Greetings. Welcome to the Carnival Corporation & plc's Second Quarter 2025 Earnings Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Beth Roberts, Senior Vice President, Investor Relations. You, Beth. You may now begin. Thank you.

Good morning, and welcome to our second quarter 2025 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 the forward-looking statement in today's press release. All references to ticket prices, yields, and cruise costs without fuel will be in constant currency unless otherwise stated. References to yields will be on a net basis. References to cruise costs without fuel, EBITDA, net income, ROIC, and related statistics for all will be on an adjusted basis unless otherwise stated. All these references are non-GAAP financial measures defined in our earnings press release. A reconciliation to the most directly comparable U.S. GAAP financial measures and other associated disclosures are also contained in our earnings press release and in our investor presentation. Please visit our corporate website where our earnings release and investor presentation can be found. With that, I'd like to turn the call over to Josh.

Thanks, Beth. Before we begin, I'd like to take a moment to address the conflict in the Middle East. The escalation of the past two weeks culminating over the last few days has been swift. While we certainly hope for a quick and peaceful resolution, and it has not yet had any discernible impact on our business, this is all unfolding too quickly in real time to try to project how it could impact our future business. Like many others, we will actively monitor the situation over the coming days and weeks to evaluate its potential effects on our business and provide updates as needed. In the interim, our thoughts and prayers are for the safety of all innocent civilians and for the brave men and women of the US Armed Forces who work tirelessly to protect the United States of America. Turning to our business. Another quarter on the books and another set of phenomenal results. This marks eight quarters in a row we have achieved record revenues on record yields. We also hit new second quarter highs for EBITDA and operating income, both in total and on a per ALBD basis, while customer deposits also reached an all-time high. Year over year, EBITDA was up 26%, operating income increased by 67%, and net income more than tripled as we continue to benefit from our focus on commercial execution. Net income came in $185 million better than guidance as we outperformed across the board. Yields grew by almost 6.5% beating our guidance by 200 basis points. Both ticket and onboard spending equally outperformed on very strong closing demand reaffirming the strength of our consumer. Unit costs also came in 200 basis points better than expected on timing between the quarters. This was yet another quarter with EBITDA margins up significantly year over year. You know, investors often ask me, can margins get above 2019 levels? Well, as I've always answered, I never thought of 2019 as a ceiling. And we've now proven that out. Last quarter, EBITDA margins were 140 basis points above 2019, and this quarter, they were 200 basis points higher. In fact, this past quarter's margins were the highest we've achieved in nearly twenty years. This consistently strong performance significantly accelerated progress towards our 2026 fee change targets. In December, we telegraphed being able to hit our 50% EBITDA per ALBD growth target at the end of 2025. In March, we said that we expected our 12% return on invested capital target to also materialize at the end of 2025. And now we can advise that through the hard work of our amazing global team, we met and exceeded both of these targets a full eighteen months ahead of schedule. We were able to deliver trailing twelve-month EBITDA per birthday 52% above our 2023 baseline, and our ROIC surpassed 12.5% more than doubling in less than two years. Now this was no small feat given these are both the highest levels this company has seen in nearly twenty years. Not to be forgotten is our third 2026 commitment, to reduce our carbon intensity by 20% as compared to 2019. I'm very pleased to report we have also just met this target as well. This is not only great for the environment; it's also great for our bottom line. Again, thanks to each of our phenomenal team members, we topped these milestones in half the time originally expected. And even better news, we have so much more potential to take our margins, returns, and results even higher. So with our 2026 targets in the rearview mirror, we anticipate setting new targets in 2025, based on our strong second quarter results while affirming yield expectations for the remainder of the year. Simultaneously, that will take our yields up 16% across 2024 and 2025. In a world of heightened volatility, the amazing cruise experiences our portfolio of cruise brands delivers at a truly exceptional value simply stand out. It's enabled us to deliver two consecutive quarters that were significantly better than expected and maintained strong 4% yield growth in the back half of the year consistent with our original guidance in December. Which I would remind you was given well before much of 2025's macroeconomic and geopolitical turbulence had surfaced. Now with the second half of the year having been even stronger before all of this noise? Absolutely. No excuses, though. We need to deal with the realities of the world we live in. And while it's proving to be a fairly unpredictable place of late, we are well positioned and clearly will do our best to meet or exceed guidance. Taking another significant step forward for the company, we also continue to set ourselves up well for 2026. Our book position is in line with last year's record levels and at historically high prices. Our elongated advanced booking window and limited capacity growth give us flexibility to patiently take price, and our sharpened yield management tools are helping us optimize our performance in the current environment. Our strong results, book position, and outlook are a testament to the success of our ongoing strategy to deliver same-ship, high-margin revenue growth. We remain focused on achieving yield improvement by driving demand that outpaces our supply, and we have a lot more in store to keep our strong momentum going. We are counting down the days to the opening of Celebration Key, which is now less than a month away. With the largest lagoons in the Caribbean at over 275,000 surface square feet, multiple times that of any other private cruise destination in existence or in construction, over one and a half miles of white sand beach, and the world's largest swim-up bar