The paragraph introduces the Norwegian Cruise Line Holdings First Quarter 2024 Earnings Conference Call, with Sarah Inman as the host. The call will be recorded and a slide presentation will be available on the company's Investor Relations website. The participants include Harry Sommer, President and CEO, and Mark Kempa, Executive Vice President and CFO. The call will include forward-looking statements and may refer to non-GAAP financial measures. Harry Sommer thanks everyone for joining the call.

The company is experiencing a successful first quarter, with strong demand for cruise vacations and record bookings. The recent newbuild ship announcement and peer development have solidified the company's trajectory for years to come. The financial performance has also been strong, with adjusted EBITDA nearly doubling compared to the previous year. The company's 12-month forward booked position remains at an all-time high and the adjusted operational EBITDA margin is approaching 33%. The company's sustainability program, Sale and Sustain, has also made significant progress.

During the first quarter, we were able to reduce our leverage and achieve a record 12-month forward book position. This was due to our focus on near-term priorities, such as increasing price and reducing net leverage. We also announced a historic newbuild program and the construction of a two ship pier at Great Stirrup Cay. Our long-term strategy involves delivering measured capacity growth and optimizing our fleet to drive strong financial returns.

The company's newbuild pipeline has increased significantly and is expected to drive revenue and adjusted EBITDA growth. Despite itinerary changes in the Middle East and Red Sea, the company has seen record bookings and a strong book position for the next 12 months. Yield growth has exceeded expectations and 2024 is expected to be a strong year.

In summary, the company is raising their full year yield guidance by 100 basis points due to a strong first quarter and high demand for the rest of 2024. Their occupancy guidance remains unchanged, but onboard revenue is a highlight with strong pre-cruise purchases. The company has also reached an all-time high in advanced ticket sales and has made strides in their sustainability efforts, including seeking government grants and equipping 50% of their fleet with shoreside technology.

The company's efforts in environmental sustainability and ethical business practices have been recognized by various organizations, including CDP Climate and Just Capital. The company also purchased carbon offsets to support their decarbonization journey and was honored as one of Forbes' Best Employers for Diversity. The CEO expresses gratitude to the team and highlights their commitment to creating a welcoming and inclusive workplace. These achievements demonstrate the company's dedication to sustainability and responsible business practices, and serve as a foundation for their future goals. The financial results and outlook will be discussed by Mark Kempa.

Mark Kempa, the speaker, begins by apologizing for his voice and then proceeds to discuss the company's first quarter 2024 financial results. He mentions that they exceeded their guidance and had a strong start to the year. Net yield increased by 16.2%, beating their guidance of 15.5%. This was due to several factors, including increased demand for Caribbean sailings. Adjusted net cruise cost excluding fuel per capacity day was slightly below guidance, but would have been flat if not for increased dry-dock days and related costs. Adjusted EBITDA was approximately $464 million, exceeding guidance and almost doubling the previous year's results.

In the first quarter, the company exceeded its adjusted EPS guidance of $0.12 with a profit of $0.16. They are pleased with the results and have raised their full year guidance for net yield growth, adjusted EBITDA, and adjusted EPS. The increase in net yield growth is due to strong demand and record bookings for the remainder of 2024. The company has also almost fully offset the impact of cancellations and redeployment of itineraries in the Middle East and Red Sea. The increase in adjusted EPS is partially offset by higher fuel costs and interest expense. The company credits its success to the efforts of its entire team.

In the second quarter, the company expects a strong performance with a 4.3% increase in net yield growth. Adjusted net cruise cost is expected to be $165 per capacity day, which is 5.8% higher than last year, mainly due to more dry-dock days scheduled. Excluding the dry-dock impact, adjusted net cruise cost is expected to be flat, showing the success of cost-saving initiatives. Adjusted EBITDA, net income, and EPS are also expected to increase. The company remains committed to reducing costs and improving margins through various initiatives. In the first quarter, adjusted net cruise cost was essentially flat compared to the previous year, excluding the impact of dry-dock days.

The guidance for the adjusted net cruise cost ex fuel for the full year 2024 remains unchanged at $159, with a $5 impact from dry-docks. Two-thirds of the dry-dock impact is expected in the first half of the year, with the remainder in the fourth quarter. The adjusted operational EBITDA margin has improved by 200 basis points in the last 12 months and is expected to continue improving throughout the year, ending at approximately 33.5%. The company's focus is on capitalizing on strong demand and reducing costs to improve margins. They have also completed a refinancing of their 650 million backstop commitment, reducing interest expenses and improving leverage.

In the first quarter, the company has successfully reduced its net leverage by a full turn and plans to continue reducing it over time. They are currently refining a multiyear plan to further reduce leverage and derisk their balance sheet. The company has had a strong start to the year and is focused on executing their strategies to drive net yield and deliver valuable experiences to guests.

In the upcoming quarters, the company plans to continue their margin enhancement efforts and focus on cost reduction and efficiencies. They also aim to improve financial stability and reduce net leverage over time. The company will be hosting an Investor Day to share their long-term strategy and financial metrics. The future looks promising and the company is excited to share their journey with investors. During the Q&A session, an analyst asks about the pricing and capacity allocation for the remainder of the year. The company has seen strong pricing in the first quarter and will be focusing on Europe in the second quarter, but expects a decrease in capacity in the back half of the year. The relationship between capacity allocation and pricing is not specified.

