Good morning, everyone, and welcome to our Business update conference call. I am Arnold Donald, President and CEO of Carnival Corporation & Plc. Today, I'm joined telephonically by our Chairman, Micky Arison; as well as David Bernstein, our Chief Financial Officer; and Beth Roberts, Senior Vice President, Investor Relations. Thank you all for joining us this morning. Before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today's press release. Yes, I know, I'm certainly not alone when I say I'm glad to put 2020 behind us. Clearly, 2020 was unprecedented. On the other hand, it also proved to be a true testament to the resilience of our company.

Thank you, Arnold. I'll start today with an update on booking trends. Then I'll provide our monthly average cash burn rate, along with a summary of our fourth quarter cash flows and then finish up with some insights into our financial position. Turning to booking trends, at this point in time, our cumulative advanced bookings for the second half of 2021 are within the historical range. Even better, our cumulative advanced bookings for the first half of 2022 are ahead of a very strong 2019, which was at the high end of the historical range. Directionally, comparable pricing on these bookings for the second half of 2021 and the first half of 2022 are down just 1% versus pricing on bookings in the beginning of fiscal year 2019, if you exclude the negative impact of future cruise credits, or more commonly known as FCCs. Pricing on bookings in the beginning of fiscal year 2019 is a tough comparison as that was a high watermark for historical yield. However, I must say, to some extent, this is an apples and oranges comparison, given the increase in bundled packages that we have offered and that guests have chosen more recently, making the underlying comparison more favorable than indicated. In the end, we expect to see the benefit of these bundled packages in onboard and other revenue. I would also like to point out that our booking position is very encouraging, given it was achieved with minimal advertising and promotional activity. Due to the pause in guest cruise operations in 2020, the Company's future booking trends will be compared to 2019 and not the prior year. It is particularly reassuring to see that approximately 60% of bookings taken during the fourth quarter of 2020 for fiscal year 2021 were new bookings, with the remainder being FCC rebooking. I am happy to report that this is a five percentage point improvement over the third quarter booking activity. And it's also promising to see that approximately 45% of the 2021 booking position are guests that are new to the brand, with the remaining 55% of guests being brand loyalists, which is just a little higher than the norm, a continuation of the positive position we had at the end of the third quarter.

Thank you, David. Operator, please open the call for questions.

So David, I want to start with your last comments there about your liquidity position. I guess I'm a little confused because you -- obviously, you have wording in the release about how you expect to enter additional financial transactions, which you just talked about. But Arnold, you also indicated you expect to have all your ships operational by year-end, which I think to some folks might seem a little aggressive. So I guess the question is around maybe, why would you need to really raise anything additional at this point, if you think you would be fully operational by year-end? And I hope that makes sense.

First of all, just to restate, we hope to have all of our ships operational by year-end. Obviously, what I’m hoping has happened so far in early '21 here is just a hangover from 2020. But we're still navigating as a planet, this whole thing. So hopefully, we have them all operating about in a year. And then I'll let David respond to the rest of your question. Go ahead, David.

Yes. So Steve, some of the uncertainty relates to the resumption of cruise operations in the various brands around the world. Exactly when and how soon, and so we're just trying to keep people aware of the fact that we do have multiple billions of dollars of debt capacity, and we can utilize that if and when needed. So we have choices, and we'll monitor the situation very carefully. And some of it also depends on, just as I said before, on the timing of the restart of the operation, which at this point in time is a little bit uncertain.

Okay. Got you. And then, I guess, a bigger question would be just around the vaccines themselves. And I assume you guys have put some thought into, are there going to be requirements for whether it's the crew, whether it's passengers, whether it's both, that they would have to be vaccinated before they're allowed to sail?

Well, you know, as you're very well aware, the whole vaccine scenario is at the very beginning here. And so we're monitoring, we're in dialogue with not only the CDC, but also with lots of other organizations around the world for other destinations. And so we'll let it evolve over time, and we'll make the most prudent decision when the time comes. But at this point, distribution remains a bit of an issue. And so, we'll make a determination as things evolve.