and the largest sandcastle. We are gearing up to deliver even more fantastic experiences for carnival guests than ever before. We are on schedule to welcome our first ship, Carnival Vista on July 19, and intentionally ramp up from there into the fourth quarter so that we can make sure the guest experience is as extraordinary as possible from the start. You know, it's gratifying to see that already Celebration Key is consistently ranked among the most searched cruise destinations on Google, and it hasn't even opened yet. We fully expect the buzz around it to only build once our five portals built for fun begin welcoming guests to our expertly curated ultimate beach day. Once complete, we'll be augmenting our marketing materials with live footage and imagery from this amazing destination. And, of course, word-of-mouth from over 2,000,000 guests annually will amplify our share of voice. We're also on track for the mid-2026 opening of a significant expansion at Relax Away Half Moon Cay, our pristine Caribbean oasis. This spectacular tropical paradise already ranked among the best private islands in the Caribbean invites our guests to enjoy an idyllic beach day full of white sand, turquoise waters, refreshing ocean breezes, delicious food, tropical drinks, and opportunities galore to do exactly as its new name invites you to do: relax. We've shaped many itineraries that combine these perfectly paired destinations in order to provide our guests with both the ultimate and the idyllic beach days, all on one vacation. During the quarter, we also announced another meaningful expansion and enhancement to our beautiful destination, Mahogany Bay, in Roatan, Honduras. Already rated one of the highest destinations in the Caribbean, upgrades will include a large pool with a swim-up bar, a beautiful new private beach club, and doubling the beach line to almost half a mile. This destination will be renamed Isla Tropical, and along with Celebration Quay and Relax Away Half Moon Quay, be the pinnacle of our seven Caribbean gems marketed as the paradise collection. You know, as beaches are the number one destination for vacationing Americans, it is no accident that this is central to our destination strategy. Our seven Caribbean gems collectively provide miles upon miles of some of the most beautiful beaches in the world. By making targeted incremental investments and stepping up our marketing efforts across this portfolio, we believe we have a significant opportunity to further monetize these strategic assets by using them to drive consumer consideration and conversion, taking share from land-based alternatives. At the same time, we continue to make investments in our existing fleet that will generate new demand and enhance pricing. Aida Diva recently reentered service, the first ship to undergo the Aida Evolution upgrade. Since her revamp and reintroduction, Aida Diva has been knocking it out of the park, with a huge take-up for its many added bar and specialty dining venues and rave reviews for its ship-wide enhancements. This success is a great sign for the remaining six vessels in the Aida fleet that will undergo this upgrade over the next few years. Also, we recently ordered two new builds for Aida for delivery in fiscal 2030 and 2032. As we reinforce our strategy to rebalance the company towards our higher returning brands, these next-generation ships coupled with the Aida Evolution program modernizing much of the existing fleet will drive even more demand for our Aida brand, which is already synonymous with cruising in Germany. Additionally, Carnival Cruise Line recently announced exciting new features for its fourth and fifth incredibly successful Excel class ships for delivery in 2027 and 2028. Carnival Festival and Carnival Tropicale will feature Sun Station Point, a new outdoor zone on the top three decks, purposely designed to be the most family-friendly water park at sea, with six exhilarating slides, including two family raft slides, and for the first time, the fun will continue into the evening with extended park hours for guests to enjoy a vibrantly illuminated nighttime waterworks, including a DJ and a slew of other special evening activities. These shifts will be ideally suited for families, with 70% more interconnecting rooms than prior Excel class shifts. And just around the corner, we'll be welcoming our next new build, Star Princess, sister ship to the hugely successful Sun Princess, awarded Conde Nast Traveler's 2024 Mega Ship of the Year. That means we'll be doubling down on Sun Princess's innovative platform and tremendously successful guest operations spanning across F and B, entertainment, and its elevated ship within a ship suites sanctuary collection. With our moderate new build pipeline, including just three ships on order over the next four years, we have ample room to continue to pay down additional debt and return to investment grade leverage metrics while providing ourselves with a headroom to return value to shareholders. And yet another opportunity that will help propel us forward is the exciting news Carnival Cruise Line announced just last week. In June of next year, Carnival will be launching a brand new and improved loyalty program. This will be an industry first, tying loyalty benefits and status to total spending on Carnival and spending on everyday purchases with Carnival's cobranded credit card, rather than being based on the lifelong accumulation of days spent. David will speak to the financial impact, so I’ll just add that we see this as an important tool for improving customer engagement and increasing customer lifetime value and a long-term strategic differentiator for us. I would like to thank our team members, ship and shore, once again, for the enthusiasm and commitment they exhibit, enabled us to deliver happiness to almost three and a half million guests this past quarter, by providing them with extraordinary cruise vacations while honoring the integrity of every ocean we sail, place we visit, and life we touch. It is their combined effort that has made a truly transformational change in this company inside of just two years. I would be remiss if I also didn't express my appreciation for all of the many supporters who contributed to this successful outcome. Thank you to our travel agent partners, destination partners, investors, and, of course, our loyal guests. We could not have done this without all of you. While I'm incredibly proud of the great progress our teams have made in such a short amount of time, these results are nowhere near our endpoint. The tailwinds and opportunities before us give us the potential for so much more. With that, I'll turn the call over to David.

