Greetings, and welcome to the Carnival Corporation First Quarter 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Beth Roberts, SVP Investor Relations. Thank you, Beth. You may begin.

Thank you. Good morning and welcome to our first quarter 2026 earnings conference call. I'm joined today by our CEO, Josh Weinstein, our CFO, David Bernstein, and our chair, Mickey Arison. Before we begin, please note that some of our remarks on this call will be forward-looking. Therefore, I will refer you to today's press release and our filings with the SEC for additional information on factors and risks that could cause actual results to differ from our expectations. We will be referencing certain non-GAAP financial measures, including yields, cruise costs without fuel, EBITDA, net income, ROIC, and related statistics for all, which are on a net basis or adjusted as defined, unless otherwise stated. A reconciliation to U.S. GAAP is included in our earnings press release and our investor presentation.

References to ticket prices, yields, and cruise costs without fuel are in constant currency, unless we know otherwise. please visit our corporate website where our earnings press release and investor presentation can be found with that i'd like to turn the call over to josh thanks beth good morning everyone and thank you for joining us today before we begin i do want to acknowledge the ongoing conflict in the middle east and the profound human impact it's having on so many people Our thoughts are with the brave men and women of our armed forces, with all those affected, and with the countless families and communities facing hardship during this time. Like so many around the world, we remain hopeful for a resolution that brings relief to those impacted and a lasting peace to the region. Turning to our business, we are off to an excellent start to the year. First quarter results came in ahead of guidance thanks to higher yields and better cost performance, reflecting healthy fundamentals and solid execution across the business. Close in demand remained robust, guests continued to spend more on board, and pricing strengthened, enabling us to outperform our December guidance and deliver record first quarter revenues, net yields, operating income, EBITDA, and customer deposits. We're seeing this momentum continue in onboard and pre-cruise sales. Guests are engaging earlier in the vacation journey, purchasing more inclusive packages, excursions, and other experiences before they even step on board. That trend is contributing to higher onboard revenue and reflects the value guests place on the experiences our cruise lines deliver. We're also seeing it in our bookings. Bookings for current year sailings increased 10% year over year, adding to our record book position for the remainder of the year at historically high prices. With nearly 85% of 2026 already on the books and less inventory available than this time last year, we remain well positioned to keep improving yields as the year unfolds. Cumulative future year bookings also reached a first quarter record, adding to our continued confidence in the trajectory of the business. And as a result, we are seeing it in our customer deposits, which reached a new first quarter record of almost $8 billion, surpassing last year's high watermark by nearly 10%. Now, what stands out most is that we're achieving all of this against such an unpredictable macroeconomic and geopolitical backdrop. It says a great deal about the demand we continue to see across our portfolio of world-class cruise lines, about the team's ability to execute on our long-term strategy, and about the progress we've made in positioning the business to perform through a wide range of environments. This start to the year also supports increasing our full year outlook operationally by approximately $150 million compared to our December view. That improvement helps absorb a $500 million fuel headwind, albeit that is against a substantial EBITDA forecast of $7 billion, which David will walk you through in more detail. This quarter and our outlook are further evidence of how far this business has come over the last several years. Over that time, we have restructured the organization, reconstituted the global leadership of the corporation and our cruise lines, actively managed the portfolio and its assets, and sharpened our commercial operations. We have also just begun to better harness the power of our unmatched Caribbean and Alaskan destination footprints, improve pricing fortify the balance sheet and embed greater rigor across the organization as you know thanks to those efforts last year we surpassed our sea change objectives in roughly half the originally outlined time frame we more than doubled our roic delivered our highest unit EBITDA in nearly two decades and meaningfully reduced our greenhouse gas intensity rate, all of which built momentum