Harry Sommer and Mark Kempa discuss the strength in pricing across all three brands and major areas for deployment. They mention that there are no specific areas with outsized or undersized strength, except for some challenges in voyages that previously visited the Red Sea. They are happy with their yield growth and have increased their yield guidance by a full point. They also mention that they have been successful in cutting costs, particularly in food and marketing, and are looking to become more efficient across the entire organization.

The company has made efforts to reduce costs, including changes to fuel and bunkering processes, cutting non-essential items, and improving logistics and purchasing. They emphasize that these changes have not affected the quality of food served on their cruise lines. They are committed to providing the best food options while also saving money in other areas.

The speaker confirms that the third quarter is expected to have the highest yield growth, but the fourth quarter will have a higher comparison due to strong performance in 2023. The company is investing in private islands as they are highly rated destinations and will provide a better return on investment due to improved accessibility.

The speaker discusses their confidence in the success of their investments in a particular location and mentions the added benefit of it being in a more certain zone closer to home. They also mention upcoming additions to the area and their commitment to improving the guest experience. The next question is about the revised yield guidance for the remainder of the year and the speaker explains that they are taking a conservative view on onboard metrics and pricing, possibly due to the strong book position. They mention that they will let another person comment on the first part of the question.

The speaker believes that the distinction between onboard and ticket revenue is not as important as it used to be due to the way they are packaged and sold. They are happy with the sales of onboard packages and have confidence in raising their yield guidance. The company remains optimistic about the strong consumer trends and may see upside in onboard revenue. They project a 34% EBITDA margin by the end of the year.

The speaker is asked about the longer term margin opportunity and the potential for cost reduction. They respond by saying that they will discuss this in more detail on May 20th. The next question is about the record book position for the next 12 months, and the speaker clarifies that this includes Q1 of 2025 and it is currently the best booked quarter for that year.

The speaker discusses the increase in ticket revenues and commissions paid out to the trade, noting that ticket revenues were up 21% while commissions, transportation, and other expenses were up 6%. They also mention that dry-docks will remain at a similar level for the next few years due to the size and composition of the fleet.

The speaker explains that the divergence in air component cost is not due to changes in passenger mix, but rather a combination of lower participation rates and more efficient air buying. They also mention that their book position is significantly ahead compared to the same time last year, but they will not disclose the exact percentage. They attribute this to a strong consumer base willing to book further out and pay higher prices.

The company is in a good position to take advantage of high demand. They are seeing strong bookings for Q1 and expect Q2 and Q3 to be similarly strong, with more Americans booking European cruises. They are not giving specific numbers but say that bookings are in line with their expectations. A question is asked about 2Q yields and the company mentions headwinds and tailwinds, such as less Caribbean cruises but the mix is not a factor. They also mention the Red Sea but do not provide further details.

The speaker is addressing a question about a perceived step down in the company's performance compared to the previous year. They clarify that it is simply a result of a comparison to the same quarter in 2023 and not a deceleration. The main factor affecting performance in the current quarter is the Mid East and Red Sea, and this will also impact the fourth quarter. The speaker also mentions the construction of a pier in Great Stirrup Cay and suggests waiting for demand to stabilize before investing further in the island.

Harry Sommer explains that the pier at Great Stirrup Cay is the key factor in determining the company's long-term plans for the island. He declines to give any indication of when these plans will be implemented, but says they will discuss it in 3 weeks. In response to a question about net yield, Mark Kempa explains that they expect the third quarter to be the highest yielding quarter, with the fourth quarter having a strong comp to roll over from the previous year. They are still building and there is still time for the fourth quarter to improve.

The environment remains healthy for the company and they expect strong results in all quarters. There may be a slight headwind in Q4 due to Red Sea cancellations, but they have already cancelled all affected voyages for 2025 to prevent similar challenges. The company is excited about new entrants in the market and sees growth opportunities for their brands. The speaker congratulates a competitor on a successful IPO and wishes them luck.

The company has announced the cancellation of all Red Sea and Mid East itineraries for 2025, which is expected to improve yield and economics. The potential upside for yields later in the year may come from onboard spending and the brands' ability to raise prices based on consumer demand.

The speaker responds to a question about the company's potential for growth and assures that they will do everything possible to optimize it. They also address a question about the increase in net yield and explain that it will add $67 million to EBITDA, with half of that due to higher fuel costs. The other half is attributed to conservatism and offset by higher interest expenses. The speaker also mentions the company's new ship orders and the impact on costs per berth.

During a conference call, Harry Sommer, Mark Kempa, and Robin Farley discussed the impact of inflation on building costs for new ships. They also addressed confusion around the EBITDA and clarified that it was only a 1% raise, not a full point. They mentioned that the company's transformation office is working to offset inflation through more efficient processes. The last question was from James Hardiman, who asked about costs and dry dock, which the speakers said were flat excluding the dry dock step up in the first half.

The speaker confirms that costs will remain stable for the second half of the year, excluding dry dock expenses. They are focused on reducing costs while maintaining a high-quality guest experience. They will discuss long-term targets and strategy on May 20. The conference call has ended.

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