Thank you, Josh. I'll start today with a summary of our 2025 second quarter results. Next, I'll provide some color on our improved full-year June guidance as well as some key insights on our third-quarter guidance. I will also explain the financial impact of Carnival Cruise Line's exciting new loyalty program, Carnival Rewards for 2026 and beyond, and then finish up with an update on our efforts to rebuild our financial fortress through refinancing and deleveraging. Turning to the summary of our second quarter results, net income exceeded March guidance by $185 million as we outperformed once again achieving our highest ever second-quarter operating results. The outperformance was essentially driven by five things. First, favorability in revenue worth $84 million as yields came in up over 6.4% compared to the prior year, and that was on top of last year's robust 12% increase. This was 200 basis points better than March guidance driven by close-in strength in ticket prices and continued strong onboard spending. The yield increase was a result of improvements on both sides of the Atlantic. The improvement in ticket prices was across all core programs. The improvement in onboard spending was broad-based, as all major categories of spending were meaningfully higher. Second, cruise costs without fuel per available lower birthday ALBD were up 3.5% compared to the prior year. This was also 200 basis points better than March guidance and was worth $56 million. The favorability in costs was driven by the timing of expenses between the quarters. Third, favorability in fuel consumption and fuel mix was worth $18 million as our efforts and investments to continuously improve the energy efficiency of our operations, leveraging technology and best practices paid off once again. Fourth, interest income and expense favorability of $8 million was driven by higher interest income and an opportunistic debt prepayment. And fifth, $15 million from the favorable net impact of currency and fuel price. Customer deposits at the end of the second quarter were at an all-time high, up over $250 million versus the prior year despite the impact from our third-quarter capacity decline of 2.4%. Next, I will provide some color on our improved full-year June guidance. June guidance net income of approximately $2.7 billion is a $200 million improvement over March guidance. The improvement was essentially driven by five things. First, our second-quarter favorability and yield flow through to the full-year improving our full-year yield guidance by 30 basis points to 5% higher than strong 2024 levels which were up almost 11%. The total increase in full-year revenue was over $100 million, which included not only the flow through of the second-quarter favorability in revenue but also additional voyages that were added by Carnival Cruise Lines primarily in the fourth quarter as a result of the change in the dry dock schedule into 2026. These additional voyages improved June guidance net income. However, given the seasonality of our business and the late opening of the voyages added to the fourth quarter, these voyages tempered the full-year positive yield impact by approximately one-tenth of a point, which is included in the full-year yield guidance of 5%. Second, cruise costs without fuel per ALBD are now expected to be up 3.6% compared to the prior year. This is two-tenths of a point better than March guidance. The improvement in this cost metric was driven by the increase in ALBDs as a result of the added voyage. Even though we already have the industry-leading cost structure, our teams will always keep looking for ways to further optimize our costs while continuing to improve the onboard experience for our guests. Third, favorability in fuel consumption and fuel mix from the second quarter is expected to continue throughout the second half and grow to approximately $30 million for the full year compared to March guidance. Fourth, favorability in interest income and expense from the second quarter is also expected to continue throughout the second half and grow to approximately $30 million for the full year compared to March guidance, driven by our refinancing efforts during the second quarter. And fifth, approximately $35 million from the favorable net impact of currency and fuel price. All of this results in $6.9 billion of EBITDA, a 13% improvement over 2024, virtually all of which is being driven by same-store revenue growth as our capacity is only up 1% year over year. Next, I will provide some key insights on our third-quarter guidance. As I previously indicated during the last two earnings calls, third-quarter cruise costs are expected to be higher than the full-year increase. Third-quarter cruise costs without fuel per ALBD are expected to be up 7% compared to the prior year. Four factors are driving nearly half the year-over-year increase. First, the introduction next month of our game-changing exclusive Caribbean destination Celebration