and, more importantly, reinforced that our approach is working. With this robust foundation in place, we are focused on the next chapter of value creation for Carnival. So today, we are introducing Propel, powering growth and returns responsibly. By 2029, we are targeting return on invested capital above 16%, earnings per share growth of more than 50% versus 2025, and the distribution of more than 40% of our cash from operations to shareholders, or approximately $14 billion. dollars. At its core, Propel is about converting strong and growing demand into higher returns, earnings, and cash flow, while maintaining disciplined capacity growth and a strong balance sheet. Now, we see four primary drivers underpinning these targets. First, yield expansion. A continued focus on high-quality execution across our commercial operations will drive even more growth in same-ship demand, strong pricing, increased onboard spend, and earlier guest engagement throughout the booking journey. These trends are already evident in our current performance and give us confidence in our ability to drive sustained yield improvement. Second, disciplined capacity growth and high returning capital allocation. Our capacity growth remains intentionally measured with only three ships scheduled to enter service during the propel period. At the same time, we'll be investing in return generating modernization programs across many of our cruise lines, building on the success we are already seeing from my Edo Evolution. And the second cruise line announcing its program will be just next month so stay tuned third further monetizing our destination portfolio we're expanding and enhancing our unique destination assets including celebration key grand bahama relax away half moon key and isla tropical roatan along with our unrivaled alaska land footprint to deliver differentiated guest experiences while generating attractive incremental returns Fourth, continued cost discipline. We remain hyper-focused on maintaining our industry-leading cost structure and driving operational efficiencies across the P&L. And all of this is supported by a phenomenal team and advancing technologies to enhance revenue and improve efficiency. Importantly, these Propel targets will not come at the expense of financial strength, corporate responsibility, or investing in our future. We are targeting net debt to EBITDA of 2.75 times and a reduction in greenhouse gas intensity of more than 25% versus 2019 levels. For us, returns, resilience, and environmental stewardship go hand in hand. And further, our growing cash flow will enable us to meet these targets while reinvesting over $15 billion back into the business over this time frame. With greater financial flexibility, we have the capacity to invest in our growth, to achieve our leverage target, to grow our recently reinstated dividend, and to return excess capital through an opportunistic buyback program, beginning with a $2.5 billion authorization announced today. This is a balanced approach, investing for growth, increasing shareholder returns, and doing so in a way that supports the long-term earnings power of our business. Accelerating returns is a natural result of that strategy and a reflection of the attractive fundamentals of our business. Our capacity growth remains measured while demand continues to expand as cruising becomes even more mainstream, as consumers are choosing to spend more of their hard-earned money on well-deserved and much-needed vacations, and as we remain under-penetrated relative to the broader vacation market. We are well-positioned with a strategy that is grounded, focused, diversified across our portfolio, and built for consistent execution over the long term. As we continue to monitor developments in the Middle East, we remain focused on executing on that strategy and delivering for our guests, for our shareholders, and our other stakeholders. While external conditions will continue to evolve, what gives us confidence is our ability to deliver exceptional vacation experiences, operate efficiently, allocate capital with discipline, and grow in a measured way. Now, none of this progress happens without the dedication of our global team, the best in all of travel and leisure. I want to thank our more than 160,000 team members, both ship and shore, for their hard work in delivering these first quarter results. They go above and beyond every day to deliver unforgettable happiness to our guests by providing them with extraordinary cruise vacations, while honoring the integrity of every place we visit, life we touch, and ocean we sail. I also want to thank our travel agent partners, our loyal guests, our investors, our destination partners, and all of our stakeholders for their continued support. With that, I'll turn the call over to David to walk you through the quarter and our guidance in more detail. Thank you, Josh.

