partnership building at our bold aspiration for our guests to vacation better and experienced more Norwegian, launched its new brand positioning experience more seats, which underscores NCLs commitment to provide guests with more variety more to see more to do more to enjoy and more value through elevated offerings, providing more of what they love vacationing.

The Morquio offering is an evolution and expansion of the previous Free at Sea package.

Now with an enhanced beverage package, additional nights, especially dining venues and StarLink high-speed Internet.

In addition to its new positioning, Norwegian also unveiled its latest partnership as the official cruise lines of the note National Hockey League.

This milestone marks and sales, first, partnership with the professional sports league and the NHL.'s first partnership with the cruise lines.

This multiyear partnership provides a fantastic platform for the brand to connect and engage age with hockey fans everywhere and show them how they can experience more and see with NCL.

Oceana.

Meanwhile, unveiled its new brand value promise and offering your world included, which features an updated selections have always included amenities for our guests as part of the new brand promise gets will now have a job generously of I-many's included in this there, including core may specialty restaurants in fleet dining, prepaid opportunities for made coffees and teas, laundry services, and unlimited StarLink Wai Fai, among others.

These enhancements have helped drive increased demand, and I'll now discuss our booking trends on Slide 9.

Since our last quarterly update in July, the cruise consumer has continued to show strength.

Resilience has allowed us to take advantage of the strong demand we experienced in the third quarter.

Net yield grew 9% year over year and outperformed guidance by an amazing 260 basis points.

This impressive performance was large.

Finally, due to strength in pricing and demand across all geographies, but particularly in Alaska and Canada, New England voyages.

We also saw strong onboard revenue across the board, particularly in shore excursions and communications.

The latter boosted by StarLink, which is already live on 30 of the 32 ships in our fleet.

I will be rolled out to the entire fleet by year-end.

Another sign of consumer health and confidence pre-booked onboard revenue continues to improve up mid single digits from the previous year and nearly doubling from 2019 levels.

Looking ahead, we are at the upper end of our optimal range on a forward 12 month basis.

And we continue to see strong do demand for all brands and deployment with pricing and load for 2025 in line or above this year's level for all four quarters and full year.

Turning to slide 10, we see the strength of our demand reflected in our advanced ticket sales, which increased 6% compared to the previous year, outpacing capacity growth.

This achievement was driven by robust pricing, a dynamic deployment mix, increased presale packages and capacity growth.

Moving to Slide 11.

I will now dive into some of our advancements in sustainability, which underpins our strategy.

We are committed to being responsible stewards of our environment while creating long-term value for all of our stakeholders.

And I'm proud to share some key highlights of our progress.

This quarter, we received some significant recognition and for our sustainability efforts, MSCI. gave us a rating of A. within the hotel and travel industry for the 2nd year in a row.

This recognition reflects our ongoing efforts to integrate environmental, social and governance factors into our business practices.

It's a testament to our dedication to transparency and responsible business practices.

Additionally, at EST. shipping award this year, we were the top rank company in the ESG leadership category and the only cruise line to even make the list.

This accolade recognizes our outstanding achievements and innovative initiatives within the global maritime industry.

It reinforced as our position as a leader in sustainable cruising and motivates us to continue pushing boundaries in this area.

Operationally, we also made significant strides in our alternative fuel initiatives.

41% of our fleet has now been tested with the biodiesel blends surpassing our 2024 volt.

This achievement underscores our commitment to reducing our carbon footprint and exploring innovative solutions for cleaner operations.

Finally, strengthening our communities is a key pillar of our global sales in SUSTAIN program, and we are committed to supporting organizations that benefit communities at large.

During the third quarter, Oceana successfully launched the Relay for Life at C. program and Oceane as Insignia and Vista.

This initiative awareness through an onboard walk and encouraging donations to the American Cancer Society.

We're excited to roll this program to the remainder of the Oceana fleet later this year, further amplifying its positive impact.

Additionally, in the wake of the destruction caused by both hurricanes Milton Angeline, we contributed $83,000 to the American Red Cross sell those and affected communities.

In addition to the $30,000 previously donated to the Red Cross to support hurricane a lean relief efforts, we are matching of the 50,000 more in public donations towards hurricane Milton relief efforts.

These achievements demonstrate our focus on and holistic approach to sustainability, encompassing environmental stewardship, social responsibility and strong governance.