Okay. Can I ask one real quick housekeeping question for David? David, can you help us maybe just think about what you guys are thinking from an interest perspective for '21?

So interest expense on the existing debt that we have at the end of 2020 would be about $130 million a month or, call it, $1.6 billion for the year. So depending on liability and management and other things, it could be a little bit plus or minus from that number.

I wonder if you could give us any sense of the timing or kind of the gating issue for your initial test cruises?

Robin, that's a work in process. Phase 1, we're in with what's been communicated by the CDC; the additional guidelines for future phases have not yet been issued by the CDC. We have weekly calls as often as we need with them. So that remains to be seen. But what I can tell you is that we're on track to be able to do whatever we need to do in a very timely manner to resume cruising ultimately.

So, it sounds like you're waiting specifically for the CDC to issue some specific guidance around the test cruise timing?

Well, to answer your question about specific timing on test cruises, yes, we would be waiting. But obviously, we're doing a lot of things. We’ve started to bring ships back into the U.S. and bringing those ships back are meeting the criteria that is currently put out there to be in a position to then subsequently do test cruises. But to give you a specific timing on the test cruises, we would need additional guidance from the CDC.

Great. And then just one other, and maybe this one is for David: How should we think about the expense of a restart? And I guess what I'm asking specifically is you've talked about how even when the ship is in warm lay-up, you have some crew on board, you're running the systems and all of that. So is the actual cost of when that ship goes from being in warm lay-up to operating? And is it just sort of increasing the staffing levels? Or is there some other incremental expense? I mean, obviously, as a ship sails, it will start to burn fuel, you'll start to have to provision for people, but I'm talking about, is there any sort of one-time cost? Or is it just that you staff up and you go from these lower levels to being what a typical expense per passenger cruise day would have been prior?

Yes. So, I can tell you what our experience has been with Costa and AIDA. Because with Costa and AIDA, the capital expenditure was de minimis; the crew were brought back, which is an expense, plane flights and testing and other protocols. You've got to spend some money for food and other inventory for the ship. But while this will be a cash outflow, as you would expect, during this period, if you're ramping up the ships, you also have a cash inflow from the customer deposits because you're getting final payments in association with those voyages. So -- and I think I have said before that the ongoing expenses that we experienced relating to protocols in Europe was a few hundred thousand euros per month per ship. For the U.S., for the CDC, as Arnold indicated before, we're still waiting for a lot of the technical guidance that was not included in their original conditional sail order. And so it's very difficult to estimate if there'll be anything different for the U.S. at the time we restart operations.

David, you gave us the interest expense. Could you just help us out maybe with the share count where it stands today and what you expect it to be once you're making money again on a diluted basis?

Yes. So today, the outstanding share count at the end of 2020 was 1.087 billion shares. And the only other thing that I'll add is with the conversion of the remaining converts, it would total 1.14 billion.

Got it. And then as we think about a presidential transition here in the next couple of weeks, maybe how you're thinking about potential risks or maybe opportunities? Do you think that changes the conversation with the CDC at all? And obviously, what was a nice benefit for you guys during the Obama administration was the availability of Cuba. Have you had any conversations on that front? It seems like it could be maybe an opportunity going forward.

I think, first of all, thanks for your question, and happy New Year. I think, first of all, look, we all stand together in trying to mitigate the spread of this virus. And whatever administration is in place, obviously, we're going to be totally in compliance, but we just want to be an ongoing part of the solution regardless. So in terms of incremental risks associated with one administration versus another, I'm not thinking that way at all. Either way, we have to do the right thing to serve the best interest of public health, and I think the size ultimately will guide us all there. With regards to other matters, obviously, Cuba was a focal point for the Obama administration opening up Cuba, etc. We'll see what happens with the incoming administration. We obviously will be well prepared; we were very active with the first ones to sail to Cuba. And we'll be well prepared to be able to operate under whatever the guidelines and rules and regulations are, but we'll be prepared to again help people who really want to go to Cuba, see it the best way we feel, which is arriving by cruise and then experiencing what Cuba has to offer when it opens.