I'll start today with a summary of our first quarter 2026 results, then I'll provide color on our full-year March guidance and finish up with some additional insights into Propel. Once again, we delivered record first quarter operating results with strong execution, resulting in us beating guidance on revenue, costs, and net income. Net income of $275 million was more than 55% higher than the prior year and exceeded our December guidance by $40 million, or $0.03 per share. The outperformance versus December guidance was driven by three factors. First, revenue favorability contributed $0.04 per share as yields were up 2.7% versus the prior year, on top of the more than 7% increase in the first quarter last year. This was over 100 basis points better than our December guidance driven by continued strong close-in demand, which drove higher ticket prices and stronger onboard spending. Yield improvement was driven by increases on both sides of the Atlantic. Second, cruise costs without fuel per available lower birthday, or ALBD, were up 5.3 percent versus the prior year. This was more than half a point better than our December guidance and contributed $0.01 per share. This benefit was driven by cost-saving initiatives that we firmed up during the quarter. Third, the remaining $0.02 per share of operational favorability came from improvements in depreciation expense, net interest expense, and fuel consumption, where we delivered a 4.7% year-over-year reduction. Total first-quarter operational improvements of $0.07 per share are fully reflected in our full-year guidance. However, those first-quarter operational improvements were partially offset by the unfavorable impact of fuel price and currency costing $0.04 per share. Turning now to our full-year March guidance. A full-year guidance calls for earnings per share of $2.21. This includes the first quarter operational improvement of $0.07 per share, as well as an additional $0.04 per share of improvement in depreciation expense, fuel consumption, net interest expense, and income tax expense over the remaining three quarters of 2026. However, that $0.11 per share operational improvement for 2026 will be more than offset by a $0.38 per share headwind from higher fuel prices driven by recent geopolitical events and reflected in our March guidance. Given the recent spike in volatility in fuel prices, we believe it is reasonable to assume some moderation over the balance of the year rather than base our guidance on current elevated spot prices. As a result, our guidance assumes the purchase price of fuel for the month of March and early April, Brent averaging $90 per barrel for the remainder of April and May, Brent averaging $85 per barrel for the third quarter, and Brent averaging $80 per barrel for the fourth quarter. A 10% change in our fuel cost per metric ton, excluding emission allowances, for the remainder of the year impacts our bottom line by $160 million, or $0.11 per share. Turning now to yield growth. Our March guidance assumes yield growth of approximately 2.75%, which is 25 basis points better than our December guidance and fully reflects the first quarter yield improvement. Importantly, our yield assumptions for the balance of 2026 remain unchanged from our December guidance. Yield growth versus 2025 reflects both higher ticket prices and continued strength in onboard spending. It is also worth noting that full year 2026 yield growth is approximately three and a quarter percent on a normalized basis, excluding the previously disclosed impact of the summer 2025 close-in decision to redeploy away from the planned first quarter 2026 Arabian Gulf voyages and the impacts of loyalty program accounting for Carnival cruise line. Cruise costs without fuel per ALBD are now expected to be up approximately 3.1 percent which is 15 basis points better than our December guidance and reflects the first quarter improvement. Like yields, our cruise cost assumptions for the balance of 2026 remain unchanged from our December guidance. On a normalized basis, cruise costs without fuel per ALBD are up just 2.3 percent after factoring in the partial year of operating expenses associated with Celebration Key Grand Bahama and Relax Away Half Moon Key, as well as the timing of certain expenses between the years. In addition, you will see that our cost growth decelerates from the first half of 2026 to the second half. The main drivers of the deceleration are the sliding of some costs from the fourth quarter of 2025 to the first half of 2026, which will impact our first half-second half comparison, as we indicated on the December earnings call. The full-year operation of Celebration Key Grand Bahama, which opened in July 2025, will also impact our first half, second half comparison. This comparison is also affected by the seasonalization of advertising and repair and maintenance spending. I will close with a few additional thoughts on Propel. As Josh said, at its core, Propel is about converting strong and growing demand into higher returns and stronger operating cash flow while maintaining disciplined capacity growth and a strong balance sheet. Our confidence in achieving our propelled targets is grounded in the same strategies, priorities, and disciplined execution that have delivered strong results and momentum in recent years. It is also supported by realistic assumptions and performance metrics that give us confidence in the path ahead. From 2026 through 2029, we expect moderate yield growth on a CAGR basis and low single-digit CAGR growth in cruise costs, excluding fuel per available lower birthday. Because we expect yield growth to grow faster than costs, we believe this will drive significant margin expansion. Achieving these targets will require heightened cost discipline and a focus on further strengthening our industry-leading cost structure. We will drive operational efficiencies and realize scale benefits within ship operating expenses and G&A through technology and sourcing, resulting in decelerating cost growth throughout the period. While it is true we are announcing Propel at a time of heightened volatility, these targets are about the long-term trajectory of our business for which I have great optimism. And I say that based on very relevant experience. During my time at Carnival, we have managed through so many challenges. 9-11, the global financial crisis, the Arab Spring uprisings, COVID, and the Ukraine war, just to name a few. And we have always come away demonstrating our ability to execute and achieve new record results while building resilience and growing stronger.