As the continued charting the course towards a more sustainable future.

We remain committed to innovation, transparency and creating positive change in the communities we touch.

With that, I'll hand the call over to Mark to go over financial results in more detail.

Smart?

Thank you, Harry, and good morning, everyone.

My commentary today will focus on our third quarter 2024 financial results.

Our increased full year 2020 for guidance and are increasingly solid financial position unless otherwise noted, my commentary on 2024 net yields, an adjusted net cruise cost, excluding fuel per capacity day metrics are on a constant currency basis and comparisons are to the same period in 2023.

Let's begin with our third quarter results, which are highlighted on Slide 2.

12, starting with the top line results were very strong, with net yield increasing 9%, exceeding our guidance of 6.4% by 260 basis points.

Several factors contributed to the strong top-line growth in the quarter.

First, exceptionally solid demand and pricing across our deployment, particularly for Alaska and Canada and New England sailings across all three brands.

Second, we experienced stronger than anticipated onboard revenue across the board, particularly in shore excursions and communications.

The benefit of this higher pricing and onboard spend is compounded by the third quarter, seasonally high occupancy resulting an outsized growth in the top line and adjusted EBITDA.

Moving to costs.

Adjusted net cruise cost ex fuel per capacity day came in CAD1 below our guidance of one 55.

This is primarily due to timing of certain expenses that will now shift into the fourth quarter.

This resulted in record breaking adjusted EBITDA for a quarter coming in at $931 million and surpassing our guidance of $870 million by over $60 million while increasing year over year by approximately 24%.

As a result, adjusted EPS was $0.99, exceeding guidance of $0.92 in the quarter and increasing 31% compared to the third quarter of 2023.

Despite a $0.06 negative impact from FX in the quarter.

We have seen strong results through the first nine months of the year and along with improved expectations for the fourth quarter, we are increasing guidance for the full year, which I will discuss on Slide 13.

Looking first at net yields and the fourth quarter, we are expecting growth of 6.9%, which was approximately 190 basis points better than our implied guidance last quarter.

We are increasing guidance based on several factors, strong demand and pricing in the Caribbean, where we have 30% of our capacity in the quarter and continued strong onboard revenue trends with healthy pre-booking for onboard amenities.

These are very strong results considering the impressive 8% net yield growth we achieved in Q4 of 2023 and the headwinds from the rerouted Middle East sailings in 2024, which comprised approximately 10% of our deployment in the fourth quarter and was disproportionately weighted to our higher yield leading brands.

Moving to fourth quarter costs, we anticipate adjusted net cruise cost ex fuel per capacity day to increase by 2.7% to one 55 from one 51 in the same period of last year, and they and $1 above our previously implied guidance.

This slide increase is mainly due to the timing of certain costs from the third to the fourth quarter, which I mentioned earlier.

Excluding the $6 impact of drydocks in the quarter, our unit costs ex fuel will be down approximately 1% year over year.

Reflecting these positive trends, fourth quarter adjusted EBITDA guidance is increasing to approximately 445 million.

These results are driving our adjusted net income to approximately $40 million and a return to positive adjusted EPS in the fourth quarter, which we expect to be approximately $0.09 considering a share count of 445 million, resulting in a positive adjusted EPS and all all four quarters of the year.

I want to remind you that at these net income levels, we expect that none of our exchangeable notes are dilutive in the fourth quarter, and there is no related interest expense add-back.

Looking at full year net yield, we are carrying forward the Q. three b. and our increasing expectations for the fourth quarter and now expect full year net yield to grow to 9.4%, which is 120 basis points better than our previous guidance and represents a record for that company for adjusted net cruise cost ex fuel and excluding the impact of our drydocks, our guidance remains unchanged and is expected to remain flat year over year despite the impact of inflation and increased variable compensation due to the strong performance of the business.

As a result of the hard work and dedication of the entire organization, we continue to pace ahead of our target to deliver 100 million in savings in 2020 Form on adjusted EBITDA, full year guidance is increasing to approximately 2.4 to $5 billion, and we have increased full year adjusted EPS guidance to approximately $1.65, which is a 136% increase over 2023 and March, significant progress toward our 2026 charting the course target of approximately $2 and $0.45.