Got it. And then maybe lastly for me. The different brands that you employ, as we think about sort of a post-vaccine environment, are you seeing major differences in terms of demand for those different brands? Obviously, depending on the country and their state in terms of the virus itself, that's going to change demand. But maybe just more broadly, are there some brands that are better positioned than others as we look to the second half of '21 and into '22?

Yes. As I stated in my opening remarks and obviously, overall demand has been very robust, and we find that very affirming for our business. We do not see major differences across brands. Obviously, one would be Costa Asia, where the booking is much closer in than any of our other brands, but absent that, there are no big dramatic differences across the brands in terms of booking patterns or trends. And there's a lot of pent-up demand for cruise, which is evidenced by the booking patterns. And so we're going to have smaller fleets. First of all, we're going to reintroduce onboard a staggered basis. The fact we have national brands, as we pointed out before, plays well for us in that regard. And the fact that we have a number of brands that are drive-to markets, easier to get to, so on and so forth, is another benefit, and that's around the world. So, given that, we don't see dramatic differences across the brands and we see genuine strength and what should be a robust opportunity once cruise resumes.

Just curious on bookings, hopefully, you could maybe flesh out some of the cadence in bookings qualitatively, sort of interested in knowing how bookings pace is faring now versus pre-vaccine? And if that's a meaningful different pace and sort of when do you think you might see that inflect?

Bookings were robust pre-vaccine and have been post-vaccine, so we haven't seen any dramatic shift in that. Again, we haven't experienced a demand challenge for cruises, all the reasons we pointed out, including the large base of previous cruise scores, repeat cruises, etc., where the demand is really getting pent-up because they've been many months without being able to satisfy their craving for a cruise experience. But I'll let David comment more granularly on some of the booking trends statement.

Yes. No. That’s correct what you said, Arnold. And the thing that I would add to that is, we've seen good demand in all of the various cruise markets: whether it be the Caribbean itineraries, Europe itineraries. We're seeing good demand for Australia, for world cruises, etc. So, it's broad-based and across, as Arnold said, all the brands.

That's helpful. And then one more for me is, on the CDC I was hoping that you could help us understand the relationship between maybe potentially as we move to the summer season and ships tend to sail more abroad, is it at all likely that you might look to get fewer ships outfitted and certified under the CDC guidelines, since there’s not a whole lot of point to get certified for one month in the spring and then go sail elsewhere where there’s not going to be the same restrictions?

We want the freedom to operate, period. And so we’ll be focused on, again, being in compliance with whatever the CDC regulates. Obviously, we give our inputs and offer up other like science, medical experts, their inputs and whatnot. But the CDC will make their determinations and we want the freedom to operate. Now having said that, as we mentioned earlier, the fact that we are global, that a large number of our sailings normally are outside the U.S. and so on, gives us additional degrees of freedom, but we also have to secure the freedom to operate in other places. Now we've been doing a really good job so far in Europe with the limited startups of Costa and AIDA. But you're right; as you look around the world in different targeted markets, the summer is also an active time for U.S. sailings with holidays and vacations. Of course, all of that feels a little different now. But nonetheless, it is an active period. So, we're well positioned; we're differentiated. We have nine well-known cruise line brands, we have national brands. As things open up in staggered ways around the world, we can take full advantage of that. But we like to have the freedom to operate everywhere.

And I'll just add that if you look at the CDC website, you'll see that we brought 30 ships back into U.S. waters, one more is expected to come back, it's in transit, the Carnival Mardi Gras. And those are the ships that we expect to sail in U.S. waters through the balance of the conditional sail order that the CDC issued this year and the remainder of the ships would sail outside U.S. waters.

A couple of quick questions. Is there an inclination or ability to possibly restart some of the ships that are currently scheduled to start, let's say, May and June as opposed to at the end of March? How easy is that? Or is that something that is not going to change?