I expect no less as we look ahead to our future. operator we're now ready to open the call for questions ladies and gentlemen the floor is now open for questions if you would like to ask a question please press star 1 on your telephone keypad at this time a confirmation tone will indicate that your line is in the question queue you may press star 2 if you would like to remove your question from the queue for participants using speaker equipment it may be necessary to pick up the handset before pressing the star keys. We do ask that in the limit of time, you please limit yourself to one question and one follow-up. One moment, please, while we poll for questions. Ladies and gentlemen, we will begin the question and answer session in just one moment. Please stand by. Ladies and gentlemen, thank you for your patience. Our first question today is coming from Robin Farley of UBS. Please go ahead.

Great. Thanks for taking the question. I wonder if you could just give us a little insight into when you were thinking about your long-term targets, did anything change from four weeks ago, aside from obviously, you know, the changes in fuel? Just wondering how anything in the last month would have impacted your longer term, you know, the other indicators. And then just as a follow-up on the share repurchase, if you could just spell out a little clearly what you'll be doing with share repurchase over the next three years. I mean, I think I can back into the math from what your dividends are and your total capital return. It's just a significant step up from what you had done pre-COVID. So I just want to make sure that we're thinking about that right. Thank you.

So first, sorry for the hug up on, which is not good when you're the speakers. With respect to the long-term targets, I mean, at the end of the day, they're long-term targets. And we have a lot of confidence in our ability to deliver. Respect to the current going to play out, but we do have very minimal closure to that region. We didn't have any this year because of the decisions we took and we've already made that decision for next year and and we have the ability to move our assets as everybody knows so we feel very good about the long-term trajectory we certainly didn't just do it based on fuel prices from 2025 we we thought about this and stress tested in various scenarios and it's something that we do believe strongly that we can we can deliver back to the capital allocation you know remember if you think about what the world looked like 10 years ago versus where we are today, our profile is very, very different. We've got no ships this year. We've got one ship a year thereafter. We are generating a lot more cash than we used to. And even with the spending that we're investing, as we noted in our materials, in ourselves, which is quite important, including the destination strategy and revitalization plans for our brands, it still leaves us with a tremendous amount of free cash flow that we can give back. And we will do just that. And you should expect both the dividend and the initial authorization of $2.5 billion. Those are starting points, and we'll progress from there.

Great. Thank you.

Thank you. Our next question is coming from Steve Wozinski of CFL. Please go ahead.

Hey, guys. Good morning. And congrats, Josh, on the strong results here. So I guess, first of all, it seems like the booking environment remains very healthy at this point. But Josh, I wonder if you could maybe walk us through what you've seen from a booking perspective for both your North American and your EAA brands. I guess what I'm trying to understand here is that if there's been any material differences in the bookings across your brands, and then also maybe you've seen any changes in your cancellation rates as we head into the summer, specifically around, I assume it would probably be European cruises this summer.

Yeah. So, you know, let me start with the cancellation question. No, we're really not seeing anything significant to talk about with respect to cancellation trends. Our onward spends have been consistently strong as we got out of Q1 and headed into Q2. So, with respect to the last three weeks, I'd say, you know, here, you know, people, what it means for the world, what it means for me personally, and then life. You know, it's not surprising that if you think about potential impact and how people are thinking about things, you know, to the extent that we're talking about sailings that are eastern Mediterranean, that's got a different profile than western Mediterranean, that's got a different profile from northern Europe, and then obviously Caribbean, Alaska, Australia. how things have been progressed volumes have been stronger uh for places like alaska and the caribbean um but but it's not like there's just this line around europe i mean northern europe is going quite well um we've made progress even with our eastern european um sailings when it comes to the to the book percentage that we're at today versus where we are a few weeks ago would it have been higher uh and more activity had all of this not happened absolutely We're going into Wave, and we did just that. So we entered into this period with a nice amount of headroom. The ins and outs, I'm sure there's going to be reverberations that we don't know about yet, but the teams are managing to the curve and being reactive because the world is pretty reactive right now.

Okay, gotcha. And then the second question, Josh, if I could ask one about Propel. You know, if we think about the target of greater than 50% EPS growth from 25 through 29, so, you know, simple math is going to say, okay, 2025 adjusted EPS, I think was, whatever it was, 225, I think. That would say 2029 EPS should be, at a worst case, greater than 338, 340, somewhere in that range. I guess with 2026 EPS now taking a pretty significant step backwards just because of fuel, is it fair to kind of assume that you guys feel pretty comfortable that you'll be able to absorb pretty much higher fuel prices over a longer period of time?

Am I kind of thinking about that the right way? yeah i think that's right over a longer period of time you know we'll we'll we'll take what the world has and we'll we'll perform you know in in any environment at the end of the day um so be performing better if fuel was back at um 60 70 but we don't plan our lives around the world where fuel stays at 60 to 70 that's why our our focus forever uh and will continue to be forever is use less because whatever the price is if we use less we do better and if you think about our our trajectory on our consumption you know if you look at the per unit consumption decreases that we've had across the fleet if you go back to where we were in 2019 versus where we are in 2026 we're saving this year alone about 650 million dollars if you go back just we are today that alone is 250 million dollars thanks to the consumption savings that we are hyper focused on and we'll continue to do that okay gotcha good color thanks Josh appreciate it thank you our next question is coming from Matthew boss of JP Morgan please go ahead great thanks Josh maybe could you elaborate on on the

curve and your comments on bookings well into 2028 maybe if you could just speak to pricing power or areas of opportunity that you see across the portfolio today I want to make sure I understand your question.