Slide 14 demonstrates how the hard work put in by our teams across the organization has resulted in significant improvements from our and our initial guidance to our current expected results for the year.

Our full year net yield growth expectation has increased 400 basis points from 5.4% to approximately 9.4%.

We have maintained our cost guidance for the full year, which is expected to be flat year over year.

Excluding the impact of drydocks.

As a result, our adjusted EBITDA guidance has increased $225 million to approximately 2.4 to 5 billion, and our adjusted EPS is increasing $0.42 to approximately a $1.65.

This performance stems from our ability to capitalize on strong demand while executing on our culinary obviously mentioned 2024 is shaping up to be an extraordinary year, surpassing our ops optimistic expectations with record net yield growth.

Looking to next year, based on coal current booking trends that are booked position, we continue to expect our full year 2025 net yield will grow consistent with our algorithm discussed at our Investor Day.

Now a couple of notes for modeling net yield in the first quarter of 2025 First, while we have a similar number of too total drydock days as the first quarter in 2024 due to the mix of vessels and the number of lower yielding repositioning days, the number of capacities related to this is 50% higher year over year.

Second, as you recall, we had a very strong net yield growth of 16% in the first quarter of 2020 for providing for a challenging comp in the quarter.

The result of these two sectors that we expect first quarter 25 net yield growth to come in lower than the full year average.

Looking at slide 15, I want to dive a bit a bit deeper into our margin enhancement initiatives.

As outlined during Investor Day, a cornerstone of our strategy is to boost margins and reduce costs across the organization while enhancing or maintaining the guest experience and product delivery are reasonable.

Our results speak for themselves, and we expect to continue executing on this algorithm as we close out 2024.

We have been able to maintain our cost guidance throughout the year, and we continue to expect that adjusted net cruise cost ex fuel per capacity day will essentially be flat year over year, fully offsetting inflation as well as increased variable compensation due to strong performance in the year.

Our margin enhancement initiatives continue to yield significant results across the organization.

As previously mentioned, we are pacing ahead of our target to reach 100 million of savings in 2024, and we remain confident in our ability to achieve our 300 million of savings, which includes certain fuel initiatives through 2026.

As we look ahead to 2225, building on our strong performance performance in 24, we remain committed to maintaining our unit costs below the rate of inflation, which supports our stated 2026 targets.

Moving on to Slide 16.

We can see how these cost savings initiatives have positively benefited our margins last 12 months adjusted operational EBITDA margin for the third quarter improved approximately 900 basis points to 34.5%, and we now expect the full year to come in at approximately 35.3%.

This continued progress sets us up well for our 2026 target and returning to margins of around 39%.

Moving to slide 17, I'd like to highlight the composition of our debt portfolio and some key developments in the quarter.

While our leverage is still higher than we prefer, it is crucial to note that 55% of our debt consists of public debt with the remaining 45% in the form of export credit agency or ECA financing, which is the primary source of financing for our ship orders.

Ecas essentially provide a guaranteed by sovereign governments such as Italy of the loans we obtain in connection with the ship orders resulting in financing rates that are much more favorable than that of which would be secured in the capital markets.

Looking ahead, we anticipate a gradual shift to a higher proportion of ECA financing as new ships come online and our remaining expected debt matures and or is repaid in addition additional.

Additionally, we aim to further derisk our balance sheet as we look at liability management opportunities going forward.

We believe our strategic approach to optimize our capital structure and debt profile and continue to reduce our cost of capital over time.

This quarter, we refinanced 315 million of notes due December 2024, with six in a quarter unsecured notes due 2030, with the remaining balance of 215 million to be paid at maturity.

On Slide 18, you can see our upcoming maturities after we paid down the remaining balance of the 250 million of the 2024 notes in December.

We have two components of debt to address on the horizon.

First, our 2025 exchangeable notes, which we plan to assemble and shares, and second, our 1.4 billion five and seven eight notes due 2026, which will become current in the first quarter of 2025.

Additionally, we have six 100 million of eight and three eighths notes, which will become callable in early 2025 that we are evaluating as the rate environment continues to improve.

Turning to leverage on slide 19, we have continued to make progress on our net leverage, which ended the quarter at 5.58 times a 1.75 times reduction from 2023 year end.

Moving leverage into the fives is another important step, and we continue to reducing.

