Carnival Corporation & plc Q3 FY2025 earnings call

Key Points

• Record Performance: Delivered record revenues, yields, operating income, EBITDA, and net income of $2 billion. Yields saw a 4.6% increase on a same ship basis despite 2.5% lower capacity than the prior year's third quarter.
• Financial Metrics: ROIC stood at 13% for the trailing twelve months, a significant milestone since 2007. Leverage improved to 3.6 times net debt to EBITDA. Refinancing efforts, including using $500 million cash to call remaining converts, were highlighted.
• Destinations: Celebration Key opened in July 2025 to rave reviews, with nearly half a million guests in two months. The mid-2026 opening of the Relax Away Hastings Quay pier expansion is planned. Caribbean destinations are expected to draw over 8 million guest visits next year.
• Brands and Execution: Aida's evolution program and Carnival's new marketing campaign, enhanced loyalty program, and strong performance in Alaska, Europe, and The Caribbean were noted. The diversified portfolio of brands and assets was emphasized as a strength.

The quarter saw record revenues, yields, operating income, EBITDA, and net income of $2 billion. Yields increased 4.6% on a 2.5% lower capacity compared to the prior year. Cruise costs without fuel per available lower berth date (ALBD) were up 5.5% but beat guidance. ROIC reached 13% for the trailing twelve months. Caribbean destinations like Celebration Key and the upcoming Relax Away Hastings Quay pier expansion are key, with the Caribbean expected to capture over 8 million guest visits next year. Alaska and Europe segments also performed strongly, though specific revenue contribution percentages per segment weren't explicitly detailed but overall strong across major regions and brands.

Forward-Looking Statements

• Full-Year 2025: Net income guidance was revised to approximately $2.9 billion or $2.14 per share, a $235 million or $0.17 per share improvement from June guidance, driven by revenue outperformance, cost savings, and interest expense favorability.
• 2026 Outlook: Capacity is forecasted to increase by just eight-tenths of a percent. Nearly half of 2026 bookings are at higher prices. The Carnival Rewards loyalty program starting in June 2026 will impact yields by about half a point. Operating expenses for Celebration Key and the Relax Away Hastings Quay pier expansion will affect cost comparisons by about 0.5 points, with potential additional expenses from 2026 dry docks up to one percentage point.
• Refinancing and Leverage: Target to reduce net debt to EBITDA ratio under three times. Convert redemption will result in a $600 million improvement in net debt, with pro forma net debt to EBITDA ratio of 3.5 times early in fiscal year 2026.

Risks Identified

• Volatility in Bookings: Past volatility in bookings was mentioned, though reduced, still a factor to consider in 2026 strategy.
• 2026 Headwinds: Includes 50 basis point impact on yields from the loyalty program, 100 basis points from dry docks, and 50 basis points from destination build-out.
• Competitive Landscape: Other cruise lines expanding in markets like Galveston and The Caribbean could impact market share and pricing.

Q&A Sessions

• Q: Clarify on historic price levels and Celebration Key's impact on yields A: Josh Weinstein stated both North America and Europe are at historical record high pricing. Celebration Key is meeting expectations and driving a premium on ticket side for itineraries calling there.
• Q: Consumer behavioral shifts and bookings A: Josh Weinstein noted strong booking trends with Carnival booking 8% more in 2025 Q3 than 2024 Q3. Volatility reduced but remains a consideration in 2026 strategy.
• Q: 2026 vs June, bookings and headwinds A: Josh Weinstein said 2027 bookings are an unprecedented start. 2026 has headwinds from loyalty program, dry docks, and destination build-out but also positives like high booking percentage, Celebration Key benefit, and no capacity growth.
• Q: Capital return, leverage, and cost growth A: Josh Weinstein said close to being able to return capital to shareholders once at 3.5 times leverage. David Bernstein said capital return is a Board decision, and they expect to return capital as leverage improves. David Bernstein also noted cost growth considerations with savings opportunities to leverage scale.
• Q: Laggard brands and dry docks A: Josh Weinstein said laggard brands are showing improvement but have room to grow. David Bernstein said dry dock days in 2027 are expected to be fewer than in 2026 but can change.
• Q: AIDA evolution program, Galveston competition, and go-to-market A: Josh Weinstein said AIDA evolution program is a template for other brands. Galveston is competitive but Carnival will keep upping game. Diversified portfolio is a benefit.
• Q: Celebration Key learnings and loyalty hit timing A: Josh Weinstein said learnings from Celebration Key include tweaks to operations. David Bernstein said loyalty program impact on yields in 2026 is second half weighted as it starts in June 2026.
• Q: Long-term opportunity, occupancy, and yield A: Josh Weinstein said there's opportunity to optimize between price and occupancy, with brands encouraged to make trade-offs to get more folks on at the right price