Key. While we anticipate that Celebration Key will be a smash hit with our guests and provide an excellent return on our investment, operating expenses for the destination will impact our overall year-over-year cost comparisons. Second, 2024 benefited from one-time items that we mentioned last year, impacting our year-over-year cost comparisons. Third, higher advertising expense, which we discussed on the December call. And fourth, lower third-quarter capacity, which results in spreading our fixed costs over fewer ALBDs. Now let me explain the financial impact of Carnival Cruise Line's exciting new loyalty program, Carnival Rewards, on 2026 and beyond. As Josh described, this new program will start in June 2026 impacting results for the second half of 2026. While the program will be cash flow positive from day one, it does impact our yields and our P&L during the first couple of years. Accounting treatment for recognizing revenue requires a deferral of a portion of the ticket price paid by the guest equal to the value of future program benefits earned. Over time, the redemption of benefits by guests will build, and so will the revenue recognized for delivering these benefits to the guests. We expect that it will take approximately two years for the revenue recognized each quarter from the benefits redeemed by guests to exceed deferred revenue of the portion of the ticket price paid for the future benefits. Once this happens, after approximately two years, the program will be accretive to our yields. As a result, the year-over-year impact on yields is expected to be about a half a point in 2026, a bit less in 2027, neutral for 2028, and turn positive thereafter. It should also be noted that we do not anticipate any meaningful impact on costs from the new loyalty program when compared to the current program. We look forward to building greater engagement with our guests because of the new exciting Carnival rewards program. Most airlines introduced similar types of loyalty programs many years ago, and we know how beneficial those programs turned out to be. Now I'll finish up with an update on our refinancing and deleveraging efforts. During the quarter, we prepaid $350 million of $1.4 billion notes due 2026 and refinanced the remainder with senior unsecured notes due 2031. These transactions will reduce net interest expense by over $20 million through early 2026. We also upsized our euro-denominated floating rate loan from €200 million to €300 million, extending its maturity and amending its margin at a favorable rate, resulting in an all-in interest rate of less than 4%. These transactions continued our efforts rebuilding an investment-grade balance sheet. We have been working aggressively to reduce interest expense, simplify our capital structure, and manage our future debt maturities, refinancing nearly $7 billion of debt already this year at favorable rates. We are pleased that our efforts have been recognized with the recent rating upgrades. In fact, we now have only one notch to go to reach our investment-grade rating with both S&P and Fitch. Over the last three months, we saw a marked improvement in our net debt to EBITDA ratio going from 4.1 times at the end of the first quarter to 3.7x as of the end of the second quarter. During the second half of 2025, we anticipate continuing to pay down debt; however, it will not impact net debt as we'll be utilizing cash already on the books. While we are guiding to improve the EBITDA in the second half of 2025, given the delivery of Star Princess later this year, with its associated export credit we expect our net debt to EBITDA ratio to remain flat at year-end from the second quarter. Earlier this month, we extended and upsized our revolver capacity by 50% to $4.5 billion on more favorable terms meaningfully enhancing our liquidity. With this in hand, and coupled with our well-managed near-term maturity towers through 2026, we expect to opportunistically accelerate our debt reduction efforts during the remainder of 2025 and 2026, executing the rest of our current refinancing plan. Looking forward, we expect our leverage metrics to continue to improve as our EBITDA continues to grow and our debt levels continue to shrink, increasing our confidence in achieving investment-grade leverage metrics in the not-too-distant future as we move further down the road rebuilding our financial fortress while continuing the process of transferring value from debt holders back to shareholders. Now operator, let's open the call for questions.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in question queue. Press 2 if you would like to withdraw your question from the queue. It may be necessary to pick up the handset before pressing the star keys. To allow for as many questions as possible, we ask that you limit yourselves to one question and one follow-up. Thank you. One moment, please, while we poll for questions. Our first question is from the line of Matthew Boss with JPMorgan.