So can you say it a different way?

Yeah, maybe if you could just elaborate on the strength on further out bookings. I think you cited well into 2028 and just where you see the greatest areas of pricing power across the portfolio. And I know we've talked about your portfolio approach and how that separates you from some of your peers in the industry.

We've seen the trajectory of our brands in a pretty holistic way, leaning forward across the board when it comes to... So it's almost uniform at the far end of their booking curve. So everybody's been taking opportunities with more lead time, driving further sales and managing the curves than they used to. It's really just evolving. We've got tools that we've invested in to help us be better at our jobs in that respect. We've brought in a lot of folks over the last few years that have great capability that are leading teams of revenue managers that are really pushing the envelope. And I think overall, we are becoming more mainstream, right? We're becoming more mainstream as a product. Our loyal guests really enjoy what they get with us and know to book in advance as far as they can so they get the best of whatever they want for their particular vacation. So I think it's all the blocking and tackling that we have been, you know, working with our teams around the world, around those brands to push things forward. And it is, you know, when we talk about bookings, we're not just, you know, internally, we're not just looking at this quarter. We're not just looking at full year. You know, what are our targets for 27, which I'm not going to tell you? What are our targets for 28? How far are we going? And are we getting the right balance, right? I mean, we don't want to be 100% booked on day one that we put things on for sale. So there is art and science behind it. But everybody's been working hard to maximize the revenue.

And then maybe, David, could you outline the drivers of ROIC above 16% in the Propel plan, meaning opportunities you see remaining across the portfolio, just how you're thinking about net yields relative to low to mid-single digits historically?

As I said in the prepared remarks, our Propel model and the 16% was built off moderate yield growth and low single-digit cost growth. And there's clearly, as Josh talked about, further out bookings and the revenue management and all, I won't repeat all the things he said, there's clearly upside opportunity on both the revenue and the onboard areas to drive the ROIC even higher than 16%. That's not a cap. It's just a target for 2019 and beyond.

Great caller. Best of luck.

Thank you. The next question is coming from Xion Xu of BNP Paribas. Please go ahead.

Hi, guys. Thanks for the question. Maybe just on the 2Q guidance, you did 2.7% net yield growth in 1Q and 2Q is guided at 2%. Maybe just can you talk about any reasons 2Q should maybe take a little bit of a step back? Because it sounds like underlying demand is quite strong.

This was less than 2%. We were pretty clear that when we were kind of, you know, the rest of the year, we kept things fairly consistent given all the noise and all the background. So, you know, there's, you know, every period's got differences based on dry docks, based on, you know, what day of the week the bookings, you know, the salings end, et cetera. But we feel that, you know, 2% is where we always try to exceed. Thanks.

And maybe just on the follow-up for longer-term outlook for net yield, you kind of mentioned moderate um yield growth could you maybe talk about what what do you think is the biggest kind of drivers within that um how do we think about the the building blocks if it's you know the the new the ship kind of uh revamps the islands like what do you think is kind of the biggest kind of drivers within that i'm going to quantify the biggest drivers are not going to be um the revamps i don't think the biggest drivers are going to be the the destinations i think They're going to absolutely be accretive, but those are fairly, you know, isolated, you know,

ship-by-ship things that are going to be nicely supportive of the yield growth. Incremental improvement in the commercial marketing, in the revolution of technology that we're already utilizing to be better at lead generation, better at conversion, not just goals and all the experiences that we have to offer on board. So, you know, the good thing is, you know, if you think about where we are now versus where we were, you know, when I was kind of talking about this stuff three years ago, I think we've got a track record of leaning into those things and getting better every day. And not only years ago, but the technology advancements to supercharge this only are going in one direction. So I think that's really where the broad-based improvements are going to be, would then get buffeted by the investments we've been making in the destinations and will continue to do so. And as you said, the refurbishments.

Great. Thank you and good luck.

Thanks very much.

Thank you. Our next question is coming from Brant Montour of Barclays. Please go ahead.