We continue to expect reducing leverage for the remainder of 2024, ending the year at around 5.4 times, an important milestone in our path to achieving our 2026 target of mid fours.

With that, I'll turn it back to Harry for closing comments.

Well.

Thank you, Mark.

I want to close by reminding everyone of the holistic strategy and ambitious targets that we laid out at our Investor Day, which are summarized on slide 20.

We are on track to end 2024 on an exceptionally strong note, marking our best year as a company since we returned to operation operations and an all time record adjusted net yield growth and record adjusted EBITDA.

With this performance and our high visibility to the future sales, we remain confident in our strategy.

Looking into next year, we will continue to drive towards our Investor Day guidance of low to mid single digit net yield growth both and sub inflationary unit cost increases, positioning us well to achieve our ambitious 2026 charting the course targets.

I want to express my deepest gratitude to our dedicated teams.

Both short-sighted shipboard, their unwavering commitment and hard work had been instrumental to our site success.

As we look to the future, I'm filled with optimism about the opportunities that lie ahead for Norwegian Cruise Line Holdings.

With that, I'll hand the call back to the operator to begin the question and answer portion of the call.

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Our first question is coming from James Hardiman from Citi.

Your line is alliance.

Hey, good morning, Tom, and thanks for taking my questions and congrats on a really strong quarter here, particularly the pricing front.

Us from doing the math right here per diems were call it, 5% movement in the second quarter.

That accelerated to 7% in the third quarter, which is obviously he exceptional fourth quarter guidance, if I'm doing the math right, gives us back back to that call at 5% range, which is really good considering Mark does not long ago, we were having a conversation as to whether or not we would even be positive in the fourth quarter, but maybe walk us through some of the non-comparable head winds and tail winds of the last couple of quarters.

It was really trying to figure out on an apples to apples to apples basis or per diems accelerating, decelerating being consistently strong.

How do I think through that?

Well, good morning, James Aetna and by the way, nice to report that you issued couple of weeks ago.

So listen, I think, as you know, as we look through to the fourth quarter and pricing, you know, I think you nailed it.

You know, when we were we were talking about this two, three quarters ago.

I think implied pricing was somewhere in the zone of flat to down 1%.

But there's a couple of important things to really remind ourselves of that, would that were challenging or that we're going against our recall, Q4 of 2023, we did have pricing of 14%.

So number one, we are rolling over a strong comp, and that translated to a yield of 8%.

But we've also been able to continue to see strength in both our near term and Caribbean deployments.

So we've continued to build upon that.

And then I think what we also need to recall is that as a result of the Mideast disruptions late last year, we have had an outsized proportion of our capacity that was originally scheduled at for the Middle East in Q4, which represented about 10% of our overall capacity and was disproportionately weighted to our higher ending brand.

So given the fact that we're out, we're now showing price thing of around 5% yield of about 7%.

I think this said, we feel this is a great, great improvement and certainly are somewhat weak where we can continue to build upon.

Got it.

Thank you.

And then Tom, I wanted to talk a little bit about the Analyst Day guidance and in particular that we built between yields and cost side found to be a pretty helpful for rubric of the Analyst Day for this year that dealt with maybe 4%, not even It now stands at 6%, right?

If you're going to grow yield of nine, 9.5 and costs 3.5, call it, you're looking at a 6% delta.

I guess as I as we roll that forward to next year, does that make it more difficult to see some, you know, significant Delta's and in particular, your 2.5 points, it seems increasingly likely that you're going to do that over the three-year period.

But is that even even possible as we think about 2025, basically trying to figure out if there's been some pull forward of that?

Because ultimately, if you maintain that build for I think you're going to comfortably exceed that, but to 45 earnings target for 26?

So officer?

James, this is a Terry.

I'll take that.

What I think the rubric with, as you mentioned, just as a way that easily see through how we can get to 2026.

But what we're focused on is the actual 2026 number, the operational EBIT margin approaching 39%, EPS at two 45 made for leverage and a record ROIC and in the neighborhood of 12%.

And I think seeing the performance this year year end and the six months since we introduced these targets, that we obviously have a better visibility into 2025 as well, just allows us to be more optimistic and more certain about our ability to obtain the numbers.

So I focus a little bit less on any specific rubric.

It more on the four numbers that data that we have given out there.