Great. Thanks, and congrats on the phenomenal quarter. So Josh, maybe could you speak to improvements in product and experience so far that you think is translating to today's above plan pricing and onboard spend? And maybe how best to think about the incremental opportunity that may be tied to the laundry list of additional drivers you cited, you talked about continued fleet improvements, the launch of Private Islands X this year, and also loyalty. So maybe the incremental opportunity or maybe where we stand in terms of innings relative to what you've already done.

Sure. You know, we've been talking about this for a few years now at this point. You know, really, when we look at what the teams have done across the commercial space, they've been making, you know, step-by-step improvements in pretty much all areas of the business. And when it comes to onboard experience and product, that's the one I've always talked about the least. In this context because they're always on their game. Right? Nothing is going to be, from my perspective, about recreation. Really, it's going to be about innovation step by step, responding to the guests that they are targeting. And it's small incremental things that make us, you know, have this improved profile on board every single quarter. I get it; you know, they're not necessarily exciting in the eyes of lots of folks, but the way that Holland America, for example, understands its guests really leaning into the concept of fresh seafood as an integral part of their cruise experience and being able to source locally fresh and be able to champion that and make that part of the experience. Little things like that go a long way; all of our brands do that all the time. Now on top of that, we obviously do take opportunities to make some investments in the assets themselves, which I talked about IEDA Evolution. And as you heard me talk about in my notes, it's exceeded our expectations when it comes to the returns that it's generating. So this is business as usual as far as I'm concerned, and that will continue well into the future. As far as, you know, looking forward, I'd say we're still in the early innings. Right? Celebration key doesn't exist yet. We have another month before that happens. And there's lots more in the pipeline, some of which we've already talked about, other things we've not which doesn't mean it's huge incremental investments the size of Celebration Key, but things that we can do to make our experiences and products on the land side even better. We look forward to talking about that over time.

Great. And then maybe, Josh, on the bottom line, how best to think about the margin opportunity, which I think you cited as so much more from here with the last two quarters now exceeding 2019. And I think you've made it clear that you don't see 2019 as a ceiling.

Right. No. I mean, highest in twenty years. Right? So we feel good about that trajectory. From our perspective, it's maintaining our low-cost industry leadership status while continuing to focus on driving incremental revenue. I mean, it is as simple as that. I mean, incremental revenue is flowing to the bottom line. That's exactly where the teams have been focused. And we can do both. We can chew gum and walk. We can manage our costs and increase revenue, is what you've been seeing.

Great color. Best of luck.

Thanks, Matt.

Next questions are from the line of Ben Chaiken with Mizuho Securities. Please proceed with your questions.

Hey, good morning. Thanks for taking my questions. Maybe you could provide some color on pricing for Celebration Key itineraries. Is this asset getting a premium today? Or is it too early? And then related, what plans do you have to market the destination? Like do you anticipate putting marketing dollars behind the project, or will this stay more word-of-mouth for the time being? And then one follow-up. Thanks.

Alright, sir. Good morning, Ben. So we are seeing a premium. It's in line with what our expectations were. So everything's proceeding exactly as we had anticipated. With respect to marketing dollars, you know, we have been putting marketing dollars and shifting marketing dollars to really lean into Celebration Key, and I think that's why it's one of the most sought-after destinations even though it doesn't take people yet. And we need one more month before that happens. So there's more to come on that, and there's more that we'll be doing in shifting the marketing spend so that we can leverage the same type of enthusiasm for the other things that we've got in the works, like the for Relax Away, which is going to be another wind at our backs, so to speak, as we get into 2020 and beyond.

Got it. I guess the essence of the marketing question was just that I would imagine it's difficult to market it too much prior to there being bodies there, but I appreciate kind of where you're coming from. Then on the loyalty program announcement, is this potentially a gateway to more of a book direct push? Or is it more about keeping customers in the network? Curious how you think about the obviously, David walked us through some of the yield impacts over the next couple of years. Thanks.

Sure. Sure. No. Definitely not a push to go more direct. Bookings with our travel agents will get the same benefit for the guest and for the trade that they always would. So we think that this is a great avenue for increasing business and loyalty and engagement, not only directly with us but through our valuable trade partners as well. Got it. Thank you.

Next questions are from the line of Steve Wieczynski with Stifel. Please proceed with your questions.

Yes. Hey, guys. Good morning. And congrats, Josh, on the second quarter and outlook here. So Josh, since we heard from you guys back in March, obviously, there's a lot, you know, that's been going on out in the world. But maybe wondering if, you know, you can kind of walk us through how those last three months looked from a booking perspective. Just, yeah, I think what we're trying to figure out here is whether there were stronger months versus softer months, or have bookings been pretty much status quo across geographies and sourcing? Maybe also wondering how bookings have looked more recently with all the noise out in the marketplace around Iran, Israel, and all that stuff you noted in your prepared remarks?

Sure. Good morning, Steve. So, yeah, no, we definitely saw more volatility in the month of April. That's probably should not be expected. That's a good dip versus where we were in the trajectory in March. But May nicely better than April and the first couple of weeks of June, nicely better than May. So, you know, we'll keep responding appropriately to a very tricky environment.

Okay. Gotcha. And then, Josh, as we think about the back half of the year, I mean, I think in your presentation you said you're 93% booked for February 2025. And if we think about, you know, you guys have actually exceeded your first and second quarter guidance. And, you know, that was pretty much driven by stronger close-in pricing and onboard trends. So Josh, I guess I'm guessing as we think about the last two quarters, should we be thinking that there probably won't be as much potential upside to your revised guidance given, you know, not as much close-in pricing is left and then the real driver of yield outperformance for the last six months is essentially just the onboard spend. Is that kind of the right way to think about the next two quarters?

