Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record bookings and advanced ticket sales indicate strong consumer demand, leading to a record 12-month forward book position.
- Adjusted EBITDA nearly doubled in Q1 2024 compared to last year, driven by stronger pricing and higher occupancy levels.
- Significant reduction in net leverage, from 6.3x at the end of Q1, progressing towards a 1.5 turn improvement for the year.
- Launch of a historic newbuild program with 8 new ships across all three brands, enhancing future capacity and growth prospects.
- Achieved a notable B rating from CDP Climate, recognizing efforts in environmental sustainability and management of climate-related risks.
Negative Points
- Cancellation and rerouting of itineraries in the Middle East and Red Sea, impacting yield growth projections for 2024.
- Higher fuel costs and interest expenses partially offset the financial benefits of increased net yield and adjusted EBITDA.
- Despite strong demand, the geopolitical uncertainties in certain regions necessitate strategic itinerary adjustments, affecting overall operational flexibility.
- The need for continuous investment in sustainability and environmental initiatives to meet long-term decarbonization goals.
- Operational challenges related to maintaining cost efficiencies, particularly in the context of global inflationary pressures affecting new shipbuilding costs.
Q & A Highlights
Q: Can you discuss the pricing and capacity allocation for the remainder of the year?
A: Harry J. Sommer, President and CEO, explained that there are no areas with outsized or undersized pricing strength; demand is robust across all brands and regions. The only challenge is the voyages that had to be rerouted from the Red Sea, affecting Q2 and Q4. Overall, the company is experiencing record bookings and pricing.
Q: Where have you seen more success in cost reduction, and where do you see additional opportunities?
A: Mark A. Kempa, EVP & CFO, highlighted that the focus is on efficiency rather than just cost-cutting. Significant savings have been achieved in fuel and bunkering processes, and ongoing efforts are in marketing and operational areas. The company is continuously identifying small, impactful cost-saving opportunities across the board.
Q: How is the second half of the year shaping up, especially with the impact of the Red Sea cancellations?
A: Mark A. Kempa mentioned that Q3 is expected to show the highest yield growth due to lesser impact from the Red Sea cancellations. Q4 faces a tougher comparison with the previous year but is expected to perform well, albeit with some impact from itinerary changes.
Q: What is driving the investment in private islands, and what returns do you expect?
A: Harry J. Sommer noted that private islands are among the highest-rated destinations, and investments like the construction of a pier at Great Stirrup Cay are expected to enhance guest experience and visitation reliability, which should provide strong returns.
Q: Can you provide more details on the expected yield growth and onboard revenue for the remainder of the year?
A: Harry J. Sommer indicated that the distinction between onboard and ticket revenue is becoming less significant due to pre-sold onboard packages. The focus should be on total revenue, which is expected to grow robustly, supported by strong consumer spending trends.
Q: How are you managing the cost structure, especially with the normalization of dry-dock schedules?
A: Mark A. Kempa explained that 2024 is a normalization year for dry-docks, and costs excluding dry-docks are expected to be flat. The company continues to focus on rightsizing costs and leveraging scale to maintain efficiency without compromising guest experience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