We are fully committed and optimistic about obtaining these numbers in 2026.

And James, I'll add to that.

What are the cornerstones of that is that we've reiterated it today is that we are we intend to deliver some inflationary unit cost growth.

And you know, as we've talked about the past, we have a 300 million plus program in place.

We are on pace with that.

In fact, we continue to be ahead of our pace with that.

So we increasingly increasingly field or more confidence around that.

So we're lining up the pieces.

But as Harry said, we're focused on those four key metrics at the net of 2026.

Got a really helpful.

Thanks, Mark.

And fair.

Thank you.

Next question today is coming from Brandt Montour from Barclays.

Your line is now live.

Good morning, everybody.

Thanks for taking my question.

So the first question is on bookings color.

What you guys gave some color was well appreciated.

Maybe we can go one layer deeper and talk about 25 bookings strength.

And maybe you can talk about that through the lens of the different brand and the different geographies.

The quarter's I know you said you're up and all four, but any quarter standing out and then you sort of demographics in your database.

Do I think that would probably quarterly with your brands, but any extra color would be helpful.

Yes.

So thanks for the effort for the question.

This is Harry again.

I'll pay.

You know, we really fine tune our revenue management tools.

So, you know, we manage to booking curve.

We managed to maximize yield.

And I can't say that we see any discernible pattern across the brands or across geographies or cost just for that matter, the sourcing of gas that stand out for the positive or negative, you know, broadly base, everything is progressing exactly as we'd like it to be.

Clearly, we continue to see this robust close-in demand, which allows us to sort of reconsider our booking curves over time because obviously we want to take advantage of it.

We said before or we don't focus on record book position.

We focused on record yields.

I think the quote I made in last year's called is like I can't take book position to the bank.

I can only take book yield to the bank, and that's 100% of our focus.

So get back to your question, we see good solid are in line with our expectation.

Bookings, both data on a low of replacing factor for 2025, in line with the overall commentary we gave in setting our charting the course targets, a moderate capacity growth, moderate yield growth, Club inflationary costs, both as Mark mentioned, with the goal of continuing to improve our margin, drive strong cash flows and delever our balance sheet.

Okay.

That's great.

Thank you for that, Harry.

And then the second question is on the booking curve.

You guys said that you're in the upper end of the optimal part of the of your curve.

Just curious, I'm curious if that optimal curve is that optimal point has evolved over time pre-COVID versus post-COVID?

And if you had to recalibrate that downward at all, just because you don't want to leave money on the table, the strength of the demand you're seeing in and sort of a again, an upward pricing environment and travel, any extra color on sort of how you're managing that and with optimal means short.

So I cover part of it and my last comment, but let me let me reiterate or react to that.

I think both the sub points, I think overall coming out of COVID, clearly there was some uncertainty and we weren't looking to push the booking curve a little further in advance in order to take risk off the table.

We didn't know what we've what we did.

And now clearly, again, we have now seen a robust close-in demand, which is a little different from what we saw last year, where the close-in demand certainly wasn't as good as we were hoping for, which has allowed us to deepen the last two quarters supposed to last year was a little bit more challenging.

So that being said, 100% are booking curve thoughts evolved over time.

But it I also want to stress read that booking curve and it's not one, you know, static number and it varies by January.

It varies by Brad.

I mean, you know this, but I say for the record of it and we have teams that will get this all day every day and take into account the latest information to set.

So the short answer to your question is yes, we are further booked ahead that we were pre-COVID, but we don't think we need to have record.

We don't think we need to continue to push the booking curve further, especially line with this robust close-in demand of inducing the last few quarters.

Thanks, everyone.

Really nice quarter.

Thank you, Ron.

Your next question today is coming from Steve Wieczynski from Stifel.

Your line is now less.

Hey, guys.

Good morning.

So I want to ask a bigger picture question if I can start here.

And if we think about the cruise yields, historically, they've grown, call it in that low single digit range based on some of the changes that you guys have talked about and that could be cabin designed, shorter itineraries, enhanced revenue management, skill in all that kind of stuff.

Is it fair to think that there's a good chance, um, I know you guys and probably the industry as well could start to see fueled growth, um, well in advance of that low single digit historical rate.

So clearly, it is our goal to grow Neil's as fast as we can.