Well, I I mean, I'll think I'll answer maybe at a little bit of a higher level, which is I think it's fair to say, you know, the upside that we thought we have in December for the back half of the year is not at the same place. And hopefully, people would expect that because the world over the last five, six months has taken some turns that nobody expected. And as we talked about before, in the grand scheme of things, a lot of times what happens is there's just a reflection for a lot of consumers about what does this mean for me, internalizing it, figuring it out, and then moving forward with their plans. And that's all well and good, and that's part of the process when these types of things occur. The issue is, you know, there's just been a lot in the first half. A lot of those points in time. And I think the team's been doing an amazing job of delivering not only the actuals that you see in the first couple of quarters, but just continuing to figure out how to navigate the yield curve and how we manage our revenue in this environment. So definitely not saying there's not upside. We're always going to strive to meet and exceed guidance, but no, definitely not the same view of the upside as we had in December.

Okay. Thanks, Josh. Appreciate it.

Next questions are from the line of Robin Farley with UBS. Please proceed with your question.

Great. Yeah. Sort of similarly thinking about the second half of the year. Can you characterize a little bit how demand for Europe is in Q3? And then just thinking about I totally understand your comments about what's going on in the world impacting bookings. Also seems like you maybe have less left to sell anyway, for the second half. But in terms of onboard revenues, that's a little bit closer in. It seems like that came in well. Despite kind of volatility and geopolitical events that people were still spending when they got on board. So does it seem reasonable that the onboard piece that there's maybe some upside potential in the second half from that? And perfectly understand you may not want to bake it into your guidance today, but it sounds like the onboard spend did kind of continue through the period of volatility. Is that just trying to characterize that? Thanks.

Good morning, Robin. How are you? We clearly said one question and a follow-up. But since it's you, so Europe Q3 is looking great. So nothing but good things to talk about there. With respect to onboard, I say we outperformed as David I think said in his notes or maybe I did. Can't even remember David. We outperformed on both the passenger revenue and the onboard. And the onboard was really quite strong throughout the month of throughout the quarter. And so far, what we've seen in the first couple of weeks in June is that continued. The yield guidance that we gave is based on, you know, what we want to be able to achieve on both the ticket and the onboard side. So it's in there. I said, we always want to outperform, but that's the guidance that we've given.

Okay. Great. Thank you. And I guess that I already have my question. So maybe just one. David, very fair. Thank you, Rob. But just if I could just mention one, oh wait. Are you there? Okay. Alright. Alright. Alright. Go ahead. No, no, no, no. Not a question. Just a suggestion that when David just talking about the impact of the rewards program next year, just that maybe next year in the first year of the program, it might be helpful for all of us if you kind of break out what the yield would have been if under the old accounting, just so we can see whether it's if it's 50 basis points, it's more, if it's less. Just that might be helpful in the first year. So just one just that thought. No, no follow-up question. Thanks.

Yeah. Happy to do that when the time comes in the back half of '26.

Thank you. The next questions are from the line of Brent Montour with Barclays.

Good morning, everybody. Congrats on the quarter. First question is on the consumer, Josh. The lower-income consumer we're seeing some struggle in that segment across other travel verticals. But we've seen that for the last two years and you guys have done really well throughout that. I just want to get your thoughts on geopolitical events aside, if that consumer feels different today, right now, this year, first half, whatever you want to kind of talk about versus last year or the year before, if you think you can kind of keep sort of knocking the ball off the cover with that consumer if that's if they're sort of accumulating a struggle, that's going to start showing up.

Sure. So we haven't seen anything really showing us a differentiation in patterns between the lower-end consumer and those that are looking for the premium or even the luxury. So nothing in particular to speak of. You know, I go back to what I've said a lot, which a lot of people say is we are an incredibly stupid value when it comes to the alternatives. And when people are looking to take vacations because they do, we hold up really, really well. And the lower down you come in income, the more important that becomes. Because they have to make their dollars really earned on their vacation. And that's what we try to do for everybody.

Okay. Thanks for that. And then just a second or another ago at the second half here. Just looking at the implied guidance in the cadence, does look like the fourth quarter implied guide is higher than the third quarter. We know that and the third quarter is obviously below the last couple of quarters run rate growth. And so if Europe is not softer or there's anything to say there then is it fair to say that the fourth quarter just has a sequential lift implied from the ramp up of the island? Or is there sort of anything else in there that we could maybe highlight?

Yeah, certainly Celebration Key is helpful in our portfolio, so we're happy about that. You know, but taking a step back from percentages, when you look at actual dollars, the increases that we're forecasting because Q3 is seasonally higher as a base they're each $8 higher year over year.

