Beth Roberts, SVP Investor Relations, welcomes listeners to the Fourth Quarter 2023 Earnings Conference Call. She introduces the CEO, CFO, and Chair of the company and mentions that some remarks on the call will be forward-looking. Non-GAAP financial measures will be used and can be found on the company's website. CEO Josh Weinstein highlights the company's record revenues, booking levels, and customer deposits for the past year. They also exceeded their guidance range for per diem EBITDA and net income for the fourth quarter, with cruise costs in line with expectations.

The fourth quarter of 2020 was stronger than expected for the company, with higher yields and occupancy levels. They were able to overcome high cost inflation and deliver strong per unit EBITDA, even exceeding 2019 levels. The company also saw improvements in ticket prices and an increase in cash flow, allowing for debt reduction and progress towards achieving investment grade leverage metrics by 2026. Despite the challenges of the year, the company was able to deliver happiness to over 12 million guests and ended the year with record booking volumes and the best booked position ever for 2024.

The company has a strong booking position for 2024, with two-thirds of the business already on the books at higher prices. They have closed the occupancy gap to historical levels and have seen no signs of business slowing. The North American and European brands have seen record booking volume at higher prices, and the European brands are expected to contribute even more to operating improvement. The company is also pulling in onboard revenue through bundling and pre-cruise sales, and expects to see further growth in this area next year. They anticipate returning to historical occupancy levels in 2023 and have captured a significant number of new guests to continue taking share from land-based alternatives.

The cruise industry is gaining momentum in closing the value gap with land-based alternatives, thanks to the exceptional service provided by the crew and the introduction of new ships. This year, several new ships will be added to the fleet, including Carnival Jubilee, Sun Princess, and Queen Anne. These new ships make up 30% of the company's capacity and demonstrate the company's commitment to strategic asset projects.

Carnival Cruise Line is making significant investments in new destinations and infrastructure, such as Celebration Key and a pierside berth at Half Moon Cay. They are also building two floating dry docks, which will improve efficiency and reduce fuel consumption. The company has seen success in advertising, leading to increased web visits, paid search, and natural search. They plan to maintain a similar level of advertising in the future to continue building demand and bookings.

Costa, Holland America, AIDA, Carnival, P&O Cruises, and Cunard have all recently launched new marketing campaigns or initiatives to improve their commercial space. The company is focused on continuously improving and has made progress in areas such as yield management and cost optimization. New-to-cruise costs for 2024 are expected to be higher than inflation, but the company is working to mitigate this through cost optimization initiatives and leveraging their scale. Two examples of initiatives underway include the rollout of sterling and the implementation of a new Vendor-Neutral platform.

The company has launched a new system called MAS to optimize equipment and machinery management, which is expected to result in significant cost savings starting in 2026. The company is also making efforts to increase revenue and manage costs, with a goal of improving margins by four points in 2024. The company's 2024 guidance is expected to lead to a 30% increase in EBITDA and a 9% ROIC, bringing them closer to their 2026 SEA Change targets. Certain brands, such as Carnival, AIDA, and P&O cruises, are leading in terms of ROIC. The company is also making progress towards their greenhouse gas reduction target, which was originally set for 2030 but has been pulled forward to 2024.

The company has been working hard to reduce its environmental impact and fuel costs, resulting in industry-leading fuel efficiency and lower GHG emissions. They have exceeded their shore power capability goals and credit their achievements to their people, ships, and shore. They are poised for another year of record revenues and EBITDA, with strong cash flow and the ability to actively manage debt. They are confident in their continued execution and credit their success to their portfolio of brands, fleet, and people.

The speaker thanks the team members, ship and shore for their efforts in providing exceptional cruise vacations to over 12 million guests. They also express gratitude to travel agent partners, destination partners, and stakeholders. The speaker then moves on to discuss the company's fourth quarter and full year results, which exceeded expectations. They attribute the success to higher ticket prices and increased net yields. The company was able to close the year with positive adjusted net income, thanks to the efforts of the team. The speaker also mentions the company's efforts in refinancing and deleveraging. They end by providing guidance for the first quarter of 2024.

In 2023, the company saw consistent spending per diems and improved ticket prices, resulting in net yields of 1% over the previous year. They also focused on refinancing and deleveraging efforts, making debt payments of $6 billion and ending the year with $30 billion of debt, better than forecasted. They successfully stretched out a 2025 maturity and called back $1.2 billion of high-cost debt. They also prepaid an additional $2.8 billion of debt and expect to receive $800 million in credit card reserves this quarter.

In 2022 and early 2023, we increased our fixed rate percentage of debt to over 80% to protect against rising interest rates and saved $200 million in interest. We have managed our debt maturities well, with the majority coming due in 2026. We will continue to evaluate refinancing opportunities and pre-pay debt in 2024. Our EBITDA is expected to continue growing, improving our leverage metrics. For 2024, we expect a 5.5% increase in capacity and an 8.5% increase in net yields compared to 2023. This is due to higher ticket prices, onboard spending, and occupancy on both sides of the Atlantic. We have less inventory to sell compared to last year, despite a capacity increase. Occupancy is expected to return to pre-pandemic levels in 2024.

In 2024, the company is forecasted to achieve record yields and maintain historical occupancy levels while balancing pricing values. Costs are expected to increase by 4.5%, mainly due to inflation and an increase in dry-dock days. However, these costs will be somewhat mitigated by economies of scale and fuel consumption reduction. The net impact of fuel prices and currency is expected to be favorable by $90 million. The first quarter of 2024 is expected to see higher net yield due to improved occupancy levels.