But I think the at the algorithm that we've discussed many times of low to mid-single in yield growth with low inflationary costs, relevant, et cetera, is what we're sticking to the timing.

Obviously, we do everything in our power into app, the government much as possible.

But I think what we're prepared to look based on what we see based on our crystal ball for lack of better term is continuing with that same that than we were talking about for a while now 24 with a little bit of an unusual year in a positive way, and we'll roll forward and we're thrilled with our results.

But I think longer term, definitely segment motor segment of moderate capacity growth, low to mid single digit yield growth, low inflationary cost growth.

Okay.

Got you.

Okay.

And then second question is going to go to the cost side of equation and market.

Obviously you've Peter, do you kind of talked about that 300 million in cost savings between now and in 2026?

In your prepared remarks, you noted that you're going to exceed kind of that third goal of 100 billion so far this year or so.

You kind of sit there and kind of continue to go through your cost structure based on what you have with based on what you guys have identified already, um, um, and assets in a way you might give you an answer, but is it fair to think when it's all said and done, that's 300 million might end up being low or conservative?

Yes, good morning, Steve.

So I certainly wouldn't want to get that far ahead of ourselves in terms of being lower conservative.

What I will tell you is is we have done a very good job at identifying the goals that we have set out.

And further, what we've said is this is not a one-time exercise.

This is a multi-year, your journey.

So we are focused on looking at every process and the business from end to end, not just looking for any low hanging fruit, all while protecting the the guest experience and the brand, the product delivery.

So look, we're six, what do we six, seven months into our stated goals and targets.

That's we're feeling increasingly confident on our path toward that.

And hopefully, you know, early summer sometime next year, we can get further progress on where we stand if it's large or conservative.

But we're feeling good with where we are today.

Okay, got it.

Thanks, guys.

Appreciate it.

Thank you.

Next question today is coming from Matthew Boss from JPMorgan.

Your line is now live.

Thanks and congrats on a great quarter.

Thank you, Matt.

Harry.

And maybe could you elaborate on the strong momentum that you cited?

Any notable outliers?

I brand reach and any signs at all of softening as you're looking into 25?

Yes.

Matt, I think I commented a little earlier on this, so I'll keep my comments on the short of really it's across the board.

We're happy with all three of our brand.

We're happy with both geographies.

We're happy with all our guests sourcing markets.

I mean, it's hard.

It's hard to see any cracks you I don't want to get ahead of our skis.

You know, as I mentioned before, we're focused on this low to mid-single digit yield growth.

So my commentary is reflective of those numbers.

I don't want any rationally to rent accrual of about 2025, but we are absolutely happening with what we're seeing today.

Great.

And then Mark, maybe just to circle back to your 250 basis point yield to cost target spread, maybe how best to think about the linearity of costs next year, if yields were to come in above your initial plan?

Yes, good morning, Matt.

So I think we've always said generally speaking, when we think about our 300 million plan, generally, we laid it out as roughly about 100 million per year, right, that that may that may vary up or down marginally.

But I think something that's important to note and we've probably been pretty public about saying this is that if we're able to exceed our that low to mid single digit yield growth than a year, that does not necessarily translate that we are going to go and spend more money.

We are focusing on right sizing and leveraging the scale of this business.

And part of that includes rightsizing our unit cost base.

So we're focused on that, but that that does not have any direct correlation.

In terms of outperformance on yield, I mean, it's really the point that Mark mix is really important.

These are independent factors where we were targeting the low to mid single digit yield growth.

We're targeting below inflationary cost growth.

I feel it's better or worse seeing how the year shapes up.

We will continue to target low inflationary cost growth.

And we've seen a culture change in the Company towards this balance of return on investment and return on experience, which we talked about at Investor Day.

We are super focused and passionate about delivering a great experience, but on things that gets truly care about and things to generate positive ROI for the Company.

Great color and best of luck.

Thinking.

Next question is coming from Conor Cunningham, familiar research providers, Alliance, everyone.

Thank you.

And I ask yes, the yield question a different way.

Maybe.

So when you say low to moderate yield growth, because that is that should that be viewed as kind of your core pricing outcome?

The reason why I ask is that every cruise line has talked about how they've left money on the table.

So I'm just the question here, system more from like what's the swing opportunity as you get better at yield managing now that you have bookings back to historical levels?