Thanks.

The next question is from the line of James Hardiman with Citi. Please proceed with your question.

Hey. Good morning. Thanks for taking my call, and obviously congrats on another strong quarter here. So Josh, you talked about a little bit of weakness in April followed by a pickup in from April to May and then from May to June. I wanted to sort of connect that to the booking commentary for 2026. I think I think coming out of Q1, we were ahead in terms of bookings and we're in line now. Should the narrative ultimately be that you saw a little bit of a lull in booking demand, but that you held strong on pricing throughout, just given the fact that you've got a lot of time, obviously, to fill out that order book? Or maybe I'm connecting dots that shouldn't be connected. Thanks.

Yeah. No. I think, yeah. Good morning, Jeff. Generally, I agree. We don't have to panic, and we don't have to do silly things. Know, volatility comes and it goes. And our like I said, our teams are managing the curve and trying to do the right things, staying ahead of the game.

Got it. That's helpful. And then, I mean, you talked about up top how it's way too early to really anticipate sort sort of the Middle East conflict and how it might impact your business. But just based on where things are happening. Right? This isn't new, at least in terms of having to take you know, that part of the world off the board, right, going back to the Israel-Gaza conflict. You anticipate where we sit today having to to meaningfully change any itinerary.

Yeah. Crystal balls are nice, but, you know, we really only have a couple of ships at the very end of this year and for winter, a few months into 2026, that potentially have their itineraries impacted, and that's because they go and base themselves out of Dubai. And we're obviously we have mitigation plans, we're looking at this, we'll make the right decision at the right time. But, you know, we already avoid the Red Sea, as you know. So know? And when it comes to things like world cruises and exotic cruises, we really have no exposure in this area. Through the end of 2026. So, you know, we'll save be paramount, and it always is. So we'll make the right decision as we understand the lay of the land looks like.

Got it. That's helpful. Thanks, Josh.

Thanks, James.

The next question comes from the line of Connor Cunningham with Melius Research. Please proceed with your questions.

Hi, everyone. Thank you. Just on the 3Q cost guide, there's a couple of things in there that I wanted to understand a little better. I think you talked a little bit about 200 basis points of timing-related stuff that shifted from 2Q to 3Q. And then you mentioned Celebration Key. Could you just, you know, give a number on Celebration Key, what that headwind is? And I'm just trying to, it's more of for 2026 as that kind of normalizes throughout the, as it matures and whatnot. Thank you.

Sure. So the four factors that I included was about half of the increase, and the total increase is 7%. Celebration Key, I had mentioned, was about a 0.5 point impact for the full year. So it's about a full point for the back half of the year in each of the third and the fourth quarter. I didn't say it was 200 basis points for the one-time benefits from last year. It's just that we had mentioned it, but it's it's about a point in the third quarter for that particular item. So a point for Celebration Key, a point for the one-time benefit, and the advertising and the lower capacity was probably worth, between the two, a little over a point.

Okay. Helpful. And then just on loyalty, don't know how much you want to talk about this, but you mentioned the airlines and how they've benefited from that. When when those companies talk about it, they talk a lot about the marketing component related to the credit card. You know, I think you extended your credit card relationship with Barclays in 2022. When does that expire? And just if do you have any details around how many people actually have the card to the.

I'm sorry. You said you broke up. I'm sorry. You want to know how it ties to the credit card? Is that is that the question? Yeah. Yeah. Yeah. So, basically, you mentioned the airlines, and I'm just trying to make the parallel because, yeah, they talk I mean, the numbers there are huge. And so just like how many people actually have the card? What percentage of marketing revenue do you get from the marketing component from the credit card? Just any any details there, I think would be really helpful. Thank you. Okay. Got it. So I'd rather not give specifics just from a competitive standpoint, but I would say that the existing program that we have for loyalty is disassociated with our co-branded credit card from Carnival, and several of our other brands have the same thing. And that's a very successful program in and of itself. The benefit of the new program, or one of the benefits is there's a distinct tie between the two, which does not mean you need a credit card. A Carnival credit card, to be able to enjoy being part of the loyalty program. But having the card will supercharge your ability to generate points, generate status, and we'll be talking more about that by the time we get to the end of the year just from a consumer standpoint about exactly how all of it will work. But we, the card is a is a great great part of this, and so the card will be part of this for the foreseeable future.

Okay. Appreciate it. Thank you.

The next questions are from the line of David Katz with Jefferies. Please proceed with your questions.

Thanks for taking my question. I wanted to just dig a little deeper on the ship sale. You don't mind. I see I think you've given us the gain, but not sort of what the amount or any color around a multiple on what that would be. And, you know, any thoughts around you know, that strategically. And, you know, do you look at these as sort of a recycling exercise that could potentially grow over time?