Hey, good morning, everybody. Congratulations on getting the buyback announcement today. I have a question on technology to kind of stay with that thread, Josh. You know, how do you think about the opportunity to do more direct integrations with companies out there that do travel. And just given sort of the inherent complexity of the cruise product for most first-time cruisers, does that have the potential to fundamentally change the way consumers find their way to cruise?

Folks that utilize, whether it's ChatGPT or Gemini, Claude, I mean, you name it. I mean, the whole nature of our interaction with the guests and how to get to our websites or our trade partners to come sail with us are in I do think and so the teams have been working for a while now will continue to do that on optimizing how we show up in those is talking about Google search I think that the thing that's probably going to be a little slower for the cruise industry because of what you said versus what you see in in places like you know Walmart and and and things that are a little bit more easy to navigate and easy to to and and find it at the price that it's listed for is we are we are more complicated there is no doubt we're not a commodity to our travel agents expect that to change anytime soon they are great and they too just like we are and just like every other company is is are working on, what does it mean to be a travel agent in a world of AI, and optimizing their operations around that, too. So I think it's going to lift a tide that's going to lift all boats.

Would be on the longer-term targets. You know, you guys, you just gave a great, we're going to be able to drive yield growth. But just sort of honing in on your ship years ago, I think we all kind of thought that you'd see one per year.

It looks like you guys are doubling down on that so they got to experience on the AIDA ship that came out of the AIDA evolution program an 18 year old ship can look and feel like a one-year old ship so so I go for looking forward to be of the belief that your capacity growth we really get to focus on improving the underlying business and keep focused on that and there is a tremendous amount of opportunity to do that and yes new builds are great but we've got 96 ships right new builds are not in the grand scheme of things, the thing in any couple of years or few year period is going to lift us up. What's going to lift us up is the 96 ships, and we have every intention of keeping this fleet going for a nice time while we do introduce new capacity over time in a measured way. So I don't know if that answers your question, but I feel that the approach has been working and will continue to work. These are very long-term assets that people enjoy. And some of the best yields and some of the best MPS we get are on some of our oldest ships.

Thank you. Our next question is coming from Trey Bowers of Wells Fargo. Please go ahead.

Hey, guys. Thanks so much for the question. Thanks for the color earlier in the call about what you guys are kind of seeing in the Med and Europe, given the conflict. But it seems like we could take out of that that maybe some of the non-European trends, are they coming in even better than you might have expected? And maybe in that, could you just break down kind of what you're seeing in the Caribbean and maybe Alaska?

So, hey, Trey, how are you doing?

I'm doing great.

First, we're getting into something that has been completely unexpected, and it's working its way. Alaska continues to be strong. we've been very pleased for a very long time about how Alaska for 2026 was shaping up I'd be saying the same thing if we were having a call at the end of February you know and with respect to with respect to Europe I mean you know and so like I said we had been pushing to really produce a good occupancy advantage and we did that there is absolutely not the pace that we would have expected over the last few versus a world where this you know wasn't wasn't happening in

the backdrop but not to an extent that there's much to talk about just an extent that yeah things have shifted a little bit here and there yeah fair and I have to ask David you know when we go through these periods of fuel spikes like this and when and if things settle down does this kind of maybe reintroduce the idea of just trying to smooth fuel prices a little bit through reintroducing a hedging program at some point. Thanks so much, guys.

Yeah, no, thank you. So, listen, we think about that question all the time, regardless of the situation and circumstance, and we talk about it. But at the moment, you know what we've done over the past decade, and, you know, we'll continue to evaluate and rethink it.

I lost a bet. It took us until 1046 for someone to ask about fuel hedging.

You're welcome.

Thank you. Our next question is coming from Ben Chaikin of Mizuho. Please go ahead.

Hey, good morning. Maybe on free cash flow, the $14 billion is very compelling. I think you framed it as 40% of operating cash flow.

If I'm not mistaken, does that kind of signal that you think about capital return and free cash flow independently in other words in you know capital return in any year is agnostic of the capex in that year and maybe all on the same lines for the implied buyback portion of that 14 billion do you expect that to be smooth or will you be opportunistic and then one follow-up thanks yeah so from an opportunity we do expect to be opportunistic in terms of the stock buybacks we've said that repeatedly um as josh said was starting with two and a half billion and clearly over this period with 14 billion of expected shareholder returns there'll be additional stock 5x you know in terms of the allocation you got to remember that our capex is reasonably predictable over time because we have laid out one ship per year and remember we're only talking about 26 through 29 here so it's one ship a year or non new build CapEx also has some level of predictability although we don't know the exact number every single year this year it's 2.4 billion and so as a result of that we were able to triangulate into 40 percent of cash from operations or more than 40 percent of cash from operations being returned to shareholders. And it's a combination of the reinvestment in the business, as Josh said, the $15 billion and $14 billion, more than $14 billion probably going to shareholders. That's the way we think about it as opposed to because of the predictability.