Thank you.

So I think there were like two or three sub-questions there.

So I'm going to China to Mike, that's remembrance of and add to that.

Yes, I think most of the yield change that you're going to see in 2025, it's going to be on pricing.

I don't expect any material change in occupancy.

Of course, we're not giving 25 guidance yet, but I think I don't see that swinging much of it does swing space and the number of children that we take, primarily that the NPL, Brad, which doesn't meaningfully contribute to what our revenue from a big picture perspective.

The second part of your question.

So on remind me, was swing opportunities get better investment with an eye.

Everything is how do I say this?

There's no evolutionary changes to our revenue management that's coming up.

We just do our best day in and day out to get slightly better.

What I what at what we do, which is part of what appeals to our stated algorithm of low to mid-single digit yield, will keep in mind that we do continue to to increase the capacity of the Company by between 46% a year in new ships come online.

So I don't see huge opportunities here.

Obviously, everyday work and our goal is to maximize yield.

I think there's another component which is onboard revenue, which doesn't get talked much about this revenue management is primarily a tool that that that talks to ticket price.

But we are trying I was saying we're in the beginning phases of doing better revenue management on our on pork product as well.

I think some of the close and strength that you're seeing in Q. three Q. for a look at various market parse through the financial statements because of the way we bundle our products.

But some of the strength that we're seeing in Q3 and Q4 is also not only, but it's also around our better revenue management, so to speak, on the onboard revenue, providing guests more opportunities that are marketing a better experiences to purchase onboard, which is generating revenue for us as well.

More presales.

Thank you, Mark.

Actually dovetails into my final question.

What percent of your customers today are doing some pretty board pre-booked onboard spend?

And then what's the gas water handling at nearly all of them buying something in front of us in front of the up in front of the other cruise?

If you I mean, if you think about the robust things that we offer between these packages, binding packages, spot, short-course idling, the list goes on and on our close, I think those are mostly to pick one nearly every customer buys something before they get on the ship.

Okay, thank you.

Thank you.

Next question is coming from Vince Ciepiel from Cleveland Research Company.

Your line is now live.

Thanks.

You look out over the next 12, 24 months as part of your long-term plan, how are you thinking about the trend line and occupancy?

I know you think are a couple of points shy of where it was historically and some of that might be mix.

But as you're adding new Norwegian hardware and 25 and 26, do you expect to offer occupancy to be a tailwind to yield growth in the next couple of years?

I think I commented a little bit about occupancy in an earlier question on our ships are essentially in full from a capital perspective.

So the changes that we may see occupancy either positive or negative when in mostly around our third and fourth in the cabin, primarily children and on the NCL rate and which don't really generate much revenue for us.

So I don't see occupancy being a tailwind or headwind off from that perspective going forward, I expect it to remain relatively stable.

Occupancy unemployment, at least through 2025 for deployment doesn't shift to know.

Remember, we have talked about a slow, the larger relies on the Caribbean going forward, but we won't really see that until late 25, but primarily to the 26 results are somewhat based on the new deal that we're building at our Creative Circle K, which will allow us to double the number of passengers we bring there in 26 compared to what it tomorrow recent years.

But I don't really see much happening on occupancy and 25.

Great, thanks.

And then another on costs, I think you called out one Q. having some headwinds on drydock and repositioning days, which I think also maybe hinders yield a bit.

But when you think about the full year impact on costs of drydocks this year, I believe it's about three points when you look into next year, is dry dock headwind neutral, a tailwind to cost growth?

Is this the new kind of baseline to utilize in years ahead?

Good morning, Vince.

Yes, so you're absolutely right on an annual basis, our dry docks year over year are relatively the same off.

So this is generally our consistent run rate post COVID.

I wonder why we called out Q1 is because there is some timing issues within the year where even though we only have six more drydock days than we did in the prior year, it actually represents 50% more capacity days.

So that's not necessarily a call out in terms of cost.

It's more of the impact that it will have on on our overall comps and the yields for the first quarter.

But again, that evens itself out over the course of the year.

And that was why we had called that out in our prepared remarks.

Thank you.

Thank you.

Next question today is coming from Robin Farley from UBS.

Your line is now live.

Great.

Thank you.

Please go back and clarify, I'm hearing when you are talking about the long-term goals at your focus is really on the number in 2020.