Yes. So we had sold the Costa Fortuna, and we announced that in the second quarter. And then the first quarter was this ship that was sold. We talked about both. You know, previously. In the case of the Costa Fortuna, I mean, we have sold many ships over time, and this is really just in the normal course of revitalization of our fleet as we move forward. Over time, since ships do get older, we will sell them to other parties. We do not feel that those parties come back to compete against us because they are generally in different marketplaces with different brands.

Understood. And these are opportunities; these are opportunistic. Yeah. I'm sorry. These were opportunistic. People came to us looking for ships and gave us prices that we thought were in the best long-term interest of the company. And so we made the decision. It doesn't impact cost as capacity when it comes to its main markets of Europe; it's going to be taking the one ship that it had that was doing a lot of charter business in Asia, Korea, Taiwan, and Japan, and we're going to be moving that back to Europe, which is slightly bigger. It's actually going to be increasing its capacity in Europe, which is a great time for Costa as well.

Understood. Sorry for cutting in. But I wanted to see if we might be able to get some color on the multiples or evaluations or, you know, any perspective at all on what those ships sold for? Thanks.

Well, it was nicely over book value. And we'll just leave it at that.

Thanks, Dave.

Our next question is from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Hi. Good morning. Thanks for taking the question. I wanted to ask more about the loyalty program. So I understand the deferral of revenue, but I'm also curious. It seems as if this would also kind of goose onboard spending quite a bit if passengers are getting rewarded for total spend. So how do we think about kind of a partial offset there in terms of onboard spend potentially accelerating? And will passengers actually have kind of real-time tracking of their spending onboard? Towards points? And how are you going to use data to facilitate all of that onboard?

Yeah. So that's a great question. So as far as will it cannibalize onboard spending, no. The answer is no. We do not believe that that would be the case. Thought maybe it would boost onboard spending. Yeah. So, you know, we think the engagement and the ability to earn points through spending is a great thing. So, you know, kind of like Celebration Key; this doesn't start for a year. So we'll talk a lot more once the program is in place, and we can talk about what it is that we're seeing. But the whole goal of this, look, at the end of the day, Carnival Cruise Line is an incredibly successful brand that's got a great base of loyal guests, and so much so that it's just hard. It's hard to be able to provide operationally all the things that we'd like to provide because there's just too many folks with the loyalty tiers on our ships. And that's a good problem to have, but it is a problem. We want to make sure that we're delivering great experiences for our loyal guests. This is a way to be able to address that, stay engaged with our guests, and hopefully they'll see the benefits as the program gets rolled out and really lean into it.

Can I ask a follow-up, Josh? I think about a year ago, you talked about about 35% of onboard being prebooked. Can you give us an update on where that stands today?

Yeah. It's more or less the same. It's a little bit higher. But it's more or less there. We don't, you know, and I've said this before, we don't have a particular target in mind. What we're looking to do is provide our guests with lots of different ways and alternatives to be able to spend on their vacation with us. And we're doing that through bundles. We're doing that through packages. We're doing that through targeted offers. And, of course, spending onboard in real-time while you're there. So, as long as we keep seeing progress, it's obviously all flowing into the onboard spending numbers that we talk about and report on, which are consistently going up quarter over quarter, and we expect that to continue.

Hi, thanks for the question. I wanted to ask a little bit more about Away and Isla Tropical. I think Half Moon had about 900,000 visitors in Mahogany Bay about 500.000 previously. Can you talk about maybe the opportunity you see for those islands and how big they could get with the expansion?

Sure. Well, with respect to Relax Away, the output can be significantly higher than the $900,000. It can certainly double and more. Because in today's world, there's one shift that tenders, and that's pretty much the extent of the operations. And we're going to be able to berth two ships and still have the ability to tender in the existing location. And because we're building up the infrastructure on the island, we feel good that we can still accommodate those folks and have them enjoy an amazing experience as you heard me talk about in my notes at the beginning of this call. With respect to Isla Tropical, we're going to be able to enhance the experience there. We're not talking about doing anything on the marine side to be able to accommodate more ships, but we can accommodate two ships at a time. So we feel real good that we'll have the ability to maximize that destination as well over time. I don't have a number for you on the Tropical, but I'm sure we'll be able to talk more about that as we get those developments where we want them to be. Thank you. We have time for one more, Robert.

Thank you. That does conclude our question and answer session. I would like to turn the call back to Josh Weinstein for any closing remarks.

Thank you, everybody, for joining us for another earnings call. And from my team, I'd say take a bow. Congratulations on exceeding SeaChange targets eighteen months in advance. That is an amazing job. Well done.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.