Yes, if it made sense. And first of all, we're always going to act in the best interest of public health; that's number one. Number two is, if we have the freedom to operate sooner and there were itineraries that made sense, we would not rule out here in January introducing customized itineraries prior to those periods for brands, if it made sense and we were able to do so. So yes, there is the possibility, even with brands that have announced a pause through a certain period of time, that if the opportunities presented themselves and it made sense, especially if it's now January here, how many -- absolutely, we could introduce some customized itineraries if it made sense.

And Arnold, you mentioned shorter cruises, which, of course, make more sense. But it's not the old -- the longer voyages over seven nights for the higher-end brands. Again, do you think the CDC might be open to reconsidering their position and possibly allow longer voyages before November?

We'll have to see what evolves. And again, with the advent of the vaccines, with the acceleration of low-cost, more rapid testing, with advancements in treatments and so on, I think all of this is potentially in flux. That would definitely be the CDC's call to make. But again, things change all the time, and we have to see. So I wouldn't say it's impossible. I think, again, everyone wants to act in the best interest based on science. If the science and conditions made it possible, then they may change their position. And then there's other places in the world, and they have their rules and regulations. So there will definitely be opportunities in some places in the world to have longer cruise itineraries for certain and possibly here in the U.S. prior to that date; we'll have to see.

And lastly, given your very active communications with the CDC, do you have any sort of an expected timeline as to when you might be receiving further technical orders and guidance? Or are you just waiting for the day they come out, and that's when all that we'll find out?

I think, I learned a long time ago in different businesses, never try to predict regulatory anything because by its nature, it's not that predictable. So we provide the information, we're in active dialogue. They'll make their determinations in the time frame that, obviously, they feel comfortable doing so, and we'll respond to that. So we don't have a definite date for future guideline release from them, but we'll be prepared to act on whatever comes, whenever it comes.

I think all of us will be waiting for further guidance as soon as it's available.

And then the last comment would be this, that obviously, we're in this business for the long term. And while we all want to resume cruising as soon as possible because cash generation and cash maximization is clearly the order of the day for us as a business at this point. The reality is we want to do it the right way and make certain that we're well prepared to be in compliance, whatever the rules and the regulations are. But whether we start sailing in April or March or June or whenever, the real value in this business, obviously, makes sense for many years and eventually, we'll all be back to the great days of growth in our industry and growth in earnings, growth in cash generation, etc. And when you look at it over time, a matter of a month here or a month there, a couple of months here or there, are not determining the future value of the industry or our company.

I agree, but I've been following the pricing for all voyages for close to two decades now and kind of itching to start getting actual moving ships as opposed to just the forward pricing. Yes. Okay. Good luck. Thank you.

Thank you.

Correct me if I'm wrong here, but I believe there was an industry meeting early last week with the CDC. And if that is correct, I'm wondering if you can share any details from that meeting.

No, we wouldn't share any details. There are multiple meetings with the CDC at different levels. There's technical levels, there's medical levels, there's all kinds of things. And so at this point, what I can tell you is that we're in constant communication, as are the other cruise lines. And also, our industry association, CLIA, is also having dialogue as appropriate. And everybody is working together focused on the resumption of cruise in a way that fits with overall what the CDC is determining is best for our society.

Okay. Fair enough. And then a second question on the 19 ships that are leaving or have left -- some of them have left your fleet; can you give us a ballpark idea of what the net cash income and cash flow from those are?

I'll give you that, David?

Yes, you're talking about the sale price?

The 19 ships we plan to exit.

Yes, so. On the cash flow, that was only 3%. We had indicated before it was 3% of operating income in 2019.

I'm talking about -- I'm sorry, the proceeds?

The proceeds. We wouldn't share that. Yes. So we don't disclose the sales price of any ship, as you would imagine, that would put us in a disadvantage in future negotiations. But I will say that prior to COVID-19 in many cases, we were selling ships for $50 million, $60 million, $70 million a piece. But obviously, in these cases, we were selling ships for somewhat less than the historical standard, post-COVID-19. So it wasn't -- it was de minimis in the grand scheme of a company of our size.