The company expects higher cruise costs without fuel per available lower berth day in the first quarter of 2024 due to a few factors, including increased occupancy and dry-dock costs. This will result in a total cost increase of approximately 3%. Despite this, the company forecasts a significant improvement in net income and EBITDA for the full year 2024. For those modeling EPS, it is important to add back interest expense related to the company's convertible notes. These positive results are a result of the company's efforts to refinance and reduce debt, putting them on track to achieve their long-term goals and deliver value to shareholders. The call is now open for questions.

During a conference call, Steve Wieczynski of Stifel asked about the yield guidance for the upcoming year. He believes the current estimate of 8.5% may be conservative due to improving occupancy and strong pricing trends. Josh Weinstein, the operator, responded by saying they have a good amount of visibility and are pleased with the current trajectory, but they will have a better understanding after the Wave period in January and February. He also mentioned that they always strive to outperform their estimates.

The speaker asks if the company's projections for onboard revenue in 2024 are conservative, and the CEO responds that they expect an increase in onboard per diems due to increased spend and differentiated experiences. The CFO clarifies that their cost guidance for 2024 is an average of 3% for the second, third, and fourth quarters, but there may be differences between each quarter due to factors such as dry dock days and advertising seasonalization.

Brandt Montour, an analyst from Barclays, asks a question about the company's long-term targets and the impact of fuel on their yield growth. CEO Josh Weinstein explains that their predictions for occupancy and pricing in 2024 are in line with their expectations. He also mentions that they are two-thirds booked for 2024, which is impressive, and that their base loading strategy may have affected pricing. He concludes by saying that their strategy for pricing in January and wave season may have changed due to being so heavily booked.

Josh Weinstein explains that the company's strategy of pulling forward volume has resulted in a 10-point increase in occupancy and higher prices compared to last year. He clarifies that this is in line with their expectations and that they expect to end the year with even higher occupancy. When asked about the decision to give full year guidance despite not having the first month of Wave, Weinstein acknowledges that this could be seen as a disadvantage but stands by their strategy and expectations.

The company is back to normal and has more visibility than before 2020. They have high expectations for their brands and are strategically focusing on advancing the needle in the long term during Wave. They are seeing better new-to-cruise and new-to-brand numbers compared to 2019, which shows confidence in their brands. The company is working to improve consideration among people who are already into cruising.

Josh Weinstein, CEO of a cruise company, believes that their brands are performing well and they have a strong understanding of their target audience. They have several upcoming marketing campaigns aimed at converting awareness into bookings. The company's pricing is still lower than land vacations, which is an advantage. When asked about changes to their sourcing strategy, Weinstein explains that they have dedicated brands for European markets and they have not deviated from this strategy.

The speaker is responding to a question about any concerns they may have and the plans for Black Friday and Cyber Monday. They mention the impact on margins and how new-to-cruise bookings typically call the 800 number directly, which saves on travel agency commissions.

Josh Weinstein discusses the potential impact of new trends on revenues and costs, specifically mentioning the increase in new-to-cruise customers and the importance of trade partners in driving this growth. He also mentions the cost efficiency of direct bookings and the variability of how new-to-cruise customers book depending on factors such as brand and itinerary length.

The analyst asks for clarification on the company's yield guidance, as the expected recovery and occupancy levels imply a lower per diem growth rate. The company's glossary definition suggests a deceleration in price, but the CEO explains that they will be solidly back to historical occupancy levels, not the high watermark of 2019. The CEO also clarifies that the expected per diem increase was previously stated as 3.5%, but has been rounded up to 7.5%.

The company saw strong pricing in the second half of the year and expects to see higher pricing on a per diem basis in the upcoming year. They focus on optimizing the price and occupancy relationship to generate the most revenue. The company expects a deceleration in growth from current levels due to the high pricing achieved in the fourth quarter of the previous year. They are confident in their booked business for the upcoming year.

The speaker explains that they must consider all factors when giving guidance for the full year. They clarify that their SEA Change program will result in low single-digit growth over a three-year period, with a larger increase in 2024 due to occupancy. They are currently ahead of their targets and are well positioned to achieve them. The speaker also jokes about the analyst always trying to get ahead of future guidance. The next question is asked by Dan Politzer from Wells Fargo.

During a Q&A session, a participant named Dan Politzer asked about the impressive increase in revenues in the fourth quarter and whether it was due to specific regions or the company's strategy. The CEO, Josh Weinstein, clarified that it was portfolio-wide and the result of strong bookings and effective yield management. Politzer also inquired about the new Grand Bahama project, asking for details on capacity, amenities, and return profile. Weinstein stated that it is still a small investment and more information will be given in the future.

The speaker discusses their plans to optimize resources and benefit the Carnival brand with 18 ships from day one. They mention Christine Duffy and the experience in 2024. They also mention the impact of the Panorama being out of service and answer a question about the impact on earnings. They end by discussing their outlook for yields and interest expenses, and mention the C-change program.

The company has paid down a significant amount of debt, which will result in a decrease in interest expense. However, lower cash and declining interest rates may offset some of the savings. In 2024, the company has scheduled maturities of $2.1 billion, but plans to replace it with $2.3 billion of export credits. They are also considering refinancing to further reduce interest costs. Despite geopolitical pressures and the absence of St. Petersburg in 2023, the company expects strong deleveraging and improved debt to EBITDA metrics.

The speaker discusses potential safety concerns for a ship traveling through the Persian Gulf and mentions having a mitigation plan in place. They acknowledge that there is always something to consider in terms of safety, and end the call by wishing everyone Happy Holidays. The operator then concludes the call.

This summary was generated with AI and may contain some inaccuracies.