Okay, got it. And then, David, in the past, you've talked about there being more costs within NCC this year versus CapEx. You didn't necessarily talk about it on this call, but I think over the last, you know, six, 12 months, you've brought it up. Have you kind of contemplated this anymore, meaning is 26 an anomaly, or is the level of cost attribution between OpEx and CapEx the right way to think for this year, the right way to think about it moving forward? Thanks.

Yeah, so you're referring to the dry dock expense where I had indicated in December that the total dry dock, the total spending on dry dock was flat, but there was a different allocation between the costs. That's something that we're going to have to look at every single year based off of the accounting rules and what can get capitalized. So stay tuned for our December guidance, But we haven't, of course, we're just beginning to work through the 2027 capital expenditure plan and dry dock schedule. So there's a lot more for us to evaluate before we can give that answer.

Was there something unique that you're doing this year on the dry docks? I appreciate it moves year to year, but just to maybe double click there.

Yeah, it wasn't anything in particular that was unique. Remember, in total, the dry dock expense, I mean, we're talking well over a billion dollars between all the ships in the year. And so a very small movement, you know, of even 1% or 2% between CapEx and expense can have an impact on the percentage increase of net cruise costs without fuel. And that's what it was. It was just a couple of percent movement, which had a, I think it was a 0.6% impact on the net cruise cost without fuel.

Thank you. Our next question is coming from Connor Cunningham of Melius Research. Please go ahead.

Hi, everyone. Just on the, so I understand that you're 85% booked for 2026, but just around fuel recapture a little bit, like on the remaining 15%, like does your pricing algorithms like immediately kick in? And then in the same context as that, like, do you worry about demand destruction at all? Just because some of your competitors obviously do hedge and you guys don't. And, like, does that put you at a disadvantage as a result on the pricing side?

The price is as much as the market can bear. We price as much as we, you know, as our guest base and potential guest base is willing to pay. And if they were willing to pay $10 more because of fuel, they should just be willing to pay $10 more. and so it is a little bit separated now clearly when we do our itinerary planning and long-term planning the price of fuel is a very big factor in how we set the itineraries to get the balance right between the the revenue that will generate and the cost that we incur but with respect to how we manage the business day-to-day now I mean we're really trying to maximize and and you know we're talking about seven billion dollars of EBITDA so I manage one way or another with respect to the price of fuel at any one given time. You know, people don't tell us we've got a great advantage when we're not hedged and the price is low. So this kind of conversation, you know, we only talk about this when fuel goes in one way and not the other. I do think, I'll go back to what I was saying before, the focus on consumption is really when you think about the long-term business and the long-term trajectory of our earnings power using less. That $650 million that I said between 2019 and this year, the savings that we'll get in this year alone because of the consumption savings, that's nicely higher than the over $500 million impact. So that will, but that's not the focus, the focus for the health of the long-term.

Totally appreciate that. And I hate to ask another fuel-related question, but But if you look at your current pricing for fuel right now, it is, you know, obviously below current spot and it's below the forward curve. So and I totally appreciate it's impossible to factor like where that's all going. But like, you know, why use those numbers? Why not assume something higher and then kind of if it comes in better? are great. Just the idea around where you're marking oil at today in general.

We literally set our guidance on Monday, and that was the curve on Monday. We rounded, but that was the curve on Monday. Since then, it's gone up. It's gone down. It will continue to change. We tried to give you information so people can model whatever you believe or whatever is happening but we just had to draw a line in the sand sometime and just move forward.

Yeah we gave you the sensitivity.

Well if you know where it is next week let me know.

If I know where it is next week I'm retiring because I know the future and I can make a lot of money doing a lot of things and I'm not the person that was betting on the prediction markets in advance of all the stuff that's been going on.

Thank you. Our next question is coming from Chris Stalusopoulos of SIG. Please go ahead.