Okay. Great. That gives me some rough ballpark idea. Thank you very much.

Thank you.

So, you talked about lower cruise costs from ships leaving the fleet. And then I think incremental to that insinuated, I believe, some lower costs as a result of more efficient shore side. Can you touch on what those improvements are? And then maybe any way to think about sizing that opportunity? And then just one more from there.

Yes. As I mentioned, with the ships exiting the fleet, there were less efficient ships we accelerated the exits, given the fact that there was no opportunity for them to generate cash in the near-term given the pause we're in. And so the -- it gives us a 2% reduction in kind of base cost based on those ships exiting. And then a 1% fuel advantage as well. So that's on the ship side. On the shore side of stuff, basically, with this pause, obviously, we furloughed and had to make a number of changes from a cash conservation standpoint to get our burn rate down. And it's also given us the opportunity to examine, and we continue to do so, all of our operations, shore side to see where we can be more efficient, where we can be more effective. And that's in every aspect of the business. So when you say, give you a few examples, it would be the normal things you would think about. Right now, we're not advertising and all that, but you're looking at your marketing department, you see how you're structured also what you're spending money on and what have you. And we were on a path of continuous improvement before. We've been very successful through our sourcing efforts, but beyond that, even our operating procedures and stuff, where we were doing a pretty good job of getting unnecessary costs out of the system. And so we continue to do that. And with this pause, we've been able to take a hard look at every aspect of the business and continue to do that and have found additional opportunities for improved efficiency.

Got you. That's helpful. And then I think, David, in your pricing commentary, you mentioned that -- I don’t know if I caught this right, but the forward pricing includes bundles, presumably, I guess, implication on listing pricing there. So I think you mentioned it was not apples-to-apples. So is it possible to get an apples-to-apples pricing for what you're seeing on your forward books versus the '19 comparison, I think?

So when we do the bundle, what we do is we allocate a portion of the bundled product to the onboard and other revenue. So the price that we're using in the comparison is only a portion of the total price that was paid by the guests overall. So, it's as close to apples and apples as we can get it. But the problem that you get into is because of the allocation, we're going to see the benefit in onboard and other revenue. So that's why I said that the comparison was probably more favorable than indicated where I said we were down 1%, excluding the future cruise credits. That's about as close as I can get it because we've allocated out the onboard and other. But you would expect to see a big increase in onboard and others as a result of the pre-purchase. So hopefully, that clarifies it for you.

I was wondering, if there were any interesting insights or takeaways from the 45% new-to-brand bookers that you guys are seeing? Are they skewing younger? Are they maybe longer lifetime customers than? Or if there's anything different than some of the new-to-cruise in the past?

So it's been... No, we have not seen any dramatic trend difference in new bookers or new cruisers than we have in the past. But David, it's like you wanted to make a comment. Go ahead.

Yes, we have not seen any dramatic trend difference in new bookers or new cruisers than we have in the past. But David, it’s like you wanted to make a comment.

Yes. No, I was just going to add that overall, whether it be the 45% or the 55%, which are brand loyalists, which, by the way, just a little -- just slightly more than the norm, we really haven't seen any significant change in the overall demographics of the people booking cruises. We're seeing people in their 20s and 30s as well as people in their 50s, 60s, 70s, and 80s. And anecdotally, I was talking to a couple of the brands asking them about various voyages and things. And they were telling me that some of the longer voyages in early 2022, they were seeing quite a few people, 70 and up, booking those voyages. And we were just speculating that maybe those were retired people that didn't have to worry about a work schedule so they could plan considerably further ahead than most people. So, we're not seeing any significant changes or trends in demographics around the globe, seeing all ages booking in all products and all brands.

Excellent. And then just a quick housekeeping follow-up. For depreciation for 2021, I know a lot of the ships that have come out of the fleet are probably largely depreciated, but can you give us an idea of like what the delta year-over-year might be in that figure?

