Norwegian Cruise Line Holdings Ltd. Q3 FY2024 earnings call

• Strong third quarter results: Exceeded guidance across all key metrics, with highest quarterly gross revenue, adjusted EBITDA, and adjusted operational EBITDA margin since returning to regular operations. Adjusted EPS increased 31% to $0.99 despite foreign exchange impact.
• Full year guidance update: Net yield projected to increase 9.4%, adjusted operational EBITDA margin to 35.3%, adjusted ROIC in double digits, net leverage to end year at 5.4x.
• New build program: Norwegian Luna to launch in 2026 with enhancements; Norwegian Aqua on track for early 2025 launch; Oceania Cruises' Allura to have Creperie; Regent Seven Seas Cruises' Seven Seas Prestige in steel cutting phase.
• Brand initiatives: Norwegian launched 'Experience More at Sea' brand positioning and NHL partnership; Oceania unveiled 'Your World Included' with enhanced amenities; strong booking trends with net yield growth and onboard revenue strength.
• Sustainability: MSCI rating A, top-ranked in ESG leadership, 41% of fleet tested with biodiesel blend, Oceania's Relay for Life at Sea program, and hurricane relief efforts.

For the third quarter, Norwegian Cruise Line Holdings achieved the highest quarterly gross revenue and adjusted EBITDA in its history. Adjusted EPS increased 31% to $0.99. While there is no detailed breakdown of revenue contribution by each product segment (brands like Norwegian, Oceania, Regent Seven Seas) in absolute terms and percentage provided, the overall performance was exceptional with key metrics exceeding guidance.

• Net yield expected to grow 9.4% in full year 2024, marking a record since 2013.
• Adjusted operational EBITDA margin forecasted to be 35.3%, a 4.6 percentage point improvement over 2023.
• Adjusted ROIC expected to close year in double digits, improving from 8% in 2023.
• Net leverage targeted to decrease to approximately 5.4x by year-end, moving towards 2026 target of mid 4x.
• Fourth quarter guidance: Net yield growth of 6.9%, adjusted EBITDA guidance increased to ~$445 million, adjusted EPS expected to be ~$0.09.

• Foreign exchange rates can impact results. For example, a $0.06 negative impact from foreign exchange rates on adjusted EPS in the third quarter.
• Rerouted sailings in the past, such as Middle East sailings in Q4 2024 which impacted deployment and needed to be considered in guidance calculations.

Q: Congrats on a really strong quarter here, particularly on the pricing front. Walk us through non-comparable headwinds and tailwinds of the last couple quarters.

A: Mark Kempa mentioned rolling over a strong comp from Q4 2023 (8% yield), continued strength in Caribbean and near term deployments, and the impact of outsized Middle East sailings in Q4 2024 which were weighted to higher-yielding brands.

Q: Talk about the Analyst Day guidance and the delta between yields and costs. Does it make it more difficult to see significant deltas going forward?

A: Harry Sommer stated focus is on actual 2026 numbers (margin approaching 39%, EPS at $2.45, mid-floor leverage, 12% ROIC) and they are optimistic about achieving these, with better visibility to 2025 allowing more certainty.

Q: On bookings, talk about 2025 booking strength across brands, geographies, quarters. Any quarters standing out?

A: Harry Sommer said bookings are broadly based, no discernible pattern across brands, geographies, or guest sourcing, with robust close in demand allowing reconsideration of booking curves.

Q: On the booking curve, how has it evolved pre- and post-COVID?

A: Harry Sommer said booking curve thoughts evolve, were pushed further pre-COVID for risk management, but with robust close in demand last few quarters, not pushing further now.

Q: On cost side, talk about the $300 million cost savings plan. Is $300 million likely to be low or conservative?

A: Mark Kempa said it's not too early to say, but they are focused on end-to-end process review without impacting guest experience, feeling confident on path towards goals.

Q: Elaborate on strong momentum by brand or region, signs of softening in 2025?

A: Harry Sommer said it's across all brands, geographies, sourcing markets, no cracks seen, focused on low-to-mid-single-digit yield growth.

Q: Circle back to yield-to-cost target spread for 2025. How to think about linearity of cost if yields are above plan?

A: Mark Kempa said 300 million plan is roughly 100 million per year, outperformance on yield doesn't directly translate to more spending, focused on right-sizing unit cost base.

Q: Percentage of customers doing pre-booked on-board spend?

A: Harry Sommer said nearly all customers buy something before the cruise, including drinks packages, dining packages, spa, shore tours, etc.

Q: Trend line in occupancy over next 12-24 months? Impact on yield growth?

A: Harry Sommer said occupancy relatively stable, changes mostly in third/fourth in cabin (children on NCL brand) which don't significantly impact revenue.

Q: Impact of dry docks on costs next year? Tailwind or headwind?

A: Mark Kempa said dry docks year-over-year are consistent, Q1 timing issues but generally consistent run rate post-COVID.

Q: Focus on 2026 goals, not every year's yield-expense spread?

A: Harry Sommer said focused on 2026 long-term targets, not specific spreads in 2025/2026 individually, with visibility allowing confidence in achieving targets.

Q: What's the inflation threshold for sub-inflationary cost growth?

A: Mark Kempa said broadly around 3% global inflation, but may vary.

Q: Color on Great Stirrup Cay pier progress?

A: Harry Sommer said on schedule to open in Q4, will allow doubling guests in 2026, improving guest satisfaction, revenue, repeat rates.

Q: Update on cost side examples from Investor Day, opportunities in 2025?

A: Mark Kempa said looking at every facet of business end-to-end without impacting guest experience, methodical and disciplined review ongoing, no specific new examples shared but focused on all areas.