Good morning, everyone. Staphylopoulos, but close enough. Josh, good morning. So, Josh, you've been in this seat now for a few years. You've navigated some difficult landscapes, I've always said, with a lot of confidence and transparency. But one of your peers in the travel space is, I guess, giving some straight talk around what an extended period of elevated energy prices might mean. So you've gotten around Russia, Ukraine, tariffs, Liberation Day, other things. Walk us through, I guess, your plan. So know you're talking about lower consumption longer term though if we're in a period of 16 24 months of $100 plus oil just how should we understand I guess internally what are the areas of focus how should we think about your ability to respond via pricing and perhaps changing itineraries and I just want to understand like I guess the mid to longer-term playbook in an extended or elevated energy cycle thanks you know from a from a consumption standpoint you've got as you you said shorter term

and longer term shorter term you know there's still things that we can do on on balance that will improve our consumption savings and really being even more maniacal that can save a lot of money with respect to how we're managing the the sailing times and making sure we get in just to the port right in time and leave on time that you know cuts your your fuel usage and how we manage the HVAC I mean all those things there's still opportunity to like I said be be more focused on the longer of the ability to make decisions about number of ports that will stop at protect in particular in particular future scenarios I would say we have been really strategic in thinking about the fuel side of our investments in our destinations in the Caribbean and we are looking to and we have been looking to create a bit of a strategic fence for ourselves where we have great opportunities to go to great places that are very very close to the home ports that we sail from and things like Celebration Key and the pier that's going up now and relax away are incredibly useful we also have things in the pipeline on the investment side which we call we've already cycled through our service power package one which cuts a lot of consumption on the hotel side we already have our plans for service power package two and incredibly bullish on that and if it's warranted we can always speed that up and get even more consumption savings you know I don't I will be honest with you though you know I don't know how to respond to your question in total because I don't know what the world looks like in a year if fuels at $110 and what that would remind everybody what it is that we have to offer. Number one, we are still a huge value gap to land at a much lower price point than people can find on land. And if people are looking to stretch their dollar further, it goes further with us. Second, we do make it convenient for people to get on our ships. About 50% of the folks that travel with us drive to get there, and that is incredibly powerful if people are looking to avoid cost, cost of air. So we will continue to, as you said, navigate challenges as they come, and I think over the last, call it five, six years, we have shown how much agility and nimbleness to overcome some pretty significant things and come out stronger all right well wanted to give you two things so we can do our math on what it means for implied EPS growth through 29 off the new guide but if you could talk a little bit more about how I guess things like

Yoda and AI I know there was an earlier question in that in AI but I had been getting some questions on how AI might perhaps unbundle and take away some potential pricing power that you've been able to extract, if you will, because of this frictionless approach or bundling around purchasing. And then also, there was a chart back in your key change deck from a few years ago that had future state capacity by brand, and I wonder if we're at a point where I think it was 30% plus for Carnival Core, where that is contemplated similar-ish level for Propel by 29. Thanks. Realize there's a lot there. Maybe if you just want to talk about, I guess, AI.

I got to be honest with you, and I apologize. I didn't understand either question. Okay.

Well, maybe if you could talk about, you're talking about the moderate yield growth, and in the past, you've done a lot of, you've spoken about IOTA and how that differentiates what you do at the core and there's been some questions around AI which perhaps is maybe at conflict with that and then on the actual capacity by brand back in the sea change slides you had future state which was 26 I'm assuming that FY29 contemplates a similar sort of distribution of capacity by brand type thanks okay so as far as the AI goes I think I understand where you're going I

mean AI has the opportunity to to certainly be a disruptor in society in a lot of different ways AI also has an opportunity to be harnessed for the benefit of supercharging what we do including how we need to utilize some pretty advanced technology in in how we how we operate our business on the revenue side and i think it's still early days so i think i think the whole world is going to move and taking advantage of what technology is going to do for businesses and for consumers with respect to the capacity i are you base are you asking basically whether our brand mix is going to be relatively consistent for 2029 versus where we are now yes got it um so i mean Yeah, I mean, more or less. I mean, you've got the roadmap, right, which is really there's just in that period that are going to Carnival. So Carnival will be a bit heavier weighted in 29 versus where we are today because they're the only ones that have ships on order over this Propel period. And then we start introducing some for AIDA. And then obviously for the 2030s. It will come at some point, and we'll share that with you when there's something to share. But it's all going to be in the vein of intentionally measured capacity growth.

Thank you.

But I do appreciate the questions, and thanks to everybody for joining. Be safe, and we'll talk to you next quarter.

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