So 2021, we're looking at roughly $2.2 billion, which is similar to what we saw in 2020. But it is a preliminary number. The difficulty in that is trying to estimate our CapEx for 2021. We obviously haven't made all of our decisions for 2021 yet. Some of it depends on the timing of the restart. So that is a preliminary number. But at this point, that's a good ballpark-ish figure.

I wanted to come back to the FCCs. I think as of the last call, roughly two-thirds were still outstanding. So curious, is that kind of roughly held? And what you think it’s going to take for more of those to start to convert? And then the next part of that is, I think you previously alluded to a mid-single-digit type of negative impact from the FCCs coming in on the pricing side. And curious if that impact kind of has held and should continue to hold as more of those convert?

So the last time, when I was talking about the mid-single digits, I was talking about the back half of 2021. When you start looking at the time period that we're talking about, the back half of '21 and the front half of '22, you're still in the same ballpark in terms of including the FCCs in terms of the pricing. As far as the FCCs, probably it's about 45% of our customer deposits at this point are still unapplied FCCs. So, we still have quite a few FCCs that have yet to rebook. But that's not really very surprising. A lot of times you get families that are booking, multiple families with kids. And you've got to coordinate vacations with supervisors at work and time frames. So we would expect these FCCs to turn into bookings over the next 6 or 12 months as people plan their vacation opportunities.

Great. That's really helpful. And maybe I wanted to think a little bit about the longer-term margin opportunity. You've talked about sales of less efficient ships, probably taking out some overhead, the arrival of newer, more efficient ships, just curious what type of EBITDA margin opportunity do you think is ahead of you as revenue more fully recovers probably in '22, '23?

Yes. I'd be reluctant at this point to kind of give you that margin opportunity that would be providing guidance, and we're not in a position yet. I think by Arnold's comments indicating the efficiencies that we expect is alluding to an improvement, but give us some time to resume guest cruise operations, get back in service, and we'll be in a much better position later this year, perhaps, to give you more guidance and details into that. But at this point, all of the cost metrics would lead you to a better margin opportunity in the future.

Great. Operator, we'll take one more question, please.

Yes. I was wondering if you could give us an approximate net debt number at the end of 2020, and ideally calendar because I think there was some export credit facilities drawn down in December, but if not, on the fiscal side.

So debt at the end of 2020, November 30, 2020, which will be the balance sheet date, will be $27 billion. And you're correct. We did -- shortly thereafter, take delivery of two additional ships and drew on the export credits associated with them. That was probably an additional call it, $1.5 billion, if I remember correctly, in December on the Carnival Mardi Gras and Costa Firenze.

Okay. And just to follow up. I mean, you've obviously given us some visibility on the delivery schedule in 2021. Have you given any thoughts on whether you could cancel any future ship deliveries? And also, what would be your anticipated fleet size in 2022 versus 2019, given the changes with the ships leaving?

Okay. So in terms of the ship deliveries, I mean we did renegotiate delivery dates, as Arnold indicated. We got a delay in all of the ship deliveries. But there are no cancellation clauses in our new building contracts. So as a result of that, I wouldn't expect any cancellation of any of the new builds on order. We started the year with 14 on order. We took delivery of 2. So, we have 12 more in the ensuing years. And as far as capacity is concerned, if you look at the end of 2022, you'll see that -- and we try to do this in ALBDs, our capacity at the end of 2022 would be about 5.6 percentage points higher than 2019. So you're really just talking about less than 2% per year capacity growth from '19 to '22 because of the new builds that came in. But remember, the acceleration of the 19 ships that left the fleet. So it nets out to less than 2% a year. And with that...

Yes, thank you, everyone. We really appreciate your interest, happy New Year. Be safe. Be responsible, I'm sure you all are. And together, we look forward to what hopefully will be a very nice 2021 leading to many future years of success. So, thank you. Thank you so much.

That concludes the call for today. We thank you for your participation and ask that you please disconnect your line.