Were you suggesting that not every year would necessarily have the deal goes to 2.5 points higher than expense growth?

So in other words, this year was a lot better than that pizza.

The algorithm for next year could be less than the 2.5 points like this.

How would you sort of communicate when you said your focus is on the absolute number in 2026?

Even if not every year looks the same to get there?

Or is that how we should interpret that comment?

I think, Robin, that's broadly correct.

You know, to be clear, we're not providing guidance for 2025 today.

So I'm not going to comment on and on a specific number, but we're focused on these long-term targets for 26, not on a specific spread in 25 or 26 individually.

Of course, we don't expect the results vary that much in these two year period based on the visibility we have today.

Okay, great.

Thank you.

And then just also thinking about 2025, and you've mentioned an expense is going to have some insulation from what do you broadly think of as inflation sort of today when you when you Thanks.

Yes.

Hi, Robert.

So broadly speaking, when we look out, inflation obviously is a bit volatile, but something that keep in mind, it's not just U.S. inflation were worldwide operator.

So we look at global inflation.

So we generally are thinking somewhere around the 3% zone based on what we see today.

Now, obviously, that may change change up or down as we go through time.

But generally speaking, that's a that's typically what we would associate as part of our longer term plan, Total banking revenues.

And Kevin, I think we have time for us for one more question.

Certainly.

Our final question today is coming from Patrick Shows from Truist Securities.

Your line is now live.

Great.

Thank you.

Tom, you mentioned just very briefly during this call about what's happening in a great store uptake and give us just a little more color where you stand with progress.

Any further thoughts on specific timing and anything you can share above and beyond what may be mixed after the kind of give us color on our progress and status?

So when we announced that we were putting the new pier there earlier this year, I've been personally a great start to see a few times to see how things are going.

And we feel really comfortable that we will remain on schedule to open that appear in in sometime in Q4 that the two team has really focused in doing an incredible job of building at you know, we're really happy to get that period because as I mentioned earlier in the call, we believe it will allow us to utilize the I would more specifically in the winter, went a little bit more would be in that region and plan to double the guest that visit that island starting in 26 compared to where we are I had today, which should generate higher guest satisfaction and higher revenue, higher repeat rates, you have becomes a virtuous cycle, so to speak from that perspective, looking past that we think the average grade, we have a great private data we have out in the great I forget what it's called, I should do better than SilverBow.

Thank you.

Which is a great mix of private Haven like experience on the out as well that lines jet skis, lots of interesting things for people to do.

But I'll tell you like with every asset in our portfolio, we are constantly reviewing this balance of ROINROX. to see what we can do to get gets a better experience that will drive our oh, I have nothing to announce today, but we continue that analysis and that team towards the future.

Thank you.

Okay.

I think since your question was short, James, what the cabin?

Excuse me, we'll have time for one more question, but certainly.

Our next question is coming from Ben Chicken from Mizuho Securities.

Your line is now live.

Thanks.

Just one quick one at the Investor Day, you flush out a number of examples on the cost side.

Would love any update here if there's anything to share some specific areas and 25 that you see as opportunities?

Thanks.

Yes, good morning, Ben.

So you don't look at it's very consistent with what we called out there.

You know, it's around looking at all of how we deliver our product from, you know, from start to finish again, on the basis of we do not want to impact the product delivery or the guest experience.

So we are looking at every facet of the business and more empowered.

Certainly, we're focused on things that the guest is either don't value or that are invisible to the guests so that we can ultimately provide more value to the gas.

So nothing up.

Nothing significant in terms of the overall categories to share, just other than we are looking at everything, whether it's on our ship site operations or at our shoreside operations in a very methodical and disciplined manner.

And then if I can squeeze one just very quick one, and I know you give us a year over year impact from drydocks 24 versus 23.

But any chance you can just high-level give us some color on the distribution of drydocks in the year on an absolute basis, meaning 1H versus 2H?

Yes, I think I think that we can probably follow up with that post call.

We can certainly give you some color on that.

Thanks.

So once again, I want to thank everyone for joining us today.

We were very pleased with our reported.

Hopefully, you are as well will be around today to answer any questions you may have.

Thank you all.

Happy Valvoline.

Happy Diwali, and have a wonderful day, everyone